American Pad and Paper Company: A Bain Capital Story

Mitt Romney has already made my list for his dangerous, reckless attitudes towards Iran, for which he runs the risk of getting us into another war in the Middle East should he be elected President. But Romney also brings big baggage in his defense of our current casino economic model and that is the subject of this posting. Mitt Romney started and ran Bain Capital from 1984-1999; he still gets profits from the company. It has been estimated that 1/4 of the companies bought or managed by Bain during his tenure were driven into bankruptcy.  One of the companies purchased and managed by Bain Capital, under Romney’s leadership, was American Pad and Paper (AmPad), purchased by Bain in 1992.   The accompanying visual representation of the AmPad’s history under Bain is summarized in the elegant, detailed graphic, put together and available as a pdf by the Boston Globe: you can download it, put it on the wall and distribute as an educational blueprint for how private equity firms operate. The story of AmPad has a beginning, when Bain purchased AmPad in 1992 and it has an ending, when AmPad was forced into bankruptcy and liquidation in 2001. In between those bookends is the story of how private equity firms generate profits for their owners and investors, but fail the company that generated those profits and the workers who ran the business. It tells the story of how a private equity firm ran the company into bankruptcy by forcing it to carry a huge debt load  (measured by the negative numbers and the green line), compared to the company’s sales, indicted by the blue line. The management fees Bain collected are illustrated with bright green circles, while the “other payments” and their amounts are represented by the dark green circles. This graph is not an outlier of the performance of private equity firms and how they manage the companies they buy or control as the major share holder. Rather, this is a graphical template of how private equity firms operate. A decent American, someone who is committed to better equity in America’s income distribution, as well as good management practices for American businesses, should be shocked by this story, but the financial industry of America and the Republican Party as its political representative, celebrate this kind of predatory behavior, because it’s the free market economy at work! If they get their way, the future will be more of the same and then some. A huge failure of our own regulatory agencies, including the SEC,  led to the era of corporate raiding, which forms the basis of our failure to support American manufacturing and the jobs that were slowly created through this process. Private equity firms are a festering wound in America’s manufacturing integrity.

Bain’s initial investment for AmPad was $ 5 million, after which they charged the company “advisory fees” for managerial services. As you can tell from their website describing the private equity branch of the firm, Bain specializes in “leveraged buyouts.” These buyouts are accomplished by putting very little money up front to purchase the company, financing the rest, either by using the companies assets if they have any or saddling the company with a substantial debt load, used to payoff the loan to purchase the company  and provide lucrative profits for the new managers–putting the company in debt is the primary means by which private equity firms generate short-term profit for their investors. Leveraged buyouts should be illegal!

The story of AmPad is hardly unique, but it encapsulates the mechanisms by which private equity firms extract money from the companies they purchase and ostensibly “manage.”  They are not interested in job creation. Their interest is purely in short-term profit-making. For Romney to talk about his work at Bain Capital as one of job creation is absurd–no one else in the private equity industry considers that as one of their motivations (see quote below from the LA Times below). The array of profit-making mechanisms imposed on companies is mind-boggling: no businessman committed to a sensible, strategic growth of their business would ever endanger his company with the kind of debt Bains put on AmPad: debt forms include leveraged buyout loans, management fees and when Bain decided to take the company public, the profits earned from the stock sale, as well as the administrative costs of issuing the IPO (Initial Public Offering) were derived from the stock sales or charged to the company. The purpose of the IPO was to was to generate stock with some value: shortly after AmPad went public Bain sold 40% of their shares, making even more money from their ownership. Private equity firms are also inclined to enhance the growth of the company through the purchase of other companies creating further debt and more job loss through additional downsizing, something usually associated with increased stock value. It should be evident that private equity firms manipulate manufacturing firms without any consideration about the future of the firm–instead they are only interested in short-term profit.

Perhaps the one thing that Texas Governor Rick Perry got right in his political campaign for the Presidency this year, was when he described private equity tactics as “vulture capitalism.” By forcing companies to run up huge debts and charging exorbitant “management fees,” companies lose their ability to make plant investments which would keep them more competitive and modernized. In its eagerness to provide a summary soundbite of private equity firms, the mainstream press is completely incapacitated. I watched on PBS news the other night as someone was trying to explain the value of private equity firms, based on whether they had created jobs or lost jobs. But that is only part of the problem–the major question is what are they doing to companies that secure their future and make them more competitive? What have they done to a company that couldn’t be done better by the ownership of the company and how stable was the company when acquired by the private equity firm?  It’s as if private equity firms and leveraged buyouts are an indication that financial institutions who make money through this sordid mechanism, have given up on American manufacturing and act as though it’s time to sell off the country’s assets and that is  a large part of what happened to the American manufacturing in the Neoliberal era (whose cloud hangs over us today). The first leveraged buyout took place in 1968, but gained momentum in the Reagan era. The practice could have been  stopped by the SEC and financial regulatory agencies, but they progressively proved to be emasculated by the frenzy of the corporate buyouts at the time. In addition, a hidden motivation for this strategy was the benefit of breaking the power of unions, whose presence made it more difficult to downsize companies and reduce wages. Wages, benefits and even whole retirement packages have been swallowed by the mechanisms that private equity firms have used to create wealth for a few investors.

Mitt Romney was hugely successful in running Bain Capital; during the time he ran the company, the investment return averaged 88 percent each year–phenomenal profit levels. These years were the fabulous growth years of our financial industry, which in the 1990s became the largest single sector of our economy and began to outpace manufacturing. In fact, the rise of financial America was created by buying, selling and destroying American manufacturing–that is how the financial sector grew–not by growing something new, but by tearing down what we already had built as a manufacturing economy. At one time America was the envy of the world for its manufacturing base. Where did it all go? And where is it written that a private equity company like Bain has people in their management structure that know how to run AmPad, better than the people running the firm in the first place? It is true that AmPad sales had a period of boom, accompanied by plant acquisitions and closures, but those kinds of performances are typically unsustainable: when a slowdown occurs or if good plant management doesn’t exist to make the appropriate investment decisions for maintaining productivity (and keeping the best people around that know what they’re doing), a company loaded with huge debts will show a drop in profits followed by a decline in the value of the stock, at which time it becomes more challenging for the company to stay afloat, something that AmPad couldn’t achieve. Many of the companies infected with the Bain virus were not new and had been around for a very long time. Take for example, Worldwide Grinding Systems (WGS), established in 1888; the went belly-up less than a decade after Bain became its majority stakeholder. Furthermore, WGS had to turn to a federal insurance agency to bailout its pension system, in large part because Bain  forced the company into a very heavy debt load.

A recent article in the Los Angeles Times describes Bain Capital as follows:

• Romney and his team also maximized returns by firing workers, seeking government subsidies, and flipping companies quickly for large profits. Sometimes Bain investors gained even when companies slid into bankruptcy.
• Romney himself became wealthy at Bain. He is now worth between $190 million and $250 million, much of it derived from his time running the investment firm, his campaign staffers have said.
• Bain managers said their mission was clear. “I never thought of what I do for a living as job creation,” said Marc B. Walpow, a former managing partner at Bain who worked closely with Romney for nine years before forming his own firm. “The primary goal of private equity is to create wealth for your investors.”

Private equity firms are predatory capitalists, willing to force the companies they buy or control to take long-term risks for short-term profits. In the process, part of the short-term profit involves down-sizing the companies they own, eliminating jobs, reducing wages and creating conditions that jeopardize the long-term future of the company. The financial interests who run companies into the ground have absolutely no interest in long-term outcomes, whether it’s related to profits way down the road or our planetary future. They are hooked on short-term profits like junkies in search of a new high. We live in a country turned upside down. Too many economists, those with whom we placed a certain level of confidence that they would be our watchdogs and make certain that the country had a healthy economy, vitalized by a concern for important issues like social stability, equitable income distribution, education opportunities and retirement pensions and programs, have abandoned the ship: our faith in them turned out to be completely misplaced. Most economists are completely supportive of the role that private equity firms play in improving the “efficiency” of companies. This word “efficiency” as derived from their vernacular equates to “downsizing” and increased corporate profitability. Few economists of today have a sufficiently broad enough view of their subject to clearly see the destructive social damage that financial investment organizations like private equity firms have created, not only in terms of our economic future,  but also for the future of our species on this planet. We are badly in need of a new discipline, one that fuses our economic future with the environmental crisis that we are in today. We are deeply in need of new kinds of experts for our badly needed new economy–a new compass that takes into account the needs of a shrinking planet. Where will these new experts come from? Not from economics departments–they had their chance and blew it. We need to build a new economy and put in the kinds of safeguards needed to prevent predatory capitalism from destroying these businesses, while at the same time investing appropriately in the infrastructure improvements needed to place the globe on a better trajectory for the future.

Perhaps we will eventually thank Mitt Romney for the social service he is about to perform as a candidate for the Presidency of the United States. By forcing the public as a whole to get better educated on the sinister motivations of greed that characterize companies like Bain Capital and how private equity firms create so much wealth for their investors, while actually diminishing the wealth of the Middle Class, Americans might finally wake up to the nature of the country we have become. Americans will also need to come to grip with their own naive trust of financial leaders and see the destructive swath that unfettered capitalism has reaped upon the stability of our society and the uncertain future we face as practicing humans trying to make it on this planet. We do not know how much of our manufacturing base was destroyed by the crazy leverage buyouts over the past thirty years and we can only imagine what kind of country we would have today if our government had intelligently stepped in and prevented these corporate disasters from ever taking place–they helped bring on the casino economy we have today.

In closing, I want to quote from a book by Walter Adams and James W. Brock, “Dangerous Pursuits: Mergers and Acquisitions in the Age of Wall Street” published in 1989, reflecting on the impact of leveraged buyout and the absurdity of the practice:

• “In 1983, Esmark, marketer of Swift meats, Butterball turkeys, Playtex products, and STP oil treatments, spent $1 billion to acquire Norton Simon, producer of Hunt’s tomato products, Wesson oil, Reddi-wip, Orville Redenbacher’s popcorn, Johnny Walker Scotch, the Avis car retinal service, and Max Factor cosmetics. The next year, Esmark-Noton Simon was acquired by Beatrice Foods, maker of La Choy, Rosarita, Tropicana fruits drinks, Jolly Rancher candies, Milk Duds, Air Stream motor homes, Samsonite luggage, Stiffel lamps and Culligan water softeners. Two years later, in 1986, Beatrice-Norton Simon-Esmark (which now ranked as the nations’s 26th largest industrial concern) was bought out by Kohlberg Kravis Roberts in a $6.2 billion deal. And for what purpose? To sell off the various Beatrice-Norton Simon-Esmark divisions that had just been consolidated.”

Leveraged buyouts and corporate merger mania made no rational sense for building continuity in manufacturing experience and expertise. The government under Ronald Reagan helped to issue a new gaming license for a new kind of sport: corporate raiding. The new sport was aided by Reagan’s abandonment of antitrust enforcement, his corporate tax cuts and his relaxation of securities regulation. Reagan followed through with his political slogan that “government was the problem, not the solution.” These forces accelerated a reduced motivation to invest in America for fear of corporate takeover. The financial industry of America  had no problem adapting to this new gaming license and showed no concern for jobs lost, companies shattered or assets sold off for profit. The original corporate raiders and arbitrageurs had names like Ivan Boesky, T. Boone Pickens and Carl Icahn, who became the new robber barons preying on companies whose stock had been devalued by economic hard times and foreign competition, some of which was induced by the actions of these robber barons themselves. Bain capital is simply another version of the corporate raiders from an earlier era. We can’t afford to allow the continuation of this silly, but destructive behavior. Too much of our future depends on eliminating this disastrous “free-market” childish behavior and getting serious about human survival and our own economic well-being.

If you want to see how private equity funds have endangered the Danish Economy see my article “Borrowing From Denmark”

RFM

Power Generation in Liberty (Zucotti) Park

William Blum has a lot to say about the conduct of American foreign policy and the deceit with which we communicate our international behavior to our citizens. To say we are duplicitous does not quite explain the true situation. We describe how we are doing God’s work abroad and then hide the numbers and details of those who have died and suffered as a consequence of carrying out His wishes–but it’s all in the best interests of “spreading democracy.”  Blum has an excellent bullshit detector and that’s why I read his blog with some regularity. Ordinarily, you don’t go to his website if you are searching for an uplifting message about America, but in his most recent blog, he actually has one! It’s all about the Occupy Wall Street (OWS) movement and, as explained therein, Blum is pleasantly surprised and uplifted by their message and their persistence in delivering it.  My son and I had a similar experience when we visited Zucotti Park   a few weeks ago (now renamed by the OWS movement as Liberty Park–its original name) and absorbed the culture of those promoting these ideas.

When you think about the major protest activities we have historically engaged in, against the wars we have entered, beginning with the Vietnam war, they have all been time-limited by the event that initiated them. When the war ended, protests stopped and everybody went home–issue over, if not forgotten, though that event in particular left a deep national scar. Sometimes, as in the case of the war in Iraq, we don’t even wait for it to end before putting it out of our mind–we simply don’t have a way of dealing with wars we start without a good reason. Bury it in a file but in which file cabinet does it belong? The OWS movement is different; it addresses another kind of issue, something that is more inter-generational, more longitudinal in scope and more fundamental, like the backbone to our culture. Yet it began with too much subtlety for us to detect and it remains an insidious force waiting to be full fleshed out. Yes, it’s neoliberalism that we are against,  and while it may have started as an economic change of course, it has become far more than an economic blueprint for a more divisive future–it has crept into every pore of our cultural being and has overtaken the central values of our society. And the politics of neoliberalism are draining to our culture–we get exhausted too easily imagining what the country was like before. Multinational corporations now effectively run governments, in fact they own them.

With the current economic meltdown, we’re beginning to perceive the real core of the problem as an encompassing social, spiritual and economic disaster–a long national nightmare of sorts.  The financial disaster that led to the “Great Recession” (let’s face it, for young people the unemployment picture is at depression levels) was initially viewed as something we could do nothing about–we were too “financialized” to confront the political and social power that controlled our government and made the rules. But the OWS movement has been courageous enough to put up the first STOP sign and begin the process of inoculating the country against this festering contagion of corruption and economic despair.  We can all hope that the movement will continue to grow until its mass reaches a critical threshold such that the  majority of Americans will recognize  we cannot continue with a system that dehumanizes us with too much poverty and too few opportunities to develop and grow as humans–there must be a better way. And so there is! But as the long struggle begins to right our ship, it is only beginning to take shape in our brains and not through identifiable objects around us.

It may have started off as a lack of good paying jobs and high unemployment, but, like the Populist movement of the 1870s, it will hopefully grow until we create a more democratic country, something like the one we quit on in the 1970s. We must radically change our system of government to make it more responsive to our social needs. Then too, we have the additional urgency of saving the planet we live on. We will not do away with our financial system, but one hopes to tame it and make it subservient to the needs of society, rather than the other way around. The neoliberal experiment is over. It didn’t work. It produced too much poverty, destroyed our national creativity, hollowed out our economy  and is completely indifferent if not hostile to the environment–that is just one more arena for corporate exploitation. Those for whom the country does work seem to be the least deserving and least imaginative members of our culture–they must become the new workers in a revised  economy that works better for all of us, including them, though they don’t see it that way right now. It’s more than just hitting the restart button. We can no longer tolerate a system in which our national assets are sold off at fire-sale prices, as employees are stripped of their retirement–that is robbery–we are now confronted with the new robber barons, who are far more sinister than the predecessors for whom they are named. They are on automatic pilot and will not cease until we stop them. One of the best things we can do to tame Wall Street is impose a small tax on every stock market exchange which will not only raise money but also inhibit the rapid, electronic stock exchanges that continue to pose a risk to our economy. America is not broke. In fact the Institute for Policy Studies has outlined several changes in our tax and subsidy policy that could create seven times the amount of money that the failed Super Committee was trying to achieve. And most of us wouldn’t know the difference. The idea that we are broke is simply another example of how the neoliberals have fashioned a corrupt tax code with advantages to the super rich and subsidies to industries that are generating huge profits, for providing energy that does not reflect the true cost of doing business. A sensible Congress could solve these issues simply and effectively.

Each and everyone of us, including the ultra-rich, have a stake in what the OWS movement achieves;  the movement or one of its eventual evolutionary outcomes will hopefully allow us to move peacefully towards a more equitable, better educated and more responsive civil and political society. So far, we have to give the OWS credit for articulating their views effectively and staying on message. “We are the 99 percent” resonates deeply with Americans and you will note that neither political party has much to say about the OWS movement, though Obama’s speech in Kansas yesterday sounded like he was getting ready to jump on the OWS bandwagon.   All Republicans and many Democrats are hoping the OWS movement will be wiped out during a long winter: I am betting that it won’t.

Today, we have the finest congress that money can buy, but it is incapable of responding to simple human needs, like a jobs bill. When my son and I were in Liberty Park, New York, we saw  the elderly and many senior citizens expressing the same kind of hope we see in the OWS movements that have spread throughout major cities in America and in many other countries. Eventually, the movement will have to transition to a more political agenda, but it still needs growth and consistency. The non-violence of the OWS movement, in contrast to the violent tactics of the police, serve as one message that registers with successful templates of past movements, such as Mahatma Gandhi’s actions against British rule in India, Martin Luther King’s leadership in the Civil Rights movement and César Chávez’s protests against treatment of farm workers in California. But those movements are long gone. Now we see a new one emerging that harnesses the energy of youth and has multiple modes of expression, driven in part by the intolerable lack of access to education amidst threats of eliminating of our social safety net. It is not that we can’t afford these things–we are still the richest country in the world.

Like the great populist movement of the 1870s, the OWS movement may take years to develop and along the way, it needs to find a means of effective communication, public education and financing. Like the forces it wants to displace, the OWS movement may have to become inter-generational. The fact that so many young people are burdened with student loans they cannot repay and faced with debts they cannot meet, is a hidden but important organizing feature even if it is one of the more subtle themes of the movement. That is one issue that struck me about young people in Zucotti Park and you can see this issue raised time and time again on the wearethe99percent web site–many of these students have been kept out of advancing their college education because it is too costly and they already have a large college-derived debt burden. Aren’t we telling young people that in today’s complex world a college education is the equivalent of a high school diploma sixty years ago? If so, shouldn’t that be freely provided, just as the high school education was at that time? We have bailed the too big to fail out–now we need to bail out the “too small to notice” to keep the promise of America healthy. Will the educational and communication  needs of the OWS movement be met through the internet communications and the social media, television coverage of the “peoples mic,” or massive public demonstrations? It wil likely involve all them just as it does today. A set of educational tools–teach-ins to discuss and educate how to respond when confronted with police brutality in order to consistently promote the theme of non-violence that seems to be an attractive and compelling part of the OWS movement, but the movement needs to be propagated on a larger scale. The OWS movement has captivated all age groups including that of William Blum and now it needs to ramp up.

I have written previously about Blum. He has authored an indispensable book, “Killing Hope: US Military and CIA Interventions Since World War II” which is the handbook of our international wars, many of which the government didn’t want you to know about. This is an indispensable reference for understanding the duplicitous nature of our country.  At no time in history have humans ever been able to establish a true democracy. The neoliberals who own our current, inequitable fantasy of a democracy have been trampling on our limited form of democratic government as they try, in states such as Ohio and Wisconsin, to trample further on the fragmented democracy that was originally founded within our shores. A populist movement, like that of the latter half of the 19th  century, is what one hopes might come out of the Occupy Wall Street movement. It is best to seek this new level of democracy without having obvious  external enemies. So before we turn China into a foe rather than a trading partner, let’s formulate new ideas about how to bring about this new, true democracy, something the world has never known. For a vacation from this exercise, we could think about a strategy to save the planet. At some point, planetary rescue and a future of hope from all the OWS movements need to come together to finance a new, more democratic society.

RFM

OWS Transition?

For an update on the status of the Occupy Wall Street (OWS) movement and perhaps learn something about where it is going, you can visit last Friday’s  Democracy Now with Amy Goodman, where excerpts from a panel discussion can be viewed. The panel discussion was sponsored by The Nation and held in the New School University in New York City, with the title “”Occupy Everywhere: On the New Politics and Possibilities of the Movement Against Corporate Power.” The participants include film maker Michael Moore, author Rinki Sen, Patrick Bruner (“veteran” OWS organizer), economic journalist William Greider and author Naomi Klein, with moderator Richard Kim. The video consists of excerpts from the discussion of what the movement has accomplished, where it is headed, what it needs to do for future growth and what needs it must fulfill if the bright promise they have aroused, that of changing the world, can gain any more traction. To begin with of course, the latter issue is not trivial and no one comes close to seriously expressing the magnitude of the problem. But so far, the incremental  steps that have been taken, such as the “99 percent” deeply resonate with all ages, and have created thirst for action that is more than just “occupy.”   Historians often express the view that the historical record of public arousal and activism against social injustice are not directly related to hard times per se, but emerge when the narrative that kept people down runs out of explanatory power. When hard times first come, people think they have to double down and work harder to get by (or maybe in the case of many Americans, they align themselves more clearly with God and religion–it’s their fault for not being a better provider–their faith hasn’t been strong enough to be rewarded by God) and finally, when multiple iterations of this strategy have failed, groups are formed that begin to articulate a better vision of tomorrow and coalesce into a more nationally identifiable  movement. That is what the OWS movement has brought to our door–they articulate the long-standing grievances we have with how our civil society has been structured and run in the last several decades.  And, they emphasize that the richest country in the world can afford to do better, can afford to do the things that they are talking about. The most boring among us have become the most rich and powerful and they have their boot on our neck. They want to establish an aristocracy so they can pass on their wealth to their offspring (no more inheritance taxes for one thing). The OWS movement is addressing issues that, economically, began in the 1970s, if not earlier. Let’s face it, at the moment, OWS is the only game in town;  after a little more than two months, the movement seems safely launched: it will surely oscillate a bit with the seasons, but one expects to see a process of growth and continued renewal and the “99 percent” is already a permanent member of our national lexicon. It’s a beautiful cutoff. The movement has already had detectable success in the November elections, particularly in Ohio. Patrick Bruner emphasized that by following Google Trends, the words used by the OWS movement have been sharply on the rise.

Other than recommend viewing the video, reading the transcript, or downloading the podcast,  I will emphasize one point from Naomi Klein’s contribution: it is one that I have been emphasizing for some time as many of you know from previous postings. Klein’s point is that the OWS movement must find a way to integrate into their language and template, the environmental movement while emphasizing the fragile condition of our planet, including the fact that we are at the beginning of a new mass species extinction (I added that last point). For this one, we have no doubt who is responsible.  The Republican party is into denial on these concepts, because, according to Klein, the business model they have for our future cannot exist if substantial effort is going to be put into saving the planet and reducing greenhouse gases; that would be giving up too much control, make us too socialized for their comfort. Furthermore, and perhaps more critically for them, they fear it would reduce their profit margin. Yet, for the OWS movement, fusing their anti-corporate, anti-neoliberal message with a “save the planet” motif will be the only source through which millions of new jobs can be generated to help create a badly needed new economy. A labor shortage needs to be created in America, such that wages will be driven upwards. To do that you need a scale of jobs that only a newly empowered movement can demand–one in which saving the planet generates new kinds of jobs through new investments, if necessary forced onto Wall Street.

Corporatists see the current crisis in some ways as a success, because it has created a labor surplus and a decrease in wage demands.  America needs to start making things again and applying our most creative instincts into this new mode of production. It’s all about infrastructure and the green economy. We cannot export the infrastructure needs of this new economy. The cities and suburbs we built after WW II were put together with long paved roads and big interconnecting highways, but this expansionary  lifestyle was based on oil at $20 a barrel or thereabouts. We should have known this would have to end once we reached our own “peak oil” condition in the 1970s. This suburban sprawl we currently have does not work when oil goes to $150 a barrel and yet, at the moment, it seems you have to practically be a visionary to see the magnitude of this looming failure. Most  believe they can still get by using automobiles and airplanes. With the explosion of the Asian and Indian economies, it is hard to see how gas prices are going to get any cheaper.  In rebuilding our urban and suburban living, we will need much better public transportation, including high speed rail and more electric cars, with electric power coming from sources that do not add greenhouse gases to the atmosphere, and we will need local markets, including food that do not require massive transportation. Some of these attributes of change, such as local farm markets are already being developed and increasingly available through local “farmers marlets.” Of course, by adopting an environmentalist strategy, the OWS movement will lose all possibility of any corporatist Republican support–but they don’t have that anyway. To convert the Tea Party members to the OWS movement, you have to convince them that government is not the source of the problem, that there is no such thing as a trickle down economy, and that government can actually serve to solve some of the major problems we face. This of course is just the reverse of what they believe now, but the “99 percent” is a catchy phrase. The advantage of the OWS movement over that of the Tea Party, is that the former promotes longitudinal thinking or long-range planning, engaging the frontal lobes of our brains. Repetition may be the best way to reach the frontal lobes of Tea Party persons and eventually things like the threat of global climate change coupled to a closer examination of their children’s future,  may become part of a newly refreshed Tea Party Engram. At the moment, expectations like this seem like a pipe dream, but the Tea Party began in harmony with the OWS movement–it’s just that they then blamed the government for the problem, not the corporations, though for a while, they were in their gunsights until they got co-opted by the Koch brothers.

You might also be interested in reading Michael Moore’s ten suggestions for where the OWS movement should go in terms of being more specific in their demands. When your through reading that, look down at the comments to see a whole bunch of additional suggestions made by readers. Perhaps you have one or two of your own. There’s probably room for something about neoliberalism.

RFM

“What a game-changing few months it’s been. Occupy Wall Street has inspired 750 events around the world, and hundreds of (semi-)permanent encampments around the United States. In so doing, the protests have wrestled the national discussion on the economy away from austerity and toward gaping income inequality (the 99% versus 1% theme), outsized executive compensation, and the plain buying and selling of American politicians by lobbyists and campaign donors.”

More from his piece:

“Mentions of the phrase “income inequality” in print publications, web stories, and broadcast transcripts spiked from 91 times a week in early September to nearly 500 in late October, according to the website Politico — an increase of nearly 450%. In the second week of October, according to ThinkProgress, the words most uttered on MSNBC, CNN, and Fox News were “jobs” (2,738), “Wall Street” (2,387), and “Occupy” (1,278). (References to “debt” tumbled to 398.)”

I subscribe to Andy Kroll’s theory–that the surprising election that took place earlier this month was energized and perhaps even converted from austerity and fear to a public mood more oriented towards social justice. If the OWS movement can find a way to energize the country, the election of 2012 could be a game-changer for a more sensible turn away from economic injustice to recognizing that the traditional social policies we installed for the last depression, must be maintained and our economic system must turn away from the neoliberal constraints that have hollowed out our culture and narrowed our economic opportunities. It is not right that the very people who brought on this financial collapse still receive huge bonuses and display no shame.

RFM

Zucotti Park First Aid

Last weekend, November 12th and 13th, my son and I went to Zucotti Park in lower Manhattan New York,  where the Occupy Wall Street (OWS) movement had established its epicenter. We were lucky to get a hotel room just around the corner from the park and spent a good part of two days mingling among the occupiers, talking to them about the movement and learning more about the people involved. The first thing you noticed when you came around the corner from Nassau Street towards Broadway and Zucotti  was the huge array of police that surrounded the park. It seemed likely that there were more police than park mainstream OWS residents, though by then the resident population of the park had reached about 1600 (see Jeff Sharlet below). The police had huge communication trucks and many different kinds of squad cars; I couldn’t  tell if Homeland Security was there, and while I didn’t see any cars bearing that label, there were many unmarked cars in the police car mix. In the post-9/11 world, getting Homeland Security involved means that the movement (like the events we saw for the Republican National Convention in St. Paul in 2008) had reached threshold for a national security threat, but so far, it didn’t seem like that had happened. Of course, as we know, Homeland Security funds and trains police departments to serve as their proxy and many police departments have paramilitary squads that are prepared to carry out lethal assaults.  It was clear that the huge police presence surrounding the park was not going to allow the OWS movement to get up and walk towards Wall Street without a serious confrontation.  Two days after our visit, the police shut the park down, evicted the occupiers and confiscated or destroyed their belongings. Last night (Thursday, November 17) a crowd estimated at 32,500 by the NYPD occupied major blocks of the city, including the Brooklyn Bridge and simply overwhelmed the police. This morning Mayor Michael Bloomberg might be wishing he had left the movement in Zucotti Park where it seemed joyfully contained and a picture of industry.

I had a hard time thinking of Zucotti Park as a park when I first saw it–it is tiny. Located one block from the World Trade Center, it is currently owned by Brookfield Office Properties, a commercial real estate firm, headquartered in New York. When the building was first constructed in the 1960s by US Steel, they built a 50 + story structure at One Liberty Plaza.  They agreed with the city to provide a publicly accessible space, available 24/7  (this was one of those trades where the corporation gets to add more floors to a building and create a park to compensate the city).  Originally it was named Liberty Plaza Park, but later renamed Zucotti Park after John Zucotti, former chair of the City Planning Commission and current chair of  Brookfield Properties. It was badly damaged in the 9/11 attack and served as a launching site for the cleanup.  The renaming came after they remodeled the park, post-9/11. But because it is not actually a public park, it doesn’t carry with it the restrictions of public parks in New York, one of which bans tents without a permit. You can read more about the history and dilemma of Zucotti Park here.

How it all began: Jeff Sharlet of Rolling Stonehas written a fascinating account of the OWS movement and its early history. From the first paragraph of his article:

• “It started with a Tweet – “Dear Americans, this July 4th, dream of insurrection against corporate rule” – and a hashtag: #occupywallstreet. It showed up again as a headline posted online on July 13th by Adbusters, a sleek, satirical Canadian magazine known for its mockery of consumer culture. Beneath it was a date, September 17th, along with a hard-to-say slogan that never took off, “Democracy, not corporatocracy,” and some advice that did: “Bring tent.“”

The OWS movement members often refer to this space as “Liberty Park.” At first glance, the park looks like a wall to wall space of a crowded  tents,  some of which were made by joining colored plastic sheets, while others were of the small conventional variety that you use for backpacking or camping.  Many people stay all night and some people are invited to spend the night, either as a small group or as individuals.  At the time of our visit, many were talking about the need for a well-insulated winter sleeping bag and a much better tent to replace their makeshift plastic sheets;  most were confident that public donations would solve that problem (the site where I donated had already raised over $500,000 for the cause). Police did not allow generators to be used, claiming that the noise level would be too high. But, to charge batteries, the Zucotti Park residents used stationary bicycles connected to an electronic arrangement that allowed recharging of computer and cell phone  batteries and those willing to peddle for a while for their contribution to the workload were always welcome.  In general, it was a very friendly environment and if you entered the park with some apprehension about your compatibility with the protestors, you could immediately relax. After all, just about everyone is a member of the 99 per cent and thus a colleague to those in the movement. And you are generally treated in that way. This group wants to grow.

Around the periphery of Zucotti, there were a few quacks, hyping some distorted vision of the World, but they were not members of the OWS movement.  I stopped to talk to one person who seemed very bright and articulate, but when he started advocating that the people in Zucotti were too lazy to work and then began quoting from the Bible, swearing that the earth was only 6000 years old and that evolution couldn’t be true because turtles always seemed to be turtles and if anyone needed to evolve it was surely turtles. As I politely parted company with the young man, it occurred to me that he was a victim of Ronald Reagan, or Reaganism, because it was Reagan who first advocated that creationism should be taught alongside science in the public school system (OK, we have the Scopes trial, but that was long ago and culturally far away: Reagan brought the issue back into our living rooms).  Our culture has been dogged by this creationism/intelligent design/science dilemma ever since and this young man sounded like an unfortunate victim, not unlike what’s still going on in much of the country. Education is critical for a modern, civilized society and we seem to be losing our grip on this requirement. This too is part of the neoliberal plan designed to reduce the cost of labor, but it has reached a runaway toxic level of intrusion.

Library in Zucotti Park

Once you begin to move from the outside periphery to a more central region of Zucotti, you are more likely to run into people who have stories to tell and sensible solutions to propose. The OWS movement has been criticized for not articulating a set of demands and many within the group have tried to inject a demand strategy. But the movement has rejected such pleas and prefers to remain a group that is growing and is certainly content to say “hey if you want to announce your objections to the system, go ahead, you are part of the 99 per cent and we don’t intend to speak for you. We encourage you to speak for yourself.” It is a group that largely emerged from the arts and communications fields rather than from progressive academics or union types. In that sense they do not carry the traditional leftist point of view, though some individuals do harbor that sentiment. The OWS movement represents, in effect, a perfect democracy where everyone has a legitimate view and the right to express it. There are many who feel that the lack of a cohesive set of demands by the group will eventually be their undoing, but right now, they have a growing sense of confidence that they have tapped into a vein running through America and they intend to pursue what has so far been a successful strategy. It is quite astonishing to recognize that the movement is only two months old.  Every person is allowed and even encouraged to express themselves. I saw one sign denouncing the communications giant Verizon for its corporate practices, but in Zucotti, there is more of a focus on Wall Street and the banks. Many in the park had signs specifying specific reasons for change and some cited historical events to make their point. Those that made specific points (the need for a constitutional amendment to declare that corporations are not people–surprisingly I think that that one might actually get through) are generally well informed about the subject and eager to converse. And everyone is talking and communicating and arguing. Virtually everyone was approachable and polite. I found that a common theme among those that have attended college is a heavy debt from student loans. In this respect, they have all been victims of corporate greed. But this is a group that has respect for education and many want to return to complete their degrees or get into graduate school. This is especially evident if you go to the wearethe99percent website and read the statements submitted by individuals. Members of the movement have also started a newspaper, The Occupied Wall Street Journal, which has received high marks for its journalistic quality.

A few paths through the park interior allow people to move through in single file, but most of the paths are all so narrow, that to me, they looked more like a  representation of the extracellular space of the brain. In the middle of the park, there was a big food line. Food is free for anyone who enters the park and it mostly comes from donated food sources, manned by dedicated volunteers, many of whom have just arrived and are anxious to contribute. There was a library at the Broadway end of the park, consisting of a large tent with plastic boxes filled with donated books. You can check a book out and don’t need a library card. And because the area has no real public library facility nearby, neighborhood parents came to the library and checked out books for their children. It was a picture of industry and the OWS movement was proud of this additional effort for the cause. When the police came in and destroyed the Zucotti camp, early Tuesday morning (November 15 at 1:00 AM)  the library books were confiscated or destroyed and the OWS movement is trying to get them back, as they look for a place where a new library facility can be established.

RFM in Zucotti: proof of presence

At the other side of the park, but still on the Broadway end, meetings are held in which discussions take place on matters brought up in the General Assembly of OWS, where meetings take place regularly, at which time they try to resolve issues about the focus and direction of the movement. They are also very big on behavior and want this movement to be non-violent. Once the General Assembly meetings are over, people gather in the park to deliberate on the issues that have been raised in the meetings.  The police did not allow the protestors to have microphones and loud speakers, so they developed the art of the “people’s mic,”  which is that when a single person raises an issue, they speak in short segments of a sentence and then wait until the entire group repeats the words, so that everyone understands what is being said. Very good if you’re hard of hearing. It works very effectively, with a couple of moderators standing in front of the crowd to help coordinate the effort. It’s a mechanism that seems to provide a bonding experience and errors for complex statements that were hard to repeat generally evoked laughter. It is through the General Assembly meetings and discussion of the ideas through the “people’s mic” where deliberations are made; anyone can speak, though it generally makes sense that you already attended the General Assembly meeting. They have hand position rules to reject, accept and listen to a speaker who has the floor. Sometimes contentious issues come up and various suggestions made at the Assembly are rejected by the group. The interior also has a First Aid tent and has some internal security. In addition, there was a large blue plastic tent that served as the communications center where people were broadcasting live feeds that you can watch on the OWS site.

Originally, the group only numbered about 60 people when they first met on September 17, 2011 and it was hard to see that they were going to get anywhere. V for Vendetta masks  were quite popular but seemed to convey a more violent confrontation when what the protestors wanted was a non-violent beginning. Drugs and alcohol were not allowed in the park, though you certainly knew that pot was on the menu. Today the OWS movement has spread not only in America, but throughout the World. About 1600 different OWS movements are flourishing globally. By the time we went, OWS was serving more than 3000 meals a day and something like 1600 people were bedding down in the park each night.

The 99 percent versus the 1 percent is a very catchy and simple phrase. It also has meaning in terms of wealth distribution. According to Joseph Stiglitz, published in his article in Vanity Fair, the top 1 percent of our society bring in nearly a quarter of the nation’s income every year and in  terms of wealth, they own 40 percent of the nation’s wealth. Twenty-five years ago, the numbers were 12 and 33 percent, respectively. Few would deny that we have a wealth distribution that is completely out of control and the neoliberal system we have been living under for the past forty years has proven to be too toxic and too radical for our cultural survival, and it is incompatible with the mounting threats we face for a healthy future for the planet we live on.

Tent City in Zucotti Park, November 12, 2011

After being evicted from Zucotti Park, the OWS movement in New York and many other cities, created a massive turnout that overwhelmed the police, whose intentions were to brutally block the demonstrators from taking over things like the Brooklyn Bridge. I have heard a rumor that the OWS library was re-established on the Brooklyn Bridge, though it’s unlikely to have permanent residence there. This movement is strikingly different than anything I have ever seen. Though they do not have demands per se, there is little doubt that they will have an impact on the coming election of 2012 and they already have sent both political parties scrambling to come up with approaches that might ameliorate them and that, in and of itself, could have a powerful transforming effect on the future direction of our economic policies and our social safety net. These are people who shun the neoliberal emphasis on individual liberties and instead promote the idea that we are all in this together–we must create an interdependent society and move away from what imprisoned and impoverished most of us for the last forty years. It will get worse before it gets better, but the OWS movement has started the spirit of revolutionary excitement that may now be impossible to contain. That is what many of us are hoping for.

RFM

David Harvey's Crisis of Capitalism on You Tube

For a short but informative historical introduction and analysis of our current fiscal crisis, I recommend David Harvey’s presentation on You Tube. In many circles and for many reasons it is no longer an unforgivable sin to be talking about Karl Marx and his critique of capitalism. When you see the corrupt form of capitalism that has emerged over the past thirty years, especially in America, you have to scratch your head to come up with a sound reason why we went in such a radical direction, except that powerful corporations declared war on the Middle Class and we didn’t offer sufficient resistance.  The main theory of capitalism is greed and complete, unfettered control of money, which turns into handsome lifestyles for the ruling class and no one else. Apart from that, there isn’t any real theory of capitalism. Why is it that brilliant analysts of social economics always seem to favor socialism or communism? They are certainly different: socialism wants to manage capitalism and communism wants to do away with it. If you have never read Karl Marx, I suggest you look at Terry Eagleton’s lively, very readable book “Why Marx Was Right.”  It’s available from Amazon and as a Kindle download. You can also take an on-line course on Marx through David Harvey’s website by clicking HERE. Who in history was a more constructive critic of capitalism than Marx? And when you see on a daily basis how our version of capitalism is perfectly content with seeing the planet blow up, draining every drop of oil and using up tar sands to further pollute the air, all done in the name of profit from excess capital, you realize that the system we have is sheer madness and completely out of control. What’s more it makes so many feel that they have to struggle, turn to religion so they can hear it from their priest or bishop that they failed because they didn’t have enough faith in God, when in reality its our economic system that has failed them.  So we need to begin a new global dialogue about bringing back back sanity in our distribution of wealth and control of runaway corporate power, in the interests of our planetary future and that of our children who will have to inherit the world we leave behind. But what kind of world will allow us to live and save the planet while doing so? The contradictions of capitalism are too many to be ignored and we cannot rely on the current system to solve important issues like healthcare and the environment. But, what system will work and will it work for everyone? Can we create a utopia out of this current fiscal crisis? It’s probably too early for that conversation, but what the hell, let’s have it anyway.  Communism has no chance of working if there is no wealth to redistribute. That’s why the Bolshevik revolution deteriorated into a caricature of communism known as Stalinism. Both Lenin and Trotsky realized that if the Bolshevik revolution was not going to be joined by the rest of the workers of the world, particularly those  in Europe (which had very active communist movements at the time), it was doomed because Russia didn’t have enough wealth for redistribution into a functional society.  That’s why Marx argued that capitalism had to proceed communism or socialism, so that wealth of production could  reach a stage at which more social control could be used to benefit society as a whole. America is decades away from having that kind of dialogue, without things getting a lot worse.   It certainly looks like we are going to lope along, with a few more financial meltdowns likely to occur before America is ready to look at its fiscal house in a serious way.  But at least alternative thinkers, like Karl Marx can now come through the door again and sit in on the conversation.

RFM

Police Arrest in the OWS Movement (From Chris Hedge's Article in Truthdig

Chris Hedges writes passionately in Truthdig about his experience when arrested last Thursday while demonstrating in front of Goldman Sachs as a participant in the OWS movement in New York City.  He has covered many major conflicts as a journalist during the latter half of the twentieth century and paints a rich set of images, borrowing from Hannah Arendt, who wrote about the banality of evil as she reported on the trial of Adolph Eichmann in Jerusalem in 1963 for The New Yorker.  Hedges leaves little doubt about where he thinks our financiers belong as a result of their fiscal transgression. Who can argue?

In case you missed it, William Black, professor of economics and law at the University of Missouri at Kansas City, who worked on the Savings and Loan scandal in the 1980s (and author of the book “The Best Way to Rob a Bank is to Own One” (University of Texas Press 2005)), wrote an article that appears in Michael Moore’s website marking the 40th anniversary of Lewis F. Powell, Jr’s famous memo (August 23, 1971),   just before he was appointed to the Supreme Court by Richard Nixon. The memo encourages  corporations to fight back against the threats to corporate standing represented by Ralph Nader and his consumer advocacy. Many interpret Powell’s memo, written to the chair of the education committee of the Chamber of Commerce, as the beginning of the neoliberal pushback by corporate America, which currently has our financial system in a hammer lock.  What does all this have to do with the OWS movement? Black was recently interviewed while visiting the OWS movement in New York and detailed the difference between the Savings and Loan scandal (where many CEOs went to prison) and the current, much worse fiscal crisis, where no charges have yet been made against any of the deeply corrupt perpetrators of our casino economy and the global economic meltdown which they instigated, with Lloyd Blankfein of Goldman Sachs, as one of the prime suspects, or certainly the symbolic leader of the indifference demonstrated by Wall Street to the serious recession we find ourselves in today.

RFM

Fig. 1 Quartile divisions of wealth accumulation: Country A is fictional, Country B is Sweden and Country C is the United States

If you were hoping that Americans were well informed about the increasing disparity in wealth distribution in America, this posting will disappoint you. Perhaps you’ve heard the story already. A few nights ago on the PBS News Hour, financial correspondent Paul Solman gave a little quiz as he walked through Times Square, interviewing different people and asking them questions based on the pie chart illustrated in Fig. 1. The three pie charts are divided into quintile (5 x 20%) sectors based on the percentage of total wealth of the country by each quintile (see wealth definition below); yellow is the top 20%, blue the next 20% followed in order by red, green and orange at the bottom 20%). Three different countries are represented by the three different pie charts. The first of two different questions Solman posed was: suppose the country’s wealth was divided into the quintiles represented by the colors–in which country would you prefer to live? The majority pointed to either Country A, which is a fictitious country, with total wealth shared equally among the five different sectors, or the Country B, which is represented by Sweden. Among those interviewed, very few selected the bottom pie chart, Country C, which is in fact the wealth distribution for the United States, in which the top 20% of the wealthiest Americans own 84 percent of the total wealth. That question by itself suggests that the majority of Americans in Solman’s sample would prefer to live in a country that has a more equitable distribution of wealth, which for them, doesn’t exist. But then the more obvious question was put forward when Solman asked, which among these three countries do you live in–which one is America? The majority of those interviewed pointed to Country A or Country B and very few selected Country C. Yet when Solman presented the pie charts to nearby entry level workers, they had no difficulty identifying the United States as  Country C.                                                                                                                                                                                          

Solman’s little quiz would hardly stand the test of statistical scrutiny because his limited sample was certainly skewed, undersized and biased in many different ways. He was actually interviewing the crowd waiting to get into the Dave Letterman Show (except the entry level workers didn’t seem to be in that line). But in fact, he was merely echoing a more complete and extensive  study carried out by two academics, Michael I. Norton and Dan Ariely, professors from, respectively,  the Harvard Business School and the Psychology Department at Duke University. The title of their paper “Building a Better America–One Wealth Quintile at a Time” was published on-line in Perspectives on Psychological Science. They had carried out a larger study asking similar questions, but with a nationally representative  online sample size of 5,522, with 51% female (mean age 44.4), randomly selected from a panel of more than 1 million Americans and completed in 2005. Median household income in their sample was $45,000, similar to that reported in the 2006 U.S. census data; in the 2004 election; 50.6% voted for Bush and 46% for Kerry, which was close to the actual outcome. All respondents had the same working definition of wealth which was read to them at the time: “wealth, also known as net worth is defined as the total value of everything someone owns minus the debt that he or she owes. A person’s net worth includes his or her banking account savings plus the value of other things such as property, stocks, bonds, art, collections, etc., minus the value of things like loans and mortgages.” Each respondent was told about Rawl’s expression of a just society: imagine if you joined this nation, you would be randomly assigned to a place in the distribution, so that you could end up anywhere in this distribution, from the very richest to the very poorest. So that instruction makes the study a little different than the simple interview that Solman carried out. Not surprisingly people overwhelmingly selected Country A or Country B. The actual numbers from their paper are shown in the shade covered pie charts of Fig. 2 ; equal distribution got 43%, Sweden got 47% and the U.S. got 10%; the comparisons between individual countries was Sweden 51/49 over equal; Sweden 92/8 over USA and equal was favored over the USA 77/23. These differences were robust across gender lines, political affiliations and personal income. The slight preference for Sweden over the equal distribution country implied that Americans wanted at least some inequality in the distribution of wealth. So the Norton & Ariely study was based on the idea that you had to decide which country you would join, when the economic strata you would occupy was randomized and you could be at the top or anywhere in between, but the decision would not be yours. When asked in this way, Americans chose a more equitable distribution than that found in the United States today.                                                                                                                                                                   

The next part of the survey will surprise no one. The general strategy is displayed in Fig. 3. The upper horizontal bar graph shows the actual distribution of wealth in America. Notice that on this scale, the fourth and fifth bottom quintiles (purple and light blue) are so small that they cannot be represented adequately on the graph scale.  If you find this shocking, then you should read Barbara Ehrenreich’s excellent book “Nickel and Dimed: About (Not) Getting by in America“ to see how problematic it is for people who do not have sufficient stability in income to keep afloat in America. We do not pay enough for entry level positions, such as maids, janitors, waitresses and WallMart employees. Today, one in six Americans gets food stamps. But, back to the graph. The middle bar shows the estimated wealth distribution in America, projected by averaging the results of all those surveyed, as they attempted to gauge the wealth distribution of America.  For this bar, each person had to estimate the relative wealth distribution for each of the quintiles. It is apparent that the group way underestimated the amount of wealth owned by top quintile  You will also notice that on this bar, all quintiles have representation, meaning that the average American doesn’t know that the lower 40 percent of Americans do not have enough wealth to have representation on the scale of the top bar graph. The relative wealth of the lower 40 percent of Americans is invisible graphically as well as invisible to most Americans. The very bottom bar, shows what those polled would like to see in “perfect America.” In that non-existent state “perfect America” looks very balanced, with a progressively smaller percentage of wealth assigned to lower quintiles of the wealth scale, but every quintile as a more robust presence. So, here too Americans want to see the “wealthy” better off, but compared to the society we currently have (top bar), they would like to see a far healthier America, with wealth distribution more equitable.

There were other small differences in the outcome Of Norton and Ariely’s study, depending on whether they looked at the results by groups, based on salary differences, gender, Republican vs Democrat, but these differences were small compared to average, indicating that most Americans had similar views when making these kinds of judgements. My conclusion from this  study is that American citizens don’t know how skewed the wealth curve distribution is in their own country, but if they could design a different country, they would generate a more equitable society. So, in terms of wealth distribution, social policies, including health care and social security, the formation of unions and the value of public education, Americans consistently support a view that is to the left of the current President or most members of Congress. The reason why this view does not dominate our political and social philosophy is because our political system is not based on an equitable distribution of representation (imagine how utterly skewed it is that California and Wyoming get the same number of Senators) and the financial costs of running an election are so great that every candidate at the national level needs support from a sugar daddy who is generally from from big business and is generally far to the right of where most people are with respect to social policy. And, thanks to the Supreme Court ruling of three years ago, corporations can throw unlimited funds to sway our political system so that it subserves the interests of corporations–the bigger the better. Whether these problems can be politically solved or not, whether America can reach for a sense of economic justice remains to be seen, but so far the polarization in America, which is now being accelerated by paranoia and demagoguery, has yet to reveal any hint that we can avoid a train wreck in our future. The best we can do is keep plugging away, keep arguing as rationally as we can and hope that the quality of our drinking water improves so that a rational society can re-emerge some time in the near future. American business has failed the country. Perhaps we could rationalize their huge paychecks, if in return they met their responsibilities and provided good paying jobs for all Americans. But in fact the evidence is clear–the interests of big business is to remove more wealth from the middle and lower income classes and make additional profits for themselves. This cannot continue.

RFM

There is no language being used in our government today that has linguistic identity with that which we use in our daily lives. The Republicans want to cut spending, even though that will eliminate jobs at a time when they have promised to create them. They are the new  impostures. Young people are in a depression: there are no good jobs available and those that infrequently come along have ferocious competition. I see people with PhDs apply for positions that require a BA or BS college degree. Have you seen this congress do anything about creating jobs? Is there a jobs bill that we haven’t heard of before or is that the “jobs-killing” plan not to raise the debt ceiling, which will translate into higher interest payments for everyone who has almost any form of loan? And Economics 101 tells us that when a recession hits, and this is a very bad one–the worst since the Great Depression–the government should create jobs by spending money and hiring people, keeping state and local workers on the job so that they in turn will spend and create more demand, which encourages companies to hire more workers and those workers in turn create a new level of demand as the snowball turns into an avalanche of jobs. Yes, along the way, we have to create a new economy, because we sent the factories for the old jobs to China. And who did that?

The stimulus package Obama engineered in 2009 worked, but it wasn’t big enough–it was too small and had too many tax breaks to keep the target of unemployment at 8%. The  $ 1.2 trillion spending bill that Romer talked about would have worked, but the $700 billion that got generated allowed the unemployment to go higher than predictions and it was loaded with tax breaks which don’t provide the same level of economic stimulation. Republicans knew this when they passed the bill. What we need is another larger stimulus package, one implemented by more progressive economists, not those who engineered our disastrous deregulation of the banks. It worked that way during the Great Depression and our job numbers, especially among the young, are in the same territory as we had in that era. So if creating jobs is so important and cutting the deficit is not something to think about until you have good job creation conditions, why does Congress concern itself with the issue of the debt ceiling?

The answer is pretty simple: the Republicans are acting in unison because they believe they can defeat Obama in the 2012 election and that, in addition to taking over the Senate and keeping the House, will give them a trifecta to carry out the complete dismantling of our social  safety net and destroy the new healthcare system before it can be fully implemented. These Republicans are not leaders, but an army of soldier ants out to destroy whatever is in their pathway and even if that means further destruction to our weak recovery. To further appreciate the captivated ideologue brain that substitutes for thinking in Washington these days, you should read Robert Reich’s blog this week, “Why Washington is About to Make Things Worse” to get reinforcement for the lost principals of E 101, as well as to explore the maddening hypocrisy of Standard and Poor’s threat to downgrade America’s credit rating, when this agency, together with the other credit rating agencies (Moody and Fitch) was giving out triple-A ratings to some of Wall Street’s riskiest experiments, including mortgage-backed securities and CDOs (collateralized debt obligations). That kind of rating continued until the eve of the meltdown in 2007. Is this what they mean by reform? Protect banks and investment firms but hold countries accountable? True reform is a long way off.

The Republicans were shocked to see that not only did America elect a black man in 2008, but they elected a competent black man, so there is double concern here. Why can’t the Democrats nominate an incompetent white guy, like the Republicans generally do? Then too, there’s the question of who will pay for all of our debt once we decide we want to do something serious about it, like Clinton did? After all, Obama proposed the most far reaching debt contraction of anyone in Washington. But, the Republicans want to take it out of Medicare, Medicaid, Social Security, education and other benefits that go to the shrinking Middle Class and with only an election trifecta to stop them, you can bet that the 2012 electoral race will bring out all the Republican bag of tricks, like those we saw in Florida in 2000 and Ohio in 2004. Many Republican-controlled states are already gearing up for 2012 by passing photo ID requirements for voting. What kind of photo ID will be required? From now on, seat belts are required. In the meantime, the one method that knocked some sense into the Republican Congressmen and women was to light up their phone system and saturate their emails, as happened after Obama’s speech on Monday.

RFM

GE was recently in the news as Americans were outraged to learn that for the year 2010 GE paid no U.S. Federal income tax and and in fact, received a tax rebate of $ 3.2 billion. GE’s current CEO, Jeffrey R. Immelt serves as the chair of the President’s Council on Jobs and Competitiveness. The purpose of this committee is to make suggestions for changes in corporate tax laws by closing loopholes in the tax code. But can a company that spends more money on lobbying than any other organization, whose efforts we must assume include those aimed at further reducing their corporate tax burden (so the company can report a higher profit, which is the sole function of a CEO) really give objective advice on closing corporate  tax loopholes? An earlier comment on the tax breaks for GE as well as a bit of their history has already appeared in these postings.

Less well known than the GE logo is the company’s history of grooming Ronald Reagan and converting him from an FDR Democrat (he voted for FDR four times) to a rabid conservative, who, as a figurehead Governor of California and then President of the United States, introduced runaway tax cuts and corporate gifts that initiated, among other transitions, the corporate merger mania and the beginnings of dismantling American manufacturing. Reagan was for many years the public face of General Electric through General Electric Theater and Death Valley Days: his indoctrination was so complete that he absorbed the core values of GE and the company was a major benefactor of Reagan’s new tax policy once he was elected to the Presidency. Citizens for Tax Justice estimated that the 1981 tax law pushed through by Reagan yielded in excess of $ 1 billion in additional tax savings to GE alone over the subsequent half decade. The tax savings were not put into plant equipment and improvements to make the company more efficient, but instead went into corporate mergers and the loss of American jobs as GE shifted many of its operations overseas.  It’s that overseas shift in jobs the gets our attention here.

It is always worth looking at the social values of a multinational giant like GE when they invest their money overseas. As these companies take away jobs from Americans, gaining lower wages workers and bigger profits, do the communities in which they invest derive improvements in their community life and if not can the lack thereof be laid at the feet of GE or any other multinational corporation? When investing in emerging economies, do the multinationals help create cities like those in 20th century America or do they prefer those that can be exploited like American cities were in the 19th century, with low wages, poverty and slum conditions of living? Was America just a stopoff center for the evolution of the multinational corporation? We hear about the lost jobs in America, but how well off are the foreign communities  when a firm like GE invests in their local and national economy? Does their presence raise all boats? Does a giant corporation like GE have social responsibility to a community in which they invest and if not, isn’t that a violation of their obligations when they apply for a corporate license? Wasn’t one of the original defining characteristics of a corporate entity based on the premise that granting a corporate license was done to facilitate public benefits?  And just providing jobs isn’t enough. We need worker safety and benefits, including health care, retirement obligations and worker retraining if the corporation decides to leave. Many of these options are no longer considered to be those of a corporation if they choose to leave the United States and locate in other countries, while continuing to make profits in the United States. But the situation is very different in European countries, such as Germany.

Enter two players who can shed light on this weighty question. The first is Genpact (previously known at GE Capital International Services (GECIS)); it’s another global company whose operations in India are finance and accounting. Genpact went public in 2007 (symbol on NY stock exchange is “G”) and GE has been reduced to a major share holder rather than outright owner.  The second stage entry is Gurgaon India, a city that barely existed a few decades ago, located about 15 miles south of India’s capital, New Dehli. Jim Yardley, writing in the NYT had an extensive article on this city which resonated with me about this question (linked above)–the question of American corporate responsibility to the foreign communities in which they  invest. On the one hand Gurgaon has become a picture of wealth and prosperity, boasting modern shopping centers and many large corporations have expanded their space and development of the city and in the process outsourced many jobs that once resided in the United States.

But Gurgaon is a city with two faces. While displaying an image of rapid growth and prosperity on the one hand, it is also a city of extreme poverty, residing in basically the same space as its far wealthier counterpart. Yet, while two widely disparate social classes reside in the same city space, they co-exist with vastly different trajectories of their economic future. Perhaps no other city in the world has such a stark display of the mean raw edge of corporatism, the global economy and its indifference to poverty and public social needs. You can see some of the contrast in living conditions in a NYT  slide show illustrating the extremes of life in Gurgaon and the contrasts so visibly evident in a seemingly prosperous city, based on privatized services that all but skip the poor. The NYT article blames the clumsy democracy of India and Gurgaon, heavily bureaucratized with a corrupt  regional government as the reason for Gurgaon’s failure to establish better living standards for all of its citizens. But what are the responsibilities of the corporations that make huge profits in Gurgaon? Perhaps corporate failure must bear some of the responsibility for the diminished water supply as the water table that feeds bolewells is reduced each year. Perhaps corporate behavior should address the lack of  schooling among the poor and, instead of paying off politicians to hide miserable conditions like poor education and filthy living conditions, the citizens of Gurgaon should rise up to demand greater attention for their needs and try to establish a more uniform standard for the basic  living conditions of all members of Gurgaon? So, an alternative explanation to the cause of Gurgaon’s widespread poverty is that corporate giants like GE have failed to meet their fundamental ethical obligations as members of the communities in which they invest. To be sure there is a shameful side of government behavior, with deep corruption and inefficiency, but isn’t this among the issues that should be of concern to the corporations of Gurgaon that make money there?

Today Gurgaon is sometimes referred to as the “United States of Gurgaon,” a rapidly expanding city in which Genpact, Coca-Cola, PepsiCo, Motorola, Ericsson, Nestle of India and many other companies operate in a city in which outsourcing has provided about 500,000 jobs. Although it barely existed before 1979, the city now has a teeming population of 1.5 million and is one of the most rapidly expanding cities in India. Next time you talk with someone in customer service or technical support, and they have an Indian accent, ask them if they are from Gurgaon.The rapid expansion and poor services for the city has been blamed on a government that can be manipulated and is seemingly incapable of significant city planning.  One of the characteristics of this city is that the corporations operate outside of government for almost all of their needs, including water, which they get by digging borewell holes, electrical power from privately owned generators and even security protection, with 12,000 private security personnel. In contrast, the village of Gurgaon is an urban slum, with open sewers, polluted water, and impoverished living conditions that are in stark contrast to the other wealthy life styles available to those who participate in corporate profit making.

You can imagine that Gurgaon is a model of how corporate America would like to see United States cities positioned, where corporate wealth leads to a vast and increasing distinction between the wealthy and the rest of us. The Republican budget recently proposed by Paul Ryan, written by the American Enterprise Institute, would force America to make a giant leap backwards towards the Gurgaon-American model for our cities, with restricted services, emasculated government and crumbling infrastructure. In case you haven’t looked around you, we already qualify for the area of crumbling infrastructure part. There isn’t a road in Minnesota that doesn’t have a string of potholes and bridge safety is a huge issue after the collapse of the I35 bridge in Minneapolis a few years ago. In the meantime, companies like GE would benefit by diminished corporate taxes and enhanced dominion over a limited government whose functions are primarily defense of the nation against external enemies, imaginary or real. It may seem far fetched to think of Gurgaon as a model for a future American city, but with increasing privatization of our government functions, how can we avoid this futuristic vision from establishing itself in America and consuming our country, just as it is consuming India, where rural peasants struggle to survive on $2 a day and find themselves in the majority but completely disconnected from any political power. Keep in mind that in America, the polls consistently show that Americans favor social structures such as labor unions, Social Security, Medicare and Medicaid. Yet, these are the very attributes of our culture that the Republican party, in its Tea Party iteration, are willing to take away for the sake of improved corporate profits and the enhanced prospects of one party rule. The election of 2012 will reveal to us how far down that road we have traveled. Will we step back from a corporatist future and the momentum for converting of our cities into Gurgaon-like entities or will we take another step forward and become more progressive and inclusive in our social policies? For me, and for many others, two giant tapestries will be used to paint the 21st century, including the one that we will use to bring corporate power into an alignment that better serves people, while the other is waiting for us to reveal our plans for the global climate change that is already upon us and already demands our attention. Denial at this point amounts to a social crime.

RFM