07 March 2010

Classic John Maxwell: Black Holes in the Global Reich



by John Maxwell

In my one excursion out of the ranks of the working press, half a century ago I was the first Information Officer for the Industrial Development Corporation, preaching the benefits of industrialisation by invitation.

At that time, Norman Manley was Premier and the government was a great admirer of the Puerto Rican model of development. The western world was also convinced that underdeveloped countries would find in this model a sovereign remedy for underdevelopment. If we could attract capital we would create jobs and find our way onto the runway for 'Take-off' into the realm of First World Development.

Fifty years later we are no further forward than we were then and in some ways we are behind where we were.

Oddly enough, the same is true of our model, Puerto Rico.

Puerto Rico seemed to have all the advantages. Their people were citizens of the US and at that time, nearly half of all Puerto Ricans lived in the US. Today there are more Puerto Ricans in the US than in Puerto Rico.

A few months ago the New York Times published an editorial "Puerto Rico, an Island in Distress" in which that other blessed isle was described in terms normally reserved for places like Jamaica. In January, the Miami Herald published a news story entitled "Puerto Rican killings may bring out National Guard" in which it was revealed that in the first 15 days of this year there were 46 homicides in Puerto Rico, just about the same level as in Jamaica.

The NYT editorial was a commentary on "The most exhaustive study of the Puerto Rican economy done in the past 75 years " This study, done jointly by the Brookings Institution and a Puerto Rican think tank, said that Puerto Rico's "hoped-for renaissance will require that the private sector and government join together to create thousands of jobs and that tax and other policies have to be developed to make this happen." Just what was needed fifty years ago.

The situation is indeed dire. According to the study "About 48 percent of Puerto Rico's 3.8 million people live below the federal poverty line, according to the 2000 Census. Despite the advances the island has made through the years, it has a per capita income of $8,185 -- about half that of Mississippi. Unemployment hovers at 13 percent.

This is odd, since Puerto Rico with only fifty percent more people than Jamaica, gets in one year assistance from the United States equivalent to Jamaica's entire National Public debt. "The island receives about $11 billion from Washington, $6 billion of which is through Social Security and federal worker pensions and salaries." That s, PR receives nearly one billion dollars in aid every month.

In the fifties and sixties Puerto Rico became a showcase for private sector investment and development. US government assistance enabled Puerto Rico to offer huge subsidies to manufacturers wishing to relocate to the island, but it soon became apparent that it was costing the US taxpayer about US$70,000 to bring an American job to PR, nearly twice as much as the real cost.

In addition to this, as in Jamaica, screwdriver industries began to leave the country as soon as there appeared to be cheaper labour elsewhere. The same process has been in train in the United States itself, which is de-industrialising as American capitalists find lusher pastures in China, which now supplies the US with manufactured goods of every description, from computers to ships.

Some of us have always contended that the so-called paradigm of 'competitiveness' meant nothing in a world in which levels of living and pay were functions more of culture and history than of economic development. The answer was, of course, Globalisation, designed to make everybody competitive.

What this really means is that the world is now engaged in a race to the bottom of the barrel, in which manufacturers forsake their own homegrounds to seek maximum profits in foreign parts, mainly Far Eastern.

It seems to have escaped most economists in the west that in order for the so-called free market system to function rationally, the essential component in production Labour should be free to relocate just like capital, but racism and nationalism prevented most people from understanding Adam Smith's truism that like water, all productive forces should be free to find their own levels.

The Chinese are for the time being, in a prison of their own culture. Having escaped the inflation and consumer-driven extravagances of the West, Chinese labour is up to now, satisfied with relatively picayune rewards. But, as soon as their productivity rises there will be demands for better pay so that workers can afford the products they produce.

In the United States that was the secret of their industrial success: thriving markets based on the increased productivity and earnings of their workers.

But in the United States, as in Puerto Rico and Jamaica, the pull to the bottom has become irresistible; American workers are no longer competitive and the giants of the last century, General Motors, Ford and Chrysler, are busy closing factories and laying off hundreds of thousands of workers.

It has not occurred to many people that if people are out of work they can't afford to buy SUVs. If the money paid to labour goes to China it is the Chinese who will be able to buy cars and expensive appliances. That's one of the reasons stock markets round the world shuddered over the last few days. The de-industrialisation of the United States has up to now been buffered by the middleclass and working class. They've been borrowing money to buy â€" following President Bush's advice a few years ago to shop till they drop to help boost the economy. But loans have to be repaid and money borrowed on rising values has a tendency to become due and payable when values are dropping. That means that ordinary Americas who bought houses in a rising market or borrowed on the apparently increased value of their houses for the same reason, are finding it difficult to repay the money they borrowed.

Running out of Money

This is partly due to the de-industrialisation process and massive job losses, but also to the fact that American workers are not properly rewarded for increased productivity. The productivity gains are siphoned off by the bosses, who have also hijacked their shareholders' interest by paying themselves enormous salaries and other benefits.

As I pointed out six years ago, The United States is the world's largest financial black hole, attracting investments from bashful millionaires in Jamaica, Kazakhstan, Malaysia, Burkina Faso you name it by way of places like Cayman, Anguilla and the Isle of Man. This constant swallowing of foreign money is what keeps the American enterprise machine and stock and bond markets booming. It also impoverishes the rest of the world.

The result, as in Jamaica and other Third World countries, is that while productivity and GDP are apparently increasing, the working classes are getting ever smaller shares of the increased pie.

So when it becomes apparent to the Chinese and others that the US as a whole is defaulting or about to default on its loans, both private and public, the Chinese stock market takes a hit when the US stock market takes a hit and the effect is knocked on round the world.

The catastrophic deceleration of the world's largest economy has only just begun, and it will gain speed as panicked investors rush to cut their losses As more of them come into the market the stock tickers will soon become unable to keep up with the runaway elevator. The result: recession and perhaps, even depression.

Depression is not as outlandish as it seems, with the United States not only overextended in its foreign borrowing, but also overextended in its defense spending. The billions draining away down the rat hole of Iraq are not recoverable, and when the American taxpayer proves unable to cough up the ready cash, the foreign lenders will find their willingness to lend even more severely tested.

All of this is the result of globalisation or extreme capitalism, in which no thought is given to the basic principles of Adam Smith which briefly stated, are that income and outgo should fairly regularly come into balance.

We will soon feel the knock on effect. We will soon find that in the new atmosphere of economic stringency, the people who have lent us money will want it back rather more quickly than they'd promised. Since we have made our economy totally open, we have nothing to produce to pay for our purchases, the remittances from our expatriates will begin to fall, because many will be out of work and the earnings from tourism will crash because many middleclass Americans will no longer be able to afford the kinds of holidays to which they have become accustomed. With gasoline at $100 a liter how much in tolls will our new superhighways be able to collect?

What will happen to places such as Puerto Rico and Jamaica?

Eating cats, rats and dogs

Jamaica has swallowed the globalisation bait hook, line and sinker. We have opened up all our markets to unbridled foreign investment and competition, and, as I pointed out several years ago, this means that ordinary jamaicans are going to pay through the nose for the inestimable privilege of becoming for the second time round, a slave society. Our beaches, our forests and our farmland will become hostages to the foreign parasites. We will re-enter slavery.

And just in case you don't know what slavery was, l;et me quote a sympathetic observer who wrote 250 years ago:

"Negroes who are now computed to be more than 120000 [120,000] in number; and by whose labours and industry almost alone, the colony flourisheth, and its productions are cultivated and manufactured. The Negroes are, for the most part, the property of the Whites; and bought and sold like every other commodity in the country"

"When we consider the inconveniences under which these creatures labour, the toils they are obliged to undergo, the vicissitudes of heat and cold, to which they are exposed, and the grossness of their food in general; we ought not to be surprized they had been still more slothful and sickly than they are

commonly observed to be;

In a footnote, Dr Patrick Browne writes:

"(a)in the country parts of the island every plantation Negroe is allowed a Saturday afternoon or some other afternoon …to stock and manure his particular patch of ground, which he generally plants in cassada (sic) yams, potatoes, Indian and Guinea corn and on Sunday they provide provisions for the ensuing week, and send some to market, to supply themselves with a little salt beef or pork or fish, and a little rum, which are the greatest dainties they can come at, unless a cat, a rat or dog fall in their way . It is true, many of them raise a little poultry, and other stock; but these they generally sell to enable them to purchase some decent as well as necessary cloathes (sic) for their wives and themselves.." ( pp 24-25 The Civil and Natural History of Jamaica by Patrick Browne, M.D., Grays Inn, London 1756)

What Dr Patrick Browne is saying is that he is surprised that the slaves were able to work as hard as they did given the treatment they received. Not only were they poorly and badly fed, but they had to supplement the estate food by growing their own. The day off they got was in fact an additional slave labour so that they could eat and dress decently. And it is clear that if they were forced by hunger to eat cats, dogs and rats, their situation was wretched in the extreme.

That is where we are headed when we beg the WTO for special treatment for bananas and sugar and when we buy the garbage about producing ethanol and aluminum. What we get is mines which will destroy our precious landscape, flora and fauna, screwdriver industries consisting only of worksites removable overnight. as we have seen and are seeing again in the "garment industry". When that goes the women are reduced to whoring and the men to driving 'robots'.

Eventually, of course, the laws of supply and demand will mean that as in Germany after the first World War, a woman may be had for a pack of cigarettes and you will need a wheelbarrow of worthless currency to buy a loaf of bread. We have seen it happen in the largest countries in Latin America, in Argentina and Brazil within the last two decades.

In protecting the bloodsucking industries of sugar and bananas and aluminum, we are sterilising our land, rendering it unfit for growing food and we will have to import food from countries where the farmers fly Cessnas to work.

Our real assets, our land and our people, remain unprotected. As I said six years ago, Jamaica is another kind of Black Hole, " sucked dry of inspiration, brainpower and resources, busy burning the furniture to keep warm. We are going to destroy world-class biological reserves in Long Mountain, heedless of the fact that our crime rate is closely connected to the fact that children have nowhere to play and have no idea of their rich history or the fact that Jamaica's 'biological heritage is one of the richest in the world and that Long Mountain and Hellshire and the Cockpit Country are among our crown jewels. We, prefer to cast our pearls before developers." – and now, before Marc Rich and Alcoa.

"Instead of giving our children space to roam, to play, to learn and to study and socialise, we foreclose their options by blitzing green space and confining them to their barracoons on the same places which were slave yards 150 years ago. Having failed them, deprived them and corrupted them, we will, by another end of pipe solution, be making criminals of them.

Jamaica and Puerto Rico, meet Haiti.

Copyright ©2007 John Maxwell


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