21 September 2008

The Rich and the Wretched

John Maxwell
Sunday, September 21, 2008


Billions of people are scared out of their minds that the world as they know it might disappear at any moment, because of the financial turmoil rapidly spreading globally. To these people wealth is an abstraction, something possessed by somebody else. Few realise that it is they, the workers and peasants of the world, who create wealth and that the world's financial system is a means of abstracting it from the poor, consolidating it and consuming it in ways that the creators would find fantastic.

A few years ago, I wrote of the British millionaire, Maurice Saatchi, who paid $1 million for a sealed tin of the excrement of an Italian artist. The tin, like money, has whatever value the rich place on it.
On Friday morning the American Secretary of the Treasury, Henry Paulsen, announced that he and other movers and shakers in Washington had agreed on a once-and-for-all fix to the current financial problem, to abort the threatening meltdown and the disruption of the world economy.

It is clear from Paulsen's words that the rich are again to be rescued by the poor, as is normal and as will continue to be normal under our systems of governance.

Paulsen made it clear that the centre of the problem, in his view, were trillions of dollars worth of "illiquid assets" in the form of dead mortgages and derivative financial gimmicks fashioned from those assets. The answer, for Paulsen, is to clear the logjam of illiquid assets so that the financial system can continue its cannibalistic career.

The capitalist market is supposedly infallible, until, as now and in 1994, 1987, 1939, and many times before, its corruption, incompetence and lunacies convince even the most ardent devotees that they have run out of magical incantations and can no longer walk on water.

It is again time to summon the government, the state, the people, to the rescue of the rich and infamous.

The patron saints of modern capitalism, Reagan and Thatcher, believed that the state - government - was 'the enemy' and their pathetic apologists all over the world, parrot their barbaric ideas as the new religion. 'Privatise, Liberalise and Deregulate' is the mantra, government must get out of the way, until the so-called Free-Market Express is periodically and regularly derailed by its own excesses.
Paulsen and company justify their actions by invoking the idea that some institutions are simply too big to fail, so the state must rescue them. The irresistible corollary to some of us is that if they are too big and important to fail, they should obviously be under social control and not left to the machinations of gamblers, criminals and lunatics in search of a get-rich-quick fix.

In Thatcher's primitive philosophy, there was no such thing as society and Alan Greenspan, the real architect of the current disaster, is a disciple of Ayn Rand who taught that self-interest and selfishness are the prime virtues.

The purveyors of this sort of garbage are usually quiet during periods of capitalistic collapse, only to begin their prattle when the poor have once again licensed them to steal and defraud.

Capitalism is not, of course, the same as free enterprise. Every human being is - in his own way - an entrepreneur. Adam Smith, the messiah of capitalism, in his utopian vision saw an 'invisible hand' which would ensure that markets were free and fair, that resources were allocated according to just principles and that everyone would be happy with the result. He also forecast that wherever two or three businessmen were gathered they would almost immediately begin to plot against the public interest. Sadly, he had no remedies for that.


In our world, the result has been regular cycles of boom and bust. Capitalism depends on three main factors:
1) Cheap labour
2) Cheap natural resources and
3) Armed force to restrain the prices of both.

The system has worked perfectly in the United States. In 1944, corporate income tax provided seven per cent of the American GDP. Five years ago it was down to 1.2 per cent. The compensation of workers has fallen from 65 per cent of GDP to about 45 per cent while the compensation of the rich has multiplied like a particularly aggressive cancer.

The US Chamber of Commerce is even now pleading for a reduction in the rate of US corporate tax, although most American corporations pay little or no tax at all. The corporations carried out a deliberate campaign against the public interest terrorising workers and unions by threat of unemployment and when that was no longer effective, moving the jobs abroad.

It did not seem to have occurred to them that their workers were the market on which their profits depended. Ignorant of both economics and demography, they did not realise that while Chinese, Indian and Haitian workers could produce at costs way below the US, they could not afford to buy the products they made.

The present crisis originated in the plan to exploit the poorest sectors of the US middle classes by offering mortgages to people at what were touted to be bargain rates and then to increase the rates to unpayable levels.

The theory was that the lender would make money on the usurious repayments and when those ended, would still have the asset value of the house to play with. Calculations like these depended on a constantly rising level of house values, and when the downsizing of companies and the outsourcing of jobs began to bite, the mortgagors were jobless, in debt and unable to pay. The mortgage companies - by these means - managed to extract billions of dollars from those most in need and carted away a substantial proportion of the savings of the black and minority communities in the United States.

In the United States, as in Jamaica and a host of other countries following fashion, the result has been the transfer of enormous amounts of wealth from the poor to the rich, and the slowing down and eventual stopping of real economic activity.

The result in the United States is that the poor taxpayer/consumer/worker must now mortgage his soul to rescue the very people who exploited him.

One of the prime ironies of the present situation is that the capitalists have insisted that governments should borrow from the private sector and should not engage in deficit financing or as they called it, 'printing money'. That privilege was to be surrendered to the private sector, whose unbridled greed has resulted in a curious situation, described on Friday morning by the US treasury secretary. There were institutions, he said, who were unable to determine the value of their illiquid assets; they were so 'leveraged' employing such arcane financial instruments that they have no real idea of how much money they owe or are owed. This is fantasy - No-Risk Capitalism.

It would seem to me, as I said earlier, that when private enterprise proves that it cannot manage some of the functions it has wrested from the state, the state must insist on new structures of management, owned and regulated by the state, the one entity too big to fail.
It will cost all of us a lot less.


I am a member of the Tribunal appointed under the Access to Information Act, assigned the duty of deciding whether the public is entitled to certain government documents and information. In proceedings last year, the commissioner of mines attempted to prevent the disclosure of maps and surveys defining mined-out land and land slated for mining by the bauxite companies.

The commissioner employed a novel argument: such information, he said, was regarded as confidential in the mining industry worldwide, protected by a 'convention or protocol' which prohibited
its publication.

Our investigations produced no evidence of any such protocol or convention and in fact, we discovered that the mining industry is busy making its affairs more transparent, for the benefit of investors and the public.

The commissioner of land and the Jamaica Bauxite Institute appear to regard themselves as defenders of the bauxite companies against the interest of the Jamaican public. According to the Mining Law, bauxite companies are obliged to rehabilitate all mined-out land, restoring the topsoil and bringing it back into some semblance of fertility.

The mining companies have over the last 50 years, disobeyed the law and left thousands of acres unrestored. Under the law, Jamaica is owed millions of US dollars for this illegal negligence.

The commissioner of lands has said that they do not intend to prosecute. The Bauxite Institute has been silent on the matter.
I believe that the Public Defender, the Contractor General and perhaps the Attorney General should take up this issue in the interests of the Jamaican people.

The powers that be, whoever they are, have apparently agreed that a consortium of companies - including Marc Rich interests, the Chinese and others - are to be given permission to establish a new alumina refinery in St Ann.

In nearly 60 years of bauxite mining, St Ann has gone from being one of the richest parishes in Jamaica to the absolute poorest, has gone from being the 'Garden parish' of beautiful, rolling hills and dales to a disfigured moonscape with thousands of acres of useless land, destroyed communities and the highest rate of teenage suicides in Jamaica.

The new alumina refinery will need to find somewhere to store three million tonnes of toxic waste every year, or 30,000 tonnes of waste per employee per annum.

St Ann is part of the Cockpit country aquifer, the biggest and most important in Jamaica. The US Corps of Engineers 10 years ago declared that it could not believe that future bauxite refining was possible in Jamaica, because of the danger of red mud to our water supplies.

Next week I hope to tell you about the threat of the new bauxite mining regime to a globally important, enormously valuable Jamaican asset, one worth billions more than bauxite.

Copyright ©2008 John Maxwell

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