Friday, December 2, 2011

Analysis of Psychosis

On the quiet Friday following Thanksgiving, I read the “business life” of Sue Raby in the Financial Times, an Avon saleswoman slugging it out on the outskirts of Liverpool.
Sue Raby, coiffed shoulder-length brown hair, a grey shawl-collar coat, sets off down the road with a wheelie shopping bag full of Avon catalogues. The 52-year old single mother of two girls (22 and 11), sweeps her arm theatrically in the air. “This is one of my streets, this estate is my territory,” she says. This “territory” is a small patch of Formby, an affluent dormitory town for Liverpool, in the northwest of England.
This opening paragraph is not dissimilar to the interview scene in the opening of The Shining. Everything seems good and in order – even slightly uplifting. Sure, the main character calls a small patch of a bedroom community her “territory”, but who among us has not exaggerated the importance of his or her job/role/blog? What matters – the take away as they call it in the corporate parlance, the thing that one has to learn from the story – is that she has options, unlike those women in Afghanistan. A single mother of two driving to work in “her territory”: what was empowering women all about if not this?
If you cut Ms Raby, a former physics teacher, in half, she says, you would find Avon in the middle. The ringtone on her mobile is the sound of a doorbell, a reference to the 1960s advertising campaign catchphrase “Ding Dong, Avon calling.” When driving her silver Vauxhall, which has a pink sign advertising her website on the side, she plays motivational CDs to gee her along. Back at her suburban home, Avon boxes and catalogues are strewn around the sitting room, piled up in the hallway.
If we cut Sue Raby in half, we’d find Avon. Avon the company? Avon’s products? Avon’s certificate of incorporation?

Okay, so the former physics teacher is using poor imagery to say that she has “internalized” Avon. But that, too, does not square with what follows. “Boxes and catalogues strewn around the sitting room and piled up in the hallway” are more like an external intrusion; she, an outstanding example of a worker forced to take her job home.
This morning she is knocking on doors, selling silky-wear lipsticks and face-lifting creams while also on the lookout to recruit new sales reps. She earns 25 per cent commission on direct sales and a percentage of those clinched by reps in her team. The hardest bit, she says, is getting people to the door – “they might think I’m a Jehovah’s Witness, or the council or bailiffs”. If she is working a estate, she says, she wears jeans rather than a skirt, which looks more official. She also tends to steer clear of houses with dogs, although others push catalogues through the letterboxes with a spatula to fend off canine bites.
The “location”, like the Overlook Hotel in The Shining, is beginning to reveal things that we did not originally know.

The affluent bedroom community has turned out to be a place where, if you knocked on a door, they would think you were a bailiff or the council; the coiffed Ms Raby has to dress down to even have her knock answered. And her territory, far from being hers, is an open field for an assortment of aggressive and enterprising competitors who brave dogs and who want to eat her lunch.  No wonder she listens to motivational speakers: she needs some stimulus to carry her through the day. Before she could sell, she had to buy into the confidence game of the confidence men selling confidence. It’s a mighty hard time, but I’m on my way, they have no doubt told her to constantly mutter to herself.

Suddenly she sprints off towards a blonde woman pushing a pram with one hand, grasping a toddler’s arm with the other. Ms Raby is – in the parlance – “buggy bashing”, stopping a young woman in the hope of recruiting her to her sales team. “Would you like to earn some extra money?” Ms Raby enquires tantalizingly.
Why would Ms Raby want to give her own customers to someone who has confessed to being incapable of making a sale? She insists she has spotted a potential “gem”. “You need confidence. I could get Kate up and running.” She knows this from personal experience. “When I first did sales I would go around houses with my one-year old with the catalogues under the buggy. I ran away from the door before anyone saw me. I was that under-confident”.
Forget the recruitment system that is modeled on degenerate cell mutation. I recruit you and you recruit another person who then recruits someone else and before you know it, the entire population of the earth has turned into Avon reps.

Look at buggy bashing, which is in the “parlance”. The FT writer, one Emma Jacobs, defines it as “stopping a young woman”, but she is being intuitively evasive and dishonest. She ignores the word buggy, which is central to the expression. Buggy bashing is recruiting a young woman with an infant. The infant is where the focus is because children elicit sympathy. Ask any beggar in Bangladesh. Better yet, read Oliver Twist, which is culturally closer to Ms Raby. Why, she herself was one such recruit, in her salad days when she was “under-confident”.

And that word: under-confident!

What a word! To know what it really means, you have to know the mentality of the people who have created it, their orientation and angle of vision to life. Both are adequately explained by Alec Baldwin’s character in this clip from Glengarry Glen Ross:

How effective is this kind of talk? It is effective enough to have come to use and stay in use. You saw a variation of it in terms of framing the issues in Part IV of the EU crisis. But it works on any scale. After being pumped up by Ms Raby’s faux can-do and you-need-confidence speech, even Emma Jacobs of the FT chimes in to describe a young nurse as having “confessed” to be “incapable of making a sale”.

She is already talking like Baldwin's character!

The psychosis in the title of this post is not about Ms Raby alone.

(And did you recognize the ABC – Always Be Closing? It is the “ding dong” ringtone of Sue Raby’s cell phone. When her phone rings, it is Avon Calling. But Avon is calling her. It is a reminder that she should always be closing!)
“If I can get Kate up to speed she’ll be doing me a favour. If not, she’ll be off my Christmas card list, and I’ll take my old customers back.”
Here, Sue is creating a “win-win situation”, as she is taught to do in her sales classes. Everything must be framed as a win-win situation.

If Sue Raby can get the under-confident nurse “up to speed”, then she – Sue Raby – will win: she would get a percent of her recruit’s 25% share of a £3 lipstick. Else, she will have one less name on her Christmas card list.

This latter expression – one less name on the Christmas list – Sue Raby has learned in the sales classes. The expression is on one hand allegorical. But at the same time it is very real in the sense that that concept of friendship (and Christmas cards) as means towards closing a sale are the Alpha and Omega of the salesmanship as spelled out by the grand daddy of all salesmen, Dale Carnegie. The Avon Lady is following him to a “t”. I quote from the upcoming Vol. 4:
Given this centrality of sales and its practically limitless sub-specialties in a Capitalist society– in the U.S., one could find hiring ads for “nuclear waste salesman” – it is natural that the subject is deeply embedded – intertwined, really – with culture. Often, it is the driver and creator of the culture, especially in the “Anglo-Saxon” U.S. and U.K., where the influence of businessmen goes further than other nations. The culture in these countries is the culture of a salesman, as it is shaped by the habits, sensibilities, tastes and priorities of salesmen. The influence is in plain view in Dale Carnegie’s How to Win Friends and Influence People. 
The book’s title is precise. It telegraphs the content, so attention must be paid. Carnegie wants to win friends. Why? Because he wants to influence them. But the purpose of this influence is not bringing the newly acquired friends to the righteous path. Carnegie is not an Islamic zealot practicing the Prevention of Vice and the Propagation of Virtues. He wants to influence people in order to sell to them. Friendship is a mere strategy, a means, towards that end. Note the word “win” – not finding friends or making friends but “winning” friends. The purpose is exploitation, after which “friends” become what they always were: people. It is a singularly calculating and cynical title.
But Baldwin’s character in the above clip does not fit the bill of a congenial salesman in search of friends. What gives?

The answer is what links Ms Raby to the EU crisis: the falling rate of profit. From Vol. 4:

When the “conduct” of the salesman changes in a fundamental way, the effects reverberate across the social and cultural spectrum.  
One such fundamental change took place after the collapse of the Bretton Woods system in 1973. The change which began gradually and continues to date was the intensification of competition due to the falling rates of profit. Coupled with the gradual desensitization and resistance of the population to the advertising pitches, the increased competition made selling a more stressful occupation than it was in the heydays of the U.S. industrial power.  
This gradual, but persistent and grinding trend, forced the salesman be more “productive”; he had to sell more than before in less time than before. But other salesmen faced the same conditions, so it became tough for everyone to make a living. The ensuing stress darkened the salesman’s mood, with the result that passive Willy Loman gave way to the obscenities spewing, conniving and downright criminal salesmen of Mamet’s Glengarry Glen Ross. How much can a man take!
We continue.
Cars and phones are dangled in front of them as incentives. Gatherings at countrywide Avon events are said to induce cult-like fervor. Worshiped are the gurus – the high earners. In Britain, there are no bigger stars than Debbie Davis and her partner Dave Carter. Ms Davis turned to Avon after being made redundant from a printing firm. Within three weeks, she had sold almost £19,000 of products and recruited her partner. Now the two have an 8,000-strong team and have turned over £13m in the past seven years.
You probably smiled reading about cars and phones being dangled in front of sales reps as incentives. Alec Baldwin’s character offered a Cadillac Eldorado and steak knives!

The ultimate incentive, though, are the high earners. They are real flesh and blood, people like just us, and they show that it can be done. It is only a matter of confidence and pushing forward and being steadfast in the face of adversity.

But then, there is the math.
Avon now operates in more than 100 countries with more than 6.5 million sales reps around the world (just over half the company’s earnings are from emerging markets). Last year, the company’s revenues were $10bn. Sales in North America account for about 20 per cent of this, while the UK is one of its top five markets.
$10bn in revenues divided by 6.5m sales reps works out to about $1,500 per rep, of which they get 25% commission. So a rep, probably a young mother with a child, can expect to make just under $400 a year.

With that, we go to the final scene in the FT story where Sue Raby has “put on” a “Christmas Party” in her mother’s house, no doubt because her own has no room thanks to Avon catalogues and products. 
That afternoon Ms Raby puts on a Christmas party in her mother’s house, down the street from her own. Plastic holly garlands hang around the fireplace, gold tinsel wraps the light shades and Merry Christmas signs are on the wall. Purple, orange-and-green packaged creams and perfumes are arranged in pyramids on tables. Mini-vanilla slices and bite-size doughnuts defrost in the kitchen. Cups of tea are handed out to the nine female guests who arrive, some with young children, some with their free old-age bus pass, to browse the catalogue.  
Ms Raby is on top form, showing off creams and fixing appointments to visit the guests in their homes. “You get out of it what you put into it,” she comments. 
What does she want to get out of it? “I don’t want to get myself a target as that would limit me. But maybe £80K a year. No, let’s say £100K.
How do you write a modern Gothic story?

I could begin with a Christmas party:

Plastic holly garlands hung around the fireplace, gold tinsel wrapped the light shades and Merry Christmas signs were on the wall. Purple, orange-and-green packaged creams and perfumes were arranged in pyramids on tables. Mini-vanilla slices and bite-size doughnuts defrosted in the kitchen. Nine female guests, some with young children, some with their free old-age bus pass, had arrived to browse the catalogue. 

You say that this is not per se Gothic, that it could be an O’Henry story about the warm hearts of the poor during Christmas? Perhaps. Try now:

The host, a single mother of two who was made redundant from her job teaching physics one supposes because all the knife wielding Liverpool students had mastered Newtonian mechanics, was taking down guests' name to later visit them in their homes for a sales pitch for lipsticks and facial creams.

Psychosis is, to use a term favored by Sartre, situational. Its dictionary definition is "profound disorganization of mind, personality, or behavior that results from an individual’s inability to tolerate the demands of his social environment whether because of the enormity of the imposed stress or because of primary inadequacy or acquired debility of his organism especially in regard to the central nervous system or because of combinations of these factors and that may be manifested by disorders of perception, thinking, or affect symptoms of neurosis, by criminality, or by any combination of these".

Those weasels at the American Psychiatric Society! How conveniently and cynically they shift the blame from the situational, which is always at least partially social, to individual. 

Inability [of the individual] to tolerate the demands of his social environment either because of the enormity of the imposed stress [on him] or because of primary inadequacy or “acquired debility” of his organism.

Let us define psychosis properly, for what it is:
Psychosis is the breakdown of the individual who, persistently and as a matter of his working condition, is put in a situation where he must perform at levels that the general, controlling conditions, will not allow.
The twin drugs of sermon and motivational speech that are commonly prescribed might at short term delay the onset of the disease – which is why they are commonly prescribed – but in the long run they exacerbate the tension and make its flare-up more violent.

The impossibility of reconciling the contradiction between an individuals particular situation and the general conditions surrounding him is the trigger for the breakdown.

In The Shining, Jack goes mad because he cannot write. The Shining, according to Stephen King, is about writer’s block.

Writer’s block is a modern phenomenon. Billions of people throughout centuries could not write, in the sense that they were bad writers. That was perfectly alright.

Then, modern economic conditions forced some people who could not write into the craft. Here,  force is social.  People are forced into writing for the same reason that they are forced into sales: because they need money and that is the only option. That is the social element in “writer’s block”. In the absence of social force, only those who could would take up writing. Can you imagine a Tolstoy struggling to tell a story or a Hemingway having trouble with a sentence?

What is one to do if he has to write but cannot? His particular situation could offer an escape route. If he has to take care of a young child, for example, or there was an extended illness in the family, he could point to them as circumstances beyond his control standing in the way of completing the work. Everyone would understand and the psychosis might be avoided or at not least not intensified.

But when the situation eliminates all the excuses – think of the quiet setting of a remote hotel for a writer, cut off from any distraction – the tension from the inability to perform finds no outward outlet and turns inward. If the situation persists, the result is psychosis and madness.

Look, now, at the position of Sue Raby. She expects to make £80K a year – no, make it £100k – from selling £3 lipsticks on which she collects 25% commission.  The average rep makes about $400 a year. But some reps make millions, so her goal is not really overly ambitious, is it?

If she cannot reach her goal, it could only be that she was under-confident and incapable of doing what others have done.

“You get out of it what you put into it,” says she, blissfully unaware of what she is saying, for what she has put in, beside some mini-vanilla slices and a few bite-size frozen doughnuts, is her time and labor, which is all but worthless as per educational authorities in Liverpool.

In Cameron’s England, for a 52-year old single mother of two, conditioned to believe in she-believed-she-could-so-she-did bullshit, if that is not the set-up for potential horror to come, I don’t know what is.

Monday, November 21, 2011

The Origin of the [crisis in the] European Union – 4: A Refresher on Finance Capital



Force is a vector. That is physicists’ way of referring to a phenomenon that requires more than one characteristic to be fully and adequately described. A force must have magnitude and direction. With either of these attributes missing, a force is inconceivable.

When Macbeth asks: “Is this a dagger that I see before me?”, we do not know whether he has found a dagger in the street or a mugger is threatening him. Then we get the clue: “its handle towards my hand.” So, there is no threat and the dagger is being “presented” to Macbeth. That is the direction of the force.

As for its magnitude, we intuitively know it. “Just a little”, if we want to scratch our back with a dagger; “a lot”, if we want to stab someone.

The direction of force is singular. It is always one specific direction. It follows, then, that force is incompatible with freedom and negates it, freedom being defined precisely in terms of existence of alternatives. Force is the absence of alternatives. Conversely – and the proposition is convertible – we could say that if there is no alternative, a force must be present.

Now, observe, these sample quotes from the EU crisis:
  • Mr. Barroso [the president of the European Commission] also reinforced calls for Greek politicians to endorse the austerity measures. “If anyone thinks that without the program agreed with the E.U. and the I.M.F. we can still get by somehow, there’s an alternative program, that’s not true. There is no alternative.”
  • In words that recall former Prime Minister Margaret Thatcher of Britain, Mrs. Merkel says there is no alternative to trimming Europe’s entitlement programs.
  • This [Portugal returning to growth] will involve “a very rigorous programme of austerity and structural reforms” covering everything from slashing public deficits and extensive privatizations to shake-ups of justice and education. “There is no alternative,” [the country’s new prime minister] says.
  • Constrained by the unpopularity of bailouts at home, political leaders appear able to act only at the 11th hour, when they have no alternative.
So, a force is acting “on” Europe; there has to be, with so many leaders telling us that there is “no alternative”.

I have showed elsewhere that the force in question is finance capital. The upcoming Vol. 4 of Speculative Capital will explore this point in further detail. I merely note here that acting alongside finance capital is its latest, most advanced form, speculative capital. The two are not different forces but two movements of the same phenomenon; the latter can be explained by the former but cannot be reduced to it.

Finance capital is a force because it causes change. And it is a social force because it changes the social systems and relations. But unlike natural forces whose “purpose” is unknown – no one really knows why electromagnetic force exists –the purpose of finance capital is clear: It wants to maximize its profit. Its direction follows from that purpose. Finance capital pushes in the direction of maximizing its rate of return.

As for the magnitude, it is a function of the resistance it encounters.

In places where finance capital has managed to be an insider and there is little or no resistance, its magnitude is barely perceptible, as when gently scratching one’s back with a dagger. Then finance capital could be said to be “polite”. Like in Cameron’s silly Big Society, it speaks in terms of “initiatives”.

When there is the need to put the impertinent representative of a periphery country in his place, the force magnitude increases, as reported in the Financial Times of June 29:
Olli Rehn is nobody’s idea of hothead. A mild-mannered Finnish economist, he is regarded even by his countrymen as unassuming – verging on dull.

But twice in recent days Mr Rehn, who is the European Union’s senior economic official, has been forced to get angry.

At an emergency meeting of finance ministers a week ago Mr Rehn came down like a ton of bricks on Greece’s Evangelos Venizelos, who had the temerity to suggest reopening talks on the €28bn ($40bn) austerity package that Athens must pass this week to avoid sovereign default.

Those present were taken aback by Mr Rehn’s ferocity, and Mr Venizelos backed down.
It was smart of Venizelos to back down. Otherwise the mild mannered economists might had pulled a knife on him – or threatened his wife. The dull Finn is a trained dolphin at the service of finance capital and performs on its behalf, however much he might be unaware of that role.

Finally, for the rabble that disturbs the peace, the magnitude is ratchet up to crack the skulls.

But where does the magnitude of the force come from? How and where, exactly, does finance capital muster the ability to cow politicians, intimidate ministers and beat the populace in broad daylight, even though it operates in democracies where the majority of the population opposes its diktat? Recall Le Monde Diplomatique’s editorial which I quoted in an earlier part:
How is it that in a democratic system, the people are forced to accept cuts and austerity simply replace one failed government with another just as dedicated to the same shock treatment?
Think about it. People go to the ballot and vote for political leaders who then turn against them and their interests. How could that be?

It is simplistic to assume “corruption” explains everything. Corruption of politicians and the political process, while very real, does not explain this:
Mr. Papandreou went into the historic vote with a five-vote parliamentary majority. But the outcome was not certain, as the austerity plan strikes at the heart of the Socialist Party base.
Why does a party enact austerity measures that strike at its base? One can easily accept that Social Democrats of Papandreou ilk are unprincipled boors who will do everything to stay in power. But then why would they weaken the machinery that is the means of their assuming political power?

The common forms of the corruption of politicians – cheating on expenses, illicit affairs, accepting kickbacks and expensive gifts – are all illegal. They can only take place beneath the surface. When exposed, they must stop.

But the Greek legislators who voted for the crippling cuts and the drastic social re- engineering of the country did so with their heads held high and patriotic tears in their eye:
Most Socialist legislators said they would back the measure, in some cases only grudgingly, and with most stressing that patriotic duty must go before party ideals.

Elsa Papadimitriou, broke ranks with her New Democracy party and voted for the measure. “There is only one act of patriotism: consensus and cooperation,” she said. “Fiscal suicide is not an alternative. “
Nor is the unapologetic, in-your-face short-changing of the citizenry limited to Greece or Europe. Across the Atlantic, the U.S. political landscape offers a treasure trove of Exhibit A's in that regard in every bent.

Everyone knows, for example, that the cost of health care in the US is increasing in double digits year on year.

Everyone knows that a major component of that increase is the rise in the price of prescription drugs.

Everyone knows that the U.S. government is the largest purchaser of the prescription drugs through Medicaid and Medicare.

Everyone knows that wholesales prices are cheaper than retail prices.

Yet, by the act of the same Congress that is obsessed with reducing government spending, the US government is expressly prohibited from negotiating price discounts for prescription drugs.

This is not corruption in the usual sense. Yes, pharmaceutical and insurance companies pay the US legislators and buy their votes. But those are all legal campaign contributions. So the practice goes on in the open view of the public.

Perversion of democracy, you say? No, democracy manifest, I say; the government of the people by the people for the people. The only catch is people, which people misunderstand, because the strong biological/anthropological connotation of the word obfuscates its social/political context. But social/political is precisely what we deal with in talking about people and democracy.

This change in connotation is subtle, the resulting disconnect between the anthropological and political man easy to miss. Even some of the great minds who wrote on the subject fell prey to it.

Consider Socrates, Plato and Aristotle. All three had contempt for democracy; they considered the rabble unfit for the affairs of governing. More to the point, reading them, you will never know that they lived in a slave owning society. There is no mention of salves. People and democracy pertain to free citizens only. Slaves are mere objects.

More than 2000 years later, we run into the same suggestive mentality in the U.S. Constitution. Again, the authors of the document were among the most outstanding citizens the US ever produced. To take Benjamin Franklin as one example, legend has it that he never wasted a minute of his life, which must have been true on the evidence of the astounding body of works that he produced alongside his many activities – and first rate works in that. At merely 23, in A Modest Enquiry Into the Nature and Necessity of a Paper Currency, he espoused ideas about the role of money and the nature of value that half a century later Adam Smith used in his magnum opus. (Even the full title of Smith’s book, An Inquiry Into the Nature and Causes of the Wealth of Nations seems to have been inspired by Franklin.)

Yet, a man with such obvious intelligence and experience saw no irony in signing his name to a document that starts with “We the People” and excludes blacks. Nor did any of his compatriots.

The explanation lies in the anthropological/political dichotomy. The Founding Fathers did not doubt that slaves were human. Surely George Washington who fathered a child with a slave servant must have known that.

But they were writing a document in governance and not in biology or anthropology. It is in that sense – with respect to having a say in the running of a republic – that blacks were left out of the Constitution; they were excluded from the political process. So were women, who did not gain the right to vote until 1920. (In Switzerland, it was 1971!) “Not being counted as people” is an inference that followed from that exclusion. But the issue was always political.

The U.S. Constitution is about the rights of property owners. Those rights arise from ownership and not a person’s biological or anthropological attributes. In that context, it did not occur to its authors to recognize slaves and women. That would be absurd, akin to recognizing pets or trees as people.

This calculus of power was on display at the Philadelphia Convention of 1787. The Convention elevated blacks to 3/5 of a person for the purpose of distribution of taxes and the apportionment of delegates to the House of Representatives. The arithmetic gerrymandering was a concession to the Southern plantation owners who were demanding more representation and thus, more power, on account of their property which also included slaves. Otherwise, it had nothing to do with the liberty of the black population whose fight for civil rights continues to date. (The Voting Rights Act – notice the name – was not passed until 1965.)

Fast forward to 2011 and we see the same practice in Murdoch’s News Corporation, where one Murdoch family member is counted as 4 regular types. From the Financial Times of July 21, under the heading US fund attacks New Corp’s share structure:
The two-tiered structure that gives the Murdoch family almost 40 per cent of the voting rights in a company where in owns about 12 per cent of the equity was a “corruption of the governance system”, said Anne Simpson, senior portfolio manager, of Calpers Global Equity and its corporate governance chief. “Power should reflect capital at risk”.
Power should reflect capital at risk.

Thank you, Anne Simpson. I could not have said it better myself!

Because at the age of self-destructive speculative capital, capital is everywhere at risk, to reflect that risk, capital moves to assume the position of power everywhere. The power commensurate with global risk is global power. That power is available only at the state and supra-state level.

In this way, finance capital assumes a new, more potent form. It is no longer the petty interests of a neighborhood “boss” enforced by physical violence or the diktat of a strongman enforced by more organized thuggery, but the international and state law, enforced by the machinery of state and international organizations. In this way, we arrive at democracy.

Sunday, November 20, 2011

The Origin of the [crisis in the] European Union – 5: Capital as the Union’s Main Driver

If you are following the crisis in Europe, you know how complicated the whole thing is. You see the stressed looks on the faces of politicians, central bankers and the heads of places like the World Bank, the IMF, the European Commission, read or listen to their often contradictory comments and wonder that if they are at a loss for an explanation/solution, what chance do ordinary mortals have of making head or tail of the situation? Look.

If that is what you think, you have been had; chalk off one “mission accomplished” for your local papers and international news media.

What is taking place is Europe is quite simple to understand.

The EU was created as the answer to the problem of falling rate of profit in the industrially advanced European countries. Reversing the falling rate of profit is the objective. The EU is the vehicle for realizing that objective, the means of getting there.

Creating a vehicle such as the EU which must stand over the heads of the European nations and governments is no easy task; the very idea points to the audacity of the force behind it. The force is capital, with the “democratic government” being its immediate manifestation. The size or intensity of the force – that would be the governments’ agenda, vision and modus operandi – is a function of the local conditions and varies from country to country and situation to situation. The direction of force, toward a homogenous social system conducive to capital, is fixed and remains unchanged throughout; it is “remorseless”, in the words of a British official.

Let us look at these points in the case of Greece. It should suffice for illustration.

When the Greeks were invited to join the EU, they were jubilant. Here at last was the confirmation that Greece had “arrived”. With the military dictatorship gone, the country could take its rightful place among the advanced, civilized countries.

As the Iranian proverb has it, they went for the smell of kebab, only to discover that donkeys were being branded. But by the time that realization came, when the draconian cuts hit every aspect of social life in the country, there was no going back, short of a violent overthrow of the government, which was not going to happen because Greece was now a democracy.

This latter point needs elaboration.

Look at this sentence from a New York Times article this summer after the Greek parliament had approved the first in a series of slash and burn measures:
Markets rallied globally, and European leaders welcomed the passage of one of the most radical overhauls of the Greek economy since democracy was restored in 1974.
The sentence is written like an advertising copy. Nay, it is an advertising copy, a style of writing designed to create an association between a product and “positive” words – and thus, feelings– in the absence of any logical association. You know the routine: Selling a car? Then say power, beauty, freedom.

The Times uses the formula to a “t”. "Positive" terms – Markets rallied, European leaders welcomed, overhaul of the Greek economy, democracy was restored – are tightly packed into a sentence to “soften up” the reader. The racket is quite sinister and demands the picture of the street riots to work, which is happily supplied.

Now, reading the jubilant account of the reaction to cuts in Greece and seeing the bloody faces of demonstrators confuses the readers. They are presented a contradiction that they cannot resolve with the limited information provided. They cannot make sense of the events. Confused, they become ignorant spectators of events, accepting whatever is thrown their way and passively waiting for leadership – of both thought and political kind – to show them the way. Murdoch provides the former. Cameron, Berlusconi, Sarkozy, Merkel, Obama and Papandreou provide the latter.

But facts are not isolated events. Their relation, arising from the compulsion of reason, remains indestructible and comes through even from behind a confused text. We only need to rearrange the words and put the emphasis where it belongs.

Here is the logical rewrite of the Times sentence that eliminates all the internal and contextual contradictions of the text:
It was precisely because democracy was restored that the most radical overhaul of the Greek economy became possible, after which finance capital everywhere celebrated as it saw its grand design for increasing its rate of return one step closer to realization.
Democracy is the name of the form of the government created by capital. One does not have to be a supporter of the Greek Junta to note that the undemocratic colonels would not dare to subject the Greek society to so violent a shock therapy. More to the point, they would not accept or allow it.

Establishing democracy in Greece was the necessary condition for, and the harbinger of, a social order mandated by the EU whose sole objective is making the member societies an agreeable stomping ground for capital. That’s what the EU’s 100,000-page rulebook is all about.

Now, Europe is a divided entity, with the political and social divisions at times following the change in landscape. Belgium, for example, only recently managed to have its first government in one and a half years because the northern Flanders and relatively poorer southern Wallonia could not agree on the division of the country’s wealth. (The compromise government, far from being a unifying power, reflects the institutionalization of the separation of North and South.) Or take the equally small Switzerland, in which the culture and social concerns in Canton Ticino are more Italian than any part of the country north of Gotthard.

Only a fanatic doctrinaire, then, will seek to explain everything that has been happening in Europe in terms of capital and finance capital. I devoted Part II of this series to “defining” Europe precisely to highlight the political, cultural and economic differences among the European countries and even within them. There is a historical rivalry between France, Germany and England, for example, and Silvio Berlusconi would have had his rivals and enemies even without the EU.

But the falling rate of profit and the need for cheaper labor is the grand narrative of the EU. All other events take shape and play out within it, in the same manner that all events in War and Peace take place within the context of Napoleon’s invasion of Russia. No detail of the EU crisis (or War and Peace) contradicts that main storyline. That is another way of saying that all the contradictions of the EU, which have manifested themselves in a laundry list of banking crises, market instability and political gridlock, could be explained and resolved by that narrative.

Let us wrap up then.

The idea of the EU rose from the need of capital in the industrially advanced West European countries for lower labor costs and new markets, the one-two punch that the industrialist in those countries correctly calculated would solve the problem of the falling rate of profit.

Germany and France were the leaders of the movement. Italy, Nordic countries, Belgium and Luxembourg with the relatively small, less export-oriented economies, assumed a secondary, supporting role.

The so-called “periphery” countries – the Greece and Cyprus and the Ireland of the Union – were the mark. So were the German and French workers. And the workers in Italy, the Nordic countries, Belgium and Luxembourg.

In an integrated EU, the German industrialist could produce machinery with the Greek wages, which is why and how, in a double whammy, and using the threat of cheap labor in the newly freed East Germany and the southern flanks of the EU, they were able to push down the German wages by about 20%. That, in turn, allowed them to set the euro rate against the USD at a relatively low level, which helped boost the exports and thus, profits. That is the story behind Germany’s “strength”, its “EU leadership” or much admired “competitiveness”. I quoted earlier:
Helmut Kohl, the chancellor of Germany in the early 1990s, was so convinced of the need to bind a united Germany into the European Union that he was prepared to press ahead with the euro, in the face of 80 per cent opposition from the German public.
Now you know the story behind the conviction and determination of politicians. (The 80% opposition, by the way, was coming from the workers and ordinary citizens who, despite massive selling of the the EU idea, had not bought into its promises. In North America, NAFTA was sold using the same exact play book. It was supposed to bring jobs to the U.S. and Mexico.)

The periphery countries proved problematic. Their problem, in a nutshell, was – and remains – the historical problem of training a peasant workforce for industrial labor.

Peasants, because their life tempo generally follows that of nature, have large margins in their daily lives. The cows need not leave their stable at 5:10am sharp, the way a train leaves the station. Approximate “sunrise” will suffice. For coming home, in like manner, “sunset” will do just fine. No need for precise arrival time, as there are no connecting herds.

This margin is precisely what the industrial capital could not permit. An assembly line is nothing but the precise quantity of work performed in an exact interval of time. When peasants are brought into the factory environment, they must be trained to shed the old ways and become robots.

Robot is precisely the word. The sole condition for working in an industrial setting is performing the prescribed steps repetitively in the given time to the exclusion of thinking and individual initiatives. That is why assembly lines naturally lend themselves to automation: in them, workers are automaton.

(The robotization/dehumanization is enforced through a training regimen whose structure and content demands a post of its own. In the training classes of FoxConn’s Chinese plants, for example, peasant/workers are instructed to go from one corner of the room to the opposite corner. When they naturally walk across the room – even donkeys would do that to reach a stack of hay on the opposite side, proving that the hypotenuse is shorter than the sum of the two sides – they are fined. The point is conditioning them to shed their instinct and initiative lest they seek shortcuts. They must at all times follow the walls, like blind men do.)

At the technical level, the inability of the peasant/workers to perform at high levels of precision translates itself to inability of the emerging countries to manufacture high quality and high precision products. So we see that even in today’s competitive markets, the members of Germany’s Mittelstnad are thriving because the highly specialized machinery they produce cannot currently be manufactured by the Chinese workers.

At the social level, the absence of industrial discipline manifests itself in a more relaxed life style which itself arises from the looser and less formal documentation of property rights and legal/commercial relations. It is not uncommon for a property’s boundary to be defined by non-stationary reference points, say, a river. Over time, then, as the boundaries change, the land disputes begin and go on seemingly forever, paralyzing the legal system. And, of course, no one beside the government workers pays much tax because the government has no way of tracking people’s income. In that regard, the racist and ignorant Prof. Hans-Joachim Voth whom I quoted in Part I of this post was right to complain about Greece’s land registry and tax system:
A European country without a land registry, without proper tax enforcement and without a responsible political process to control spending and borrowing needs all the outside pressure it can get to increase state capacity. The economic evidence is unambiguous – the larger and more effective a country’s state apparatus, the higher output per capita. Pressure to improve state capacity and become a grown-up country is what Germany and European Union are currently providing, free of charge.
When a less industrial country such as Greece is forced into a union with an industrially developed country such as Germany under conditions that are defined for the benefit of capital only, its life style must change accordingly. Dinner starting at 9 and lasting till midnight – and that on a week night? Inconceivable! Retirement before 60? You must be kidding.

These habits and conventions, however much their roots might be economical, pertain to the old ways of doing things, i.e., they are cultural. So, as the mouthpieces of capital are quick to remind everyone, the cultural in these countries must change:
As a British taxpayer and therefore (via IMF), a contributor to the Greek budget, I was irritated to discover that all Greek students still have a constitutional right to a free, university education – and spend an average of more than seven years over their degrees. British students will be charged up to £9,000 ($15,000) a year in tuition from next year … Greece has been promised new money. Now it needs a cultural change. Otherwise the country really is going to the dogs.
And it is not Greece only. The Spaniards, Portuguese and even Italians had it too good for too long. But the party is over now and it is time to "grow up", time to pay the piper. The “piper” is the “democratic government”, which, as per Prof. Voth, must be strengthened so it could deliver the populace to the capital – lock, stock and barrel – until such time that its even minimal regulation gets in the way of capital’s expansion, at which time it should be dismantled through whatever means necessary, say a “big society” racket here or the installation of some mad man as president there.

That is it, then, all one needs to know about the EU. As for the roving sovereign/banking crisis which has been hitting the EU member states in the past couple of years, in one sense, the crisis is real. As the rate of profit across the EU members has fallen, the government expenditures that corresponded to the pre-fall era have become “unsustainable”, to use a word now in vogue. So expenditures must be cut, especially in the euro zone where government can no longer print money.

In the private sector, the main expenditure is the labor cost; hence the mass layoffs and refusal of the businesses to hire which has resulted in record unemployment.

In the public sector, in addition to labor costs, the retirees’ pension is a large expenditure. Naturally, then, it is the main focus of the “pension reform”, which aims to simultaneously cut off the pension payments and increase the retirement age so that the payments will start later.

But believing that no crisis should be allowed to go to waste, the architects of the EU are using the governments’ revenue shortfall as a bogeyman for further weakening the power of labor unions and pushing down the wages. The case of Italy shows us how the game works. FT’s political/financial commentator on October 12:
While [Italy’s] public sector debt is high at 119 per cent of gross domestic product, the private sector balance sheet is remarkably strong and the government budget is in primary surplus – that is, before interest payments. The surplus is forecast to increase significantly.

The short term position is thus comfortable and in ordinary times markets would be relaxed about default risk here.
So, Italy’s finances are in order. The country’s surplus is “forecast to increase significantly”.

But that is not the point and certainly no excuse. The commentator goes on:
In common with much of the rest of southern Europe it has a huge competitiveness problem, with unit labor costs reckoned to be 30-40 per cent too high relative to Germany. Even if we charitably assume that Italy’s underlying trend growth rate is 1 per cent, it is hard to see how the trajectory of public sector debt can be pulled back.
You see the sudden shift to the labor costs. Either Italy – now a “south European” country, and we know how those people are – increases the rate of profit by bringing down the labor costs or else. In the “else” scenario, the “markets” will discover that the Italians have been living beyond their means, the country’s bonds will tumble and the spreads on its credit default swaps will rise to the stratosphere. The country will no longer be able to borrow on capital markets and might be forced to default, with all the consequences that follow. To avoid all that, the draconian reforms must be implemented, including the “labor market reform” and pension reform.

Berlusconi could not play along so he was pushed out – for that reason alone and not for any of his long list of transgressions.

Now the “technocrat” Monti has been brought in with much hoopla to save Italy. The ignorant consumers of news are jubilant:
“We finally have a competent government, not one of dwarfs and ballerinas,” said Antonio di Pietro, the former anti-graft magistrate and head of the Italy of Values party.
Perhaps Berlusconi’s government was a circus. But alas, the joke is on the ex-magistrate and the technocrat Monti will do exactly, precisely what capital demands of him – and not an iota more or less. The Financial Times of November 15:
Mr Monti has plenty of ideas to promote in the long term through liberalising the labour market, weakening the powers of fiefdom of professional services and making it easier for public and private sectors to hire and fire.
At the end it makes no difference who is in charge because capital is ultimately in charge.

I will return with the concluding part.

Sunday, October 30, 2011

I'm Still Around

When Rumi finally completes the long-delayed Vol. 3 of Masnavi, his explanation in the opening verse of the book is the most compelling: It takes time for blood to turn into milk! His excuse/reason is doubly profound if you know the background story which had to do with his son's prolonged illness from which he happily recovered.

I have no such exquisite reason but reasons good enough. I had several commitments, some quite time-consuming, that came due one after another in September and October. Then I began a long-planned month-long trip to areas with spotty, slow and blocked internet access which made writing very difficult and posting impossible. Let us say that all was a Black Swan. That should explain everything.

My apologies and thanks for the kind inquiries. I am not back to my base yet but getting there. Will return shortly.

Monday, September 19, 2011

The Morality of a Liberal

This past Thursday, Paul Krugman, the Nobel prize winning liberal economic columnist of the New York Times, was outraged. He was outraged because he had discovered that the U.S. was losing its moral heading.

The event that set him on the discovery was an exchange about death and freedom during the Republican presidential debate. According to Krugman:
CNN’s Wolf Blitzer asked Representative Ron Paul what we should do if a 30-year-old man who chose not to purchase health insurance suddenly found himself in need of six months of intensive care. Mr. Paul replied, “That’s what freedom is all about — taking your own risks.” Mr. Blitzer pressed him again, asking whether “society should just let him die.”

And the crowd erupted with cheers and shouts of “Yeah!”
Krugman singled out Milton Friedman and his Free to Choose TV series for this supposed breakdown of morality and the loss of compassion in the country. (The title of his column was Free to Die. Got it?) He wrote:
The incident highlighted something that I don’t think most political commentators have fully absorbed: at this point, American politics is fundamentally about different moral visions.
How can one make this fool realize that he himself is in the “other” camp?

He blames Friedman for lowering the country's moral standards, but his own mentor at MIT, Paul Samuelson, was every bit as instrumental in emptying the mind of students of moral considerations.

As for Krugman himself, google his defense of NAFTA in the 1990s – the same NAFTA that was supposed to bring in jobs to the U.S. – and see that he can be as vicious as the most vicious Tea Party member or neocon thug.

Three years ago, I touched upon the relation between morality and economics in the The Descent of Man.

For an even deeper insight to the subject, let me quote Jean Paul Sartre from his Critique of Dialectical Reasoning.

According to Sartre, a society consciously chooses its dead, “whether it be the raft of the Medusa, an Italian city under siege, or a modern society (which, of course, discretely selects its dead by simply distributing items of expenditure in a particular way, and which, at its deepest foundation, is already in itself a choice of who is well provided for and who is to go hungry.)”

So, you see, Mr. Krugman, you do not have to wait for the next election. The selection has already been made – and made with your full and energetic participation. It is all there. It is just a matter of willingness to see.

Friday, August 26, 2011

What Is Behind the Critical Shortage of Prescription Drugs?

Today, the critical shortage of prescription drugs reached the editorial page of the New York Times. Under the heading The Shortage of Vital Drugs, the paper said:
A widespread shortage of prescription drugs is hampering the treatment of patients who have cancer, severe infections and other serious illnesses.

The Food and Drug Administration says that some 180 medically important drugs have been in short supply, many of which are older, cheaper generic drugs administered by injection that have to be kept sterile from contamination.

A survey of 820 hospitals in June … found that almost all of them had experienced a shortage of at least one drug in the previous six months … As a result, more than 80 percent of the hospitals delayed needed treatments, almost 70 percent gave patients a less effective drug, and almost 80 percent rationed or restricted access to drugs.
The cause of this shortage? According to the editorial:
Nobody is sure just what is causing the shortages ... But several factors are likely to be involved: contamination problems at some manufacturing plants, forcing unexpected production shutdowns; difficulties in getting pharmaceutical ingredients from suppliers, especially those abroad; reluctance to invest in production-line improvement for low-profit generics when high-priced brand-name drugs bring in far higher profits. Sweeping consolidation in the generic drug industry means that fewer companies are left in that market to make up for a shortage.
The Times has become a trashy paper, more in the league of The New York Post than its previous self. Its stories are old, the opinions in its pages downright embarrassing. That is why I rarely quote it now.

Here, it blames “contamination” and the difficulties with the supply lines. The drug companies in question are some of the largest, most advanced industrial corporations in the world. They are the “Big Pharma”, some with over a century of experience in drug manufacturing; we are not talking about the chicken processing plants in Alabama and Georgia. The idea that they will allow contamination or suppliers to impact their output is laughable.

More than 3 months ago, the Financial Times had covered the same story in a greater depth. On May 4, in a news story titled Drug takeovers spark shortages it said:
Pricing pressures and takeovers in the US pharmaceuticals sectors have contributed to record medicine shortage and could put lives at risk, sparking calls for wide-ranging reform.

The American Society of Health-System Pharmacists said last year its members could not obtain an unprecedented 211 prescription drugs through the usual channels ...

Cynthia Reilly, director of the ASHP’s practice development division, said: “There has been a lot of consolidation among manufacturers, with fewer producing any given product, and more quality inspection by regulators. “For older, off-patent drugs, some companies are disengaging because it’s not where the profit is.”
Cynthia Reilly is barely touching upon the subject. The background of the drug shortage, in a nutshell, is that the century-old business model of pharmaceutical companies – doing research and bringing new drugs to market under the protection of the patent law – is no longer working. The problem is structural.

In the 1980s, the Big Three auto companies also faced a structural problem: they could no longer afford the social function of supporting their retirees. At one point, GM claimed $1,100 in the price of each car was earmarked for retirees' pension and insurance. With a nod from the company, the stories spread about GM being a retirement fund that also happened to make cars. In the face of stiff competition from then Japanese car makers, that could not be done. The rest is history, with bankruptcies, pension losses and layoffs.

The problem of the big pharma is likewise structural albeit of a different nature. “Structural” is the key word, though. It means that there is no cure. The business model is dying and, naturally, the vultures have descended on the scene.

Here is one, as per The New York Times of January 26, 2005, under the heading Making a Fortune by Wagering That Drug Prices Tend to Rise. As you can see, the problem has been in the making for some time.

Over the last 20 years, the packing and shipping of drugs evolved into a game of arbitrage, called speculative buying, with distributors like Mr. Rahr (who paid $45 million cash for an East Hampton estate) wagering on drug price increases.

This common industry practice seems more fitting to a casino than a distribution warehouse. And in the 1990’s and the early years of this decade, with prices far outstripping inflation, it was a sure bet…..

Mr. Rahr would not disclose exactly how much he made through speculative buying. Goldman Sachs estimated that the distribution industry, which is dominated by three large public companies, made 60 percent of its profit, or $980 million, from speculative buying in 2001, when the practice was at its peak. More recently, Goldman Sachs estimated speculative buying’s contribution at 40 percent of profits.
In some ways, the practice helped drug manufacturers, who relied on speculative buying in lieu of paying distributors to get drugs to pharmacies. In effect, it was a form of hidden compensation that never showed up as a cost to manufacturers. But speculative buying fostered many problems, industry analysts and economists said. Some said it played a role in drug cost inflation by adding an incentive for manufacturers to raise prices repeatedly. It also gave sometimes gave drug makers false signals that products were in demand, prompting them to turn out excess product.

By encouraging distributor stockpiling, the system also led to shortages in some regions of the country, a situation known as a “stock out” and one that the industry does not like to discuss. Last year, Bristol Myers Squibb paid $150 million to settle allegations … that it misled investors by aggressively encouraging wholesalers to flood their warehouses, thus artificially inflating its sales.
That’s all. Unless you want to know about Mr. Rahr, the sophisticated Brooklynite with his “trademark yellow ray ban glasses”. Then google him. Interesting character, he.

Sunday, August 14, 2011

The Origin of the [crisis in the] European Union – 3: To Serve Europeans or 2 or 3 Things I know About Force

In one of the episodes of the old US TV series, The Twilight Zone, an alien ship lands on earth and a heated discussion ensues among the earthlings as to the aliens’ intentions: are they friends or foes?

Some say the aliens are friendly. Others are skeptical. How is one to judge?

The aliens have a book that they frequently consult. It is agreed that if the book is deciphered, it could provide a clue to their intentions. So cryptographers go to work and finally get the books’ title: To Serve Man.

Everyone is jubilant. The aliens have come to earth to serve the people. Friendly aliens, these.

People drop their guards. They begin mingling with the aliens and even accept their invitation to visit the alien ship and travel with them.

In the final scene, as the ship is taking off with its human cargo, the code breaker who had been working on the translation finishes her job and frantically runs to inform the human passengers. To Serve Man was a cookbook.


At that point, if the humans wanted to get off the space ship, they would have been stopped by force.

Force comes in when the “free choice” of the subjects will not do the trick.

Democracies count on that free choice to function.


The EU is the spaceship. Its member states are the humans. Finance capital, and its most recent offshoot, speculative capital, are the aliens. I am one of the code breakers. And force is, well, force.


To talk about force, you have to know your stuff.

Take Newton’s F = ma.

Now, stay with me.

The equation says that force equals mass times acceleration.

This is the most profound relation in physics; the much touted E=MC2 is derived from it. (And don’t be fooled by its simplicty. It is a vector differential equation, if you know your math and physics).

What is force in this equation, I ask you.
  • Well, Nasser, it is force.
  • But what is force? Acceleration has a precise definition: it is the change in speed per unit of time. If your car’s speed increases from 30 to 40 miles in 4 seconds, its acceleration is 2.5 miles/hr per second. Do we have a definition like that for force?
  • Nasser! Force is force – like gravity. Like the weak and strong nuclear force. Like electromagnetism. Just like pornography, we know force when we see it.
  • Pornography has a precise definition. It is the depiction of sex for the purpose of commerce. It was this commerce angle that the pedestrian intellect of that Supreme Court judge could not see. But, force?
At this point, you might try defining it from the equation: from F=ma, force is that thing which, applied to mass m, gives it a given acceleration.

But, then, what is mass?

Alas, that too is a tricky thing to define. All we can say at this level is that mass is the property of matter.

In twin ambiguities of force and mass lies the profundity of F=ma. The equation defines physics. What is force and what is matter: these are the twin subjects of the discipline.

The four type of forces in the universe I mentioned above must somehow be related. To date, no one knows how. The Grand Unification Theory is the suitably descriptive name for the line of research to answer that question.


As in nature, so in social life: there are different types of social forces. But unlike in nature, we know their commonality thanks to Karl Marx. “Force”, he wrote, “is an economic factor”.

The statement lends itself to being read in a way that does not sufficiently highlight the role of force. Any “non-personal” force is an economic factor. The famous line in The Godfather movies – “it is business; it is not personal” – repeated several times throughout, succinctly captured that truth.

Except for acts of passion and mad men, force is always used in furtherance of economic interests. The “business” is always the end. Force – manifested in violence and thuggery – is always the means. It is an aspect of doing business, like meeting and negotiation. That few people got that central theme of The Godfather is a testimony to the visual and aesthetic underdevelopment of the general population; the message was there throughout, loud and clear.

The meeting of the heads of the 5 families in which they agree to get into narcotics is a board meeting – and the most authentic representation of a board meeting in the movies that I know of; it stretches into the night as the members argue over an important strategic move.

Or take the famous scene in the Bronx restaurant where Michael Corleone, played by Al Pacino, shoots the corrupt cop and a rival gangster, Sollozzo.

It is a business meal that would be tax deductible – had Sollozzo stayed alive to report it as an expense.

Paul Carlucci no doubt did. He is a thug by virtue of being a Murdoch minion and the “publisher” of the New York Post. He is also a consigliere who sets the News Corp's corporate philosophy. From the New York Times:
News America was led by Paul V. Carlucci, who, according to Forbes, used to show the sales staff the scene in “The Untouchables” in which Al Capone beats a man to death with a baseball bat. Mr. Emmel testified that Mr. Carlucci was clear about the guiding corporate philosophy.
Observe this encounter he had with a businessman whom Murdoch wanted to force out of business, as reported in the New York Times:

George Rebh, who founded Floorgraphics along with his brother Richard, met with Paul V. Carlucci, head of News America, in 1999 at a Manhattan restaurant, and the News Corporation executive got right to the point.

“I will destroy you,” Mr. Carlucci said, according to his deposition in the Floorgraphics suit against News America, adding, “I work for a man who wants it all, and doesn’t understand anybody telling him he can’t have it all.” (Mr. Carlucci is now the publisher of the News Corporation-owned New York Post.)

Just in case the Rebh brothers did not get the point, court records indicate that beginning in October 2003, someone working out of the Connecticut headquarters of News America Marketing gained access to the Floorgraphics computer network, which included a collection of advertisements the company had created for its customers.
Don Corleone did not want it all. Rupert Murdoch wants it all, as befitting a man bent on creating a global media empire.

But if you want it all, something has to give: all the people around you have to get to work, including your wife; we all know that wife has to work if the family wants a better car or a bigger house.

If the work involves paying cops, eavesdropping on unsuspecting victims and hacking dead schoolgirls’ cell phones, the working wife must fit in. The disengaged wives of yesteryears who, by their admonishing silence and disapproving looks mitigated the violence in however a small way, are gone.

In their stead, we have Wendi Murdoch.

According to the New York Times, “although she occupies no formal position in Mr. Murdoch’s companies, she acts as counselor to her husband and by all accounts has asserted influence in his global media empire.”

So, she, too, is the consigliere, just like Tom in The Godfather. Only in those bygone days, Tom could stay a consigliere and out of direct thuggery; everyone knew he was not a “soldier”.

That comfortable division of duties is no longer possible. In the modern business word, everyone has to join the battle on all fronts. Consiglieri cannot sit on their asses and intellectualize. Carlucci who sets the corporate policy also quotes Al Capone and threatens people. Consigliere Wendi must likewise multitask.

You no doubt know that during the parliamentary hearing to Murdoch’s criminality, a protester hit him in the face with a plate of foam and Murdoch’s wife rose to her husband’s defense.

Watch these pictures taken from the live recording of the event.

The protester in the checkered shirt is on the left side. Wendi Murdoch stands out in the pink jacket. She is sitting behind her husband, Rupert, the bald man sitting at “7 o’clock”.

There are many things we can learn from these shots. But I don’t want to digress too much. Merely compare the first and the last frame and observe the speed and the angle of the wife’s reaction.

She is surprisingly quick. The woman in the grey suit has reacted first but only because she is closer to the protester and has seen him first.

Then Wendi moves in and immediately overwhelms everyone around her.

The important point is that she completely ignores her husband.

A woman’s first instinct – her maternal instinct – would be to shield her husband from an attack. Or rush to see if he was hurt.Wendi Murdoch displays no such weakness. She jumps straight at the attacker, but even in that move, the point is not to “neutralize the threat”, as a trained bodyguard would do, but to beat the man. The incident is an excuse for unleashing violence. He made her day.

The pictures do not show, but after the man was subdued, Wendi Murdoch kept pummeling away the man in the face and head and then she went further. According to the same article:
Some reports in the British press suggested that after the thwarted attack she even picked up the paper plate from the witness table and shoved it into the protester’s face, screaming as she did so. The protester ... was later led away by the police with his face covered in white cream.
“Mr. Murdoch, your wife has a very good left hook,” said Tom Watson, a Labour member of Parliament.

You have to imagine the mentality and disposition of a woman who lands repeated blows to a subdued man’s face and then takes a plate of foam and shoves it in his face.

And she does that in front of Members of the Parliament of the United Kingdom with TV cameras rolling and hundreds of reporters present, in a meeting convened to investigate the criminal conduct of an organization of which she is a consigliere.

Imagine what this woman could do in private with a vulnerable rival or underling. We are dealing with a Sonny Corleone here, however unlikely the physical resemblances might be. But Jean-Luc Besson showed us that slender women in evening dresses are perfectly capable of doing what men do.

That is the stuff a modern-day media empire is made of.

All this was the good news, in the sense that these thugs are small time players. Their use of force is limited in scope – threatening Peter here, whacking Paul there – and plain for everyone to see. They merely aim to “engineer” the individuals, if you will.

Even when thuggery becomes grand scale in the form of war, most people can see it for the racket it is. War is costly and at some point, it has to end.

It is different with finance capital. Like a well-trained boxer who punches not merely with his arm but with the full weight of his body, finance capital hits with the full weight of “the system”. Nay, it hits with the system. So it never has to stop.

What enables it to do so is democracy.

Sunday, August 7, 2011

A Brief Commentary on the U.S. Rating Downgrade

S&P downgrading the U.S. “credit” was a publicity stunt by the company for the company. The stunt had its share of bit players and company politics, but it took place within, and was ultimately driven by, a larger narrative that is slow growth in the U.S. and the finance-capital driven mandate of slashing public spending. Let us take them one by one.

One bit player was John Chambers of S&P, with the transparently fraudulent title of head of the company’s “sovereign rating committee”. He no doubt sees no absurdity in rating countries; his job title discourages coherent thinking, which is why he says drivel like this in a news conference:
“The debacle over the debt ceiling continued until almost the midnight hour,” said John B. Chambers, chairman of S.& P.’s sovereign ratings committee [by way of defending the downgrade].
Never mind that a debacle, by definition, cannot continue. But suppose it could and did. What of it? Was it at that last hour that the Chairman of S&P’s Sovereign Rating Committee realized there was a gridlock in Washington?

In truth, the “debacle” was an excuse as minds were already made up. Observe:
Officials at the White House and Treasury criticized S.& P.’s move as based on faulty budget accounting that did not factor in the just-enacted deal for increasing the debt limit.

In its analysis, S.& P. had projected the nation’s debt as a share of gross domestic product to reach 93 percent by 2021. That was around 8 percentage points higher than the figure administration officials believed the rating agency should have used — what they now call a $2.1 trillion error.

Gene Sperling, the director of the White House national economic council, called the difference, totaling over $2 trillion, “breathtaking” and said that “the amateurism it displayed” suggested “an institution starting with a conclusion and shaping any arguments to fit it.”

Around 5:30 p.m. [the day the downgrade was announced), S.& P. officials called the group of Treasury officials. “You were right,” Mr. Chambers told them, but said he was prepared to proceed because the revisions didn’t meaningfully affect S.& P.’s conclusion.
So the boys at S&P miss more than $2 trillion. The error is pointed out to them, but they still go ahead with the downgrade.

Why? Why such resoluteness to do something so controversial, especially when the other two big raters, Moody’s and the historically more strict Fitch, did not agree?

Enter another bit player, one Barry Rosenstein, a hedgie by day and human rights fighter by night.

He and other “activist investors” have accumulated large blocks of shares in McGraw Hill, the parent company of S&P. The plan is to break up the company, sell the valuable parts for profit and discard the rest.

When that time comes, the image of S&P as an independent and objective rating agency that took on the U.S. government could boost its value – or so the thinking must have been inside the company. Hence, the downgrade stunt.

Beyond the narrow company politics is the larger narrative of the downgrade as an instrument of coercion to force the government to cut their spending. In the upcoming Part III of the EU crisis, I examine this coercion mechanism in some length. It has implications that go far beyond the bit and two-bit players in the corporate, hedge fund and the takeover world.

Saturday, July 23, 2011

The Origin of the [crisis in the] European Union – 2: Where is Europe?

Sometimes you can tell a book by its cover – or what’s written on it.

Early this year, I got the 2011 edition of Best European Fiction. The idea of the best European fiction is inherently idiotic, like the best city, the best university or the best food.

A few stories I read were sophomoric and just plain bad. So out went the book. But I remember the struggle of the editor to define Europe in the introductory chapter; I suppose you have to do it if you are editing a book of European fiction.

He got nowhere. Anyone setting out to define Europe through the commonality of themes in fiction is setting himself up for failure because there is no such commonality.

Europe, first and foremost, is an economic entity and must be understood as such. Even in the midst of an economic crisis which points to that fact – can you imagine a linguistic crisis in Europe, or a moral or cultural crisis? – that obvious fact is overlooked – or not understood at all.

Hegel showed that we think in names. “Given the name lion, we need neither the actual vision of the animal, nor its image even. The name alone, if we understand it, is the unimaged simple representation. We think in names“, he wrote in Philosophy of Mind.

What do we think of when we think Europe?

We think of Beethoven’s symphonies, Newton’s mechanics, Italian architecture, French cuisine, the Dutch masters. We think Mozart, Hegel, Faraday, French Revolution.

These names resonate with us because our lives in some way are impacted by them. The nature of that impact does not concern us here. But note that all the names are clustered in a region that is geographically Western Europe. That is no coincidence. The countries in Western Europe were the first to emerge from a feudal society into a capitalist state. It is that socio-economic transformation that defines Europe and its place in the world. Europe is the Capitalist Europe; note how the names are also clustered around a specific time – roughly the 18th century – which corresponds to the rise of Capitalism.

The degree of the Europeanness of the countries in the continent is measured with that yardstick. Unsurprisingly, that measure correlates with the geography and the physical proximity of the countries to the Western European center. Using the parlance of the current crisis, we can say that there are “core” and “periphery” countries in Europe.

Correlation, though, is not causation. It does not contain the element of necessity. We cannot always infer a country’s stage of economic development from its position on the map. Art and literature are better indicators. They more accurately reflect the economic and social relations in a country because they are born out of those relations.

Take Spain and Portugal which both began the road to Capitalism early but then fell behind their northern rivals.

To date, they are less Europe. If you do not live in Portugal, you would be hard pressed to think of a universally recognized European icon that is Portuguese.

As for Spain, the example of Picasso will suffice. His success is precisely due to the fact that he is Spanish, a lifetime spent in France notwithstanding. John Berger, in his masterly exposition of Picasso in The Success and Failure of Picasso hits on this very point: Picasso being a “vertical invader” of the European stage from the trapdoor that was Barcelona:
Poverty is not surprising to any Spaniard. But the poverty Picasso witnessed in Paris was of a different kind. In the Paris self-portrait of 1901 we see the face of a man who not only is cold and hasn’t eaten much, but who is also silent and to whom nobody talks.

Nor is this loneliness just a question of being a foreigner. It is fundamental to the poverty of outcasts in a modern city. It is the subjective feeling in the victim that corresponds exactly to the objective and absolute ruthlessness that surrounds him. This is not poverty as a result of primitive conditions. This is poverty as the result of man-made laws; poverty which, legally accepted, must be dismissed from the mind as unworthy of any consideration.

Many peasants in Andalusia must have been hungrier than the couple at the table in the etching of The Frugal Meal. But no couple would have been so demonized, no couple would have felt themselves to be so worthless.
Hungary is not Europe. As a part of the Austro-Hungarian Empire, it came in touch with the European core and was set on its way to Capitalism. It is all there in Musil’s masterpiece, The Man Without Qualities. He describes a country in which “there was some show of luxury, but by no means as in such overrefined ways as the French. People went in for sport, but not as fanatically as the English. Ruinous sums of money were spent on the army, but only just enough to secure its position as the second-weakest among the great powers.”

WWI aborted the transformation and later, under socialism, semi-feudal relations survived. Socialism did not destroy them with the vehemence that capitalism would have. You can see that in the beautiful novels of Sandor Marai, in Casanova in Bolzano or Embers.

In Embers, a man’s sense of honor prevents him from opening the diary of his long-dead wife, although it would answer a question which has been tormenting him for 40 years.

Imagine Rupert Murdoch – the hacker of dead schoolgirls’ cell phones – being restrained by a sense of honor. Or Tony ‘Yo’ Blair. Or David Cameron. Sarkozy. Berlusconi.


I am not talking about the leaders and outstanding citizens only. Western European writers in general could not think of the idea of leaving a dead wife’s diary unopened. Nor would their readers believe such a plot; it would make no sense to them. That is because sense of honor is not only internal, but also external: it springs from a concern and respect for the others. It is ultimately the recognition of others as one’s equals. A “rational” Western man who is conditioned to view maximizing one’s profit at the expense of others as the natural order of the universe would reject that equality even if his life depended on it.

It is in that sense that Hungary is not Europe: a strong sense of honor is still conceivable there.

And Greece is not Europe. Greece most definitely is not Europe.

Geographically, Greece is attached to Turkey. It was a part of Turkey for 400 years. But it is not geography alone; if Turkey could qualify as a North Atlantic country in NATO, then Greece could qualify as a European country. I am talking about economic and social relations.

In both respects, Greece is closer to Turkey and Iran than France and Germany. The commonality goes beyond baklava and stuffed grape leaves. It pertains to the balance of power between business and the government from which, ultimately, the country’s social relations and the tempo of its daily life originates. You can see that in the disorganization of the social institutions perfectly reflected in traffic. It is the hallmark of a society which has not internalized the discipline of the assembly line – or the call centers, as the case may be.

Because business – Capitalism – in Greece is relatively underdeveloped, the government has assumed the economic functions that in more developed economies are left to the businesses. That further accentuates the relaxed mood of the country and acts as a brake against the “entrepreneurial drive” that is so evident in the West and, especially, in the U.S.

Until the new reforms kicked in, for example, the Greek government paid the full pension of deceased pensioners to the surviving spouse. And if the couple had children under 18, they too, were paid until they turned 18. Turkey and Iran have similar laws.

To the advocates of family values in the West, that is a scandal, a paternalistic restraining of the free people’s spirit which had to change if Greece was going to join the ranks of civilized nations.

That is precisely what the EU and euro are all about. The issue is not the core countries. They are already European. The plan is make the periphery core. Why? Because in less developed periphery countries labor is cheap. Given a common currency, the core countries can exploit that advantage to raise the rate of return of capital.

For that to happen, the government in the periphery countries must get out of the way and make room for business – after making the conditions right for the business to come in.

That is what the racist professor whom I quoted in Part I was saying about Greece. Let us hear him one more time:
A European country without a land registry, without proper tax enforcement and without a responsible political process to control spending and borrowing needs all the outside pressure it can get to increase state capacity ... Pressure to improve state capacity and become a grown-up country is what Germany and European Union are currently providing, free of charge.
Exactly. The Greek government must establish a land registry so that property rights could be unquestionably asserted. It must establish proper tax collection to enforce tax payment from small businesses and the middle class and, most important of all, reign in the spending. What a scandal, paying for the living expenses of a child just because his parents are dead.

This is what has been happening in all periphery countries.

As for the governments getting out of the way, they have no alternatives. Just listen to Jacob Funk Kierkegaard, at the Peterson Institute of International Economics in Washington. He was quoted in the Financial Times of July 22:
Absent a dramatic improvement in the business climate or Greece raising money by selling off its islands, I still think it is going to be a struggle to get investors to have confidence in Greece with such a high level of debt burden.
Greece raising money by selling its islands!

But I am getting ahead of myself.