Tuesday, June 27, 2017

The Italian job.

Italian Taxpayers foot the bill, rescue banks and bondholders
by Michael Roberts

The Italian government is putting up €17bn in public money (from the ‘magic money tree’) to bail out two Venetian banks.  The banks will not be nationalised, but instead handed over to Intesa Sanpaolo Spa, Italy’s biggest bank, for the token sum of one euro!

Intesa will guarantee the cash deposits of the Venetian banks, but it will sack several thousand bank employees, while getting 900 new branches and billions in financial guarantees from the government.  Intesa will take over all the performing loans from the Venetian banks, while the state gets to keep all the bad debts that it must either write off or try to collect over time.

So yet again, the reckless activities of some banks and the stagnation of the economy that made many companies unable to pay their debts are to be ‘resolved’ by the state stumping up the cash.  The bailout is equivalent to 1% of Italy’s GDP, adding yet more to the size of Italy’s already massive public sector debt of 135% of GDP.  Intesa gets some cleaned-up banks for just one euro, just as JP Morgan got the banking network of Bear Stearns in the global financial crash for one dollar – all paid for by taxes or government borrowing.  The state and the people get nothing for their €17bn.

What is even more ironic is that the Italian deal breaks the very banking rules set up by the EU governments after the global financial crash to avoid bank investors (bondholders) being bailed out at taxpayer expense.  Under the EU’s Bank Recovery and Resolution Directive (BRRD), such bailouts should first be funded by bank bondholders, including so-called senior bonds, and only after that, in the extreme, by EU funds.  But the EU’s Single Resolution Board accepted, under pressure from the Italian government, that there was no real ‘banking crisis’ that required EU intervention and so it could be dealt with by Italy alone.

After all, the Venetian banks had only 2% of the banking system. But what was not taken into account was the already huge losses being run up by other Italian banks, like Monte dei Paschi.  Indeed, Italy has €300bn in non-performing loans on its bank books, or some 20% of GDP. A resolution under EU rules would have required Italy to find another €12bn for the country’s deposit guarantee fund. And UniCredit, Monte dei Paschi di Siena and UBI Banca would have had to make further capital calls and may have been deserted by investors.

The deal has been frowned upon by Germany, as it bends the new banking rules to the point of making them irrelevant – but then the head of the ECB, Mario Draghi, is an Italian and former head of Italy’s central bank.  For the Germans, it is a signal that further integration financially in the Euro area is impossible if nation states break the rules flagrantly.

Politically, it helps the ruling centre-left Democrats in the bid by its leader Matteo Renzi to regain his position as prime minister in any election due by May.  If the banks had been bankrupted, deposits may have been lost and bondholders liquidated – bad electorally as many bondholders are small business people persuaded by the banks to invest in bank bonds.  The news of the deal has been greeted with rapture by the stock market.

Thus we have another bank bailout, nine years since the global financial crash that nationalizes the losses caused by the bankers and privatizes gains for those bankers remaining: exactly what EU banking union rules were meant to stop.   Thousands of bank employees will be out of work; but bank investors and bondholders are laughing all the way to the new bank.  The state racks up more debt and thus increases the pressure to introduce more austerity to service the debt.  And other bankers know that, if they make a mess of things, they can escape with a state bailout and carry on as before.
There is no idea in this deal that the people through the state could take these banks (and the other major banks) into public ownership and make banking a public service for households and small businesses and not be used as vehicles for reckless speculation, greed and corruption.  On the contrary, this Italian job is business as usual.

Trump‘s Red Line: Seymour Hersh on Syrian Sarin Attacks

This piece from the respected journalist, Seymour Hirsh, was first published in the German media, Welt, on June 25th.   It is relevant in that the White House is now threatening Syria, Russia and Iran if Assad carries out another Sarin attack despite intelligence claiming he never carried out the first one that resulted in Trump's missile attacks on Syria. RM

Trump‘s Red Line

Von Seymour M. Hersh | | Lesedauer: 24 Minuten
Retaliation: Tomahawk missiles from the "USS Porter" on the way to the Shayrat Air Base on April 6, 2017 Retaliation: Tomahawk missiles from the "USS Porter" on the way to the Shayrat Air Base on April 6, 2017
Retaliation: Tomahawk missiles from the "USS Porter" on the way to the Shayrat Air Base on April 6, 2017
Quelle: picture alliance / Robert S. Pri/dpa Picture-Alliance / Robert S.
President Donald Trump ignored important intelligence reports when he decided to attack Syria after he saw pictures of dying children. Seymour M. Hersh investigated the case of the alleged Sarin gas attack.

On April 6, United States President Donald Trump authorized an early morning Tomahawk missile strike on Shayrat Air Base in central Syria in retaliation for what he said was a deadly nerve agent attack carried out by the Syrian government two days earlier in the rebel-held town of Khan Sheikhoun. Trump issued the order despite having been warned by the U.S. intelligence community that it had found no evidence that the Syrians had used a chemical weapon.

The available intelligence made clear that the Syrians had targeted a jihadist meeting site on April 4 using a Russian-supplied guided bomb equipped with conventional explosives. Details of the attack,  including information on its so-called high-value targets, had been provided by the Russians days in advance to American and allied military officials in Doha, whose mission is to coordinate all U.S., allied, Syrian and Russian Air Force operations in the region.

Some American military and intelligence officials were especially distressed by the president's determination to ignore the evidence. "None of this makes any sense," one officer told colleagues upon learning of the decision to bomb. "We KNOW that there was no chemical attack ... the Russians are furious. Claiming we have the real intel and know the truth ... I guess it didn't matter whether we elected Clinton or Trump.“

Within hours of the April 4 bombing, the world’s media was saturated with photographs and videos from Khan Sheikhoun. Pictures of dead and dying victims, allegedly suffering from the symptoms of nerve gas poisoning, were uploaded to social media by local activists, including the White Helmets, a first responder group known for its close association with the Syrian opposition.
Seymour M. Hersh exposed the My Lai Massacre in Vietnam 1968. He uncovered the abuses at Abu Ghraib prison in Iraq and many other stories about war and politics
Seymour M. Hersh exposed the My Lai Massacre in Vietnam 1968. He uncovered the abuses at Abu Ghraib prison in Iraq and many other stories about war and politics
Quelle: Getty Images/Getty Images North America
The provenance of the photos was not clear and no international observers have yet inspected the site, but the immediate popular assumption worldwide was that this was a deliberate use of the nerve agent sarin, authorized by President Bashar Assad of Syria. Trump endorsed that assumption by issuing a statement within hours of the attack, describing Assad’s "heinous actions" as being a consequence of the Obama administration’s "weakness and irresolution" in addressing what he said was Syria’s past use of chemical weapons.

To the dismay of many senior members of his national security team, Trump could not be swayed over the next 48 hours of intense briefings and decision-making. In a series of interviews, I learned of the total disconnect between the president and many of his military advisers and intelligence officials, as well as officers on the ground in the region who had an entirely different understanding of the nature of Syria’s attack on Khan Sheikhoun. I was provided with evidence of that disconnect, in the form of transcripts of real-time communications, immediately following the Syrian attack on April 4.

In an important pre-strike process known as deconfliction, U.S. and Russian officers routinely supply one another with advance details of planned flight paths and target coordinates, to ensure that there is no risk of collision or accidental encounter (the Russians speak on behalf of the Syrian military). This information is supplied daily to the American AWACS surveillance planes that monitor the flights once airborne. Deconfliction’s success and importance can be measured by the fact that there has yet to be one collision, or even a near miss, among the high-powered supersonic American, Allied, Russian and Syrian fighter bombers.

Russian and Syrian Air Force officers gave details of the carefully planned flight path to and from Khan Shiekhoun on April 4 directly, in English, to the deconfliction monitors aboard the AWACS plane, which was on patrol near the Turkish border, 60 miles or more to the north.

The Syrian target at Khan Sheikhoun, as shared with the Americans at Doha, was depicted as a two-story cinder-block building in the northern part of town. Russian intelligence, which is shared when necessary with Syria and the U.S. as part of their joint fight against jihadist groups, had established that a high-level meeting of jihadist leaders was to take place in the building, including representatives of Ahrar al-Sham and the al-Qaida-affiliated group formerly known as Jabhat al-Nusra. The two groups had recently joined forces, and controlled the town and surrounding area.

Russian intelligence depicted the cinder-block building as a command and control center that housed a grocery and other commercial premises on its ground floor with other essential shops nearby, including a fabric shop and an electronics store.

"The rebels control the population by controlling the distribution of goods that people need to live – food, water, cooking oil, propane gas, fertilizers for growing their crops, and insecticides to protect the crops," a senior adviser to the American intelligence community, who has served in senior positions in the Defense Department and Central Intelligence Agency, told me. The basement was used as storage for rockets, weapons and ammunition, as well as products that could be distributed for free to the community, among them medicines and chlorine-based decontaminants for cleansing the bodies of the dead before burial. The meeting place – a regional headquarters – was on the floor above. “It was an established meeting place,” the senior adviser said. “A long-time facility that would have had security, weapons, communications, files and a map center.” The Russians were intent on confirming their intelligence and deployed a drone for days above the site to monitor communications and develop what is known in the intelligence community as a POL – a pattern of life. The goal was to take note of those going in and out of the building, and to track weapons being moved back and forth, including rockets and ammunition.

One reason for the Russian message to Washington about the intended target was to ensure that any CIA asset or informant who had managed to work his way into the jihadist leadership was forewarned not to attend the meeting. I was told that the Russians passed the warning directly to the CIA. “They were playing the game right,” the senior adviser said. The Russian guidance noted that the jihadist meeting was coming at a time of acute pressure for the insurgents: Presumably Jabhat al-Nusra and Ahrar al-Sham were desperately seeking a path forward in the new political climate. In the last few days of March, Trump and two of his key national security aides – Secretary of State Rex Tillerson and UN Ambassador Nikki Haley – had made statements acknowledging that, as the New York Times put it, the White House “has abandoned the goal” of pressuring Assad "to leave power, marking a sharp departure from the Middle East policy that guided the Obama administration for more than five years.” White House Press Secretary Sean Spicer told a press briefing on March 31 that “there is a political reality that we have to accept,” implying that Assad was there to stay.

Russian and Syrian intelligence officials, who coordinate operations closely with the American command posts, made it clear that the planned strike on Khan Sheikhoun was special because of the high-value target. “It was a red-hot change. The mission was out of the ordinary – scrub the sked,” the senior adviser told me. “Every operations officer in the region" – in the Army, Marine Corps, Air Force, CIA and NSA – “had to know there was something going on. The Russians gave the Syrian Air Force a guided bomb and that was a rarity. They’re skimpy with their guided bombs and rarely share them with the Syrian Air Force. And the Syrians assigned their best pilot to the mission, with the best wingman.” The advance intelligence on the target, as supplied by the Russians, was given the highest possible score inside the American community.

The Execute Order governing U.S. military operations in theater, which was issued by the Chairman of the Joint Chiefs of Staff,  provide instructions that demarcate the relationship between the American and Russian forces operating in Syria. “It’s like an ops order – ‘Here’s what you are authorized to do,’” the adviser said. “We do not share operational control with the Russians. We don’t do combined operations with them, or activities directly in support of one of their operations.  But coordination is permitted. We keep each other apprised of what’s happening and within this package is the mutual exchange of intelligence.  If we get a hot tip that could help the Russians do their mission, that’s coordination; and the Russians do the same for us. When we get a hot tip about a command and control facility,” the adviser added, referring to the target in Khan Sheikhoun, “we do what we can to help them act on it."

“This was not a chemical weapons strike,” the adviser said. “That’s a fairy tale. If so, everyone involved in transferring, loading and arming the weapon – you’ve got to make it appear like a regular 500-pound conventional bomb – would be wearing Hazmat protective clothing in case of a leak. There would be very little chance of survival without such gear. Military grade sarin includes additives designed to increase toxicity and lethality. Every batch that comes out is maximized for death. That is why it is made. It is odorless and invisible and death can come within a minute. No cloud. Why produce a weapon that people can run away from?”
This photograph by the Syrian opposition (Edlib Media Center) shows the aftermath of a strike against the town of Khan Sheikhoun. A large building was hit, but it’s unclear were the strike took place exactly

This photograph by the Syrian opposition (Edlib Media Center) shows the aftermath of a strike against the town of Khan Sheikhoun. A large building was hit, but it’s unclear were the strike took place exactly
Quelle: picture alliance / ZUMAPRESS.com/Shalan Stewart
The target was struck at 6:55 a.m. on April 4, just before midnight in Washington. A Bomb Damage Assessment (BDA) by the U.S. military later determined that the heat and force of the 500-pound Syrian bomb triggered  a series of secondary explosions that could have generated a huge toxic cloud that began to spread over the town, formed by the release of the fertilizers, disinfectants and other goods stored in the basement, its effect magnified by the dense morning air, which trapped the fumes close to the ground. According to intelligence estimates, the senior adviser said, the strike itself killed up to four jihadist leaders, and an unknown number of drivers and security aides.

There is no confirmed count of the number of civilians killed by the poisonous gases that were released by the secondary explosions, although opposition activists reported that there were more than 80 dead, and outlets such as CNN have put the figure as high as 92. A team from Médecins Sans Frontières, treating victims from Khan Sheikhoun at a clinic 60 miles to the north, reported that “eight patients showed symptoms – including constricted pupils, muscle spasms and involuntary defecation – which are consistent with exposure to a neurotoxic agent such as sarin gas or similar compounds.” MSF also visited other hospitals that had received victims and found that patients there “smelled of bleach, suggesting that they had been exposed to chlorine.” In other words, evidence suggested that there was more than one chemical responsible for the symptoms observed, which would not have been the case if the Syrian Air Force – as opposition activists insisted – had dropped a sarin bomb, which has no percussive or ignition power to trigger secondary explosions. The range of symptoms is, however, consistent with the release of a mixture of chemicals, including chlorine and the organophosphates used in many fertilizers, which can cause neurotoxic effects similar to those of sarin.

The internet swung into action within hours, and gruesome photographs of the victims flooded television networks and YouTube. U.S. intelligence was tasked with establishing what had happened. Among the pieces of information received was an intercept of Syrian communications collected before the attack by an allied nation. The intercept, which had a particularly strong effect on some of Trump’s aides, did not mention nerve gas or sarin, but it did quote a Syrian general discussing a “special” weapon and the need for a highly skilled pilot to man the attack plane. The reference, as those in the American intelligence community understood, and many of the inexperienced aides and family members close to Trump may not have, was to a Russian-supplied bomb with its built-in guidance system. “If you’ve already decided it was a gas attack, you will then inevitably read the talk about a special weapon as involving a sarin bomb,” the adviser said. “Did the Syrians plan the attack on Khan Sheikhoun? Absolutely. Do we have intercepts to prove it? Absolutely. Did they plan to use sarin? No. But the president did not say: ‘We have a problem and let’s look into it.’ He wanted to bomb the shit out of Syria.”

At the UN the next day, Ambassador Haley created a media sensation when she displayed photographs of the dead and accused Russia of being complicit. “How many more children have to die before Russia cares?” she asked. NBC News, in a typical report that day, quoted American officials as confirming that nerve gas had been used and Haley tied the attack directly to Syrian President Assad. "We know that yesterday’s attack was a new low even for the barbaric Assad regime,” she said. There was irony in America's rush to blame Syria and criticize Russia for its support of Syria's denial of any use of gas in Khan Sheikhoun, as Ambassador Haley and others in Washington did. "What doesn't occur to most Americans" the adviser said, "is if there had been a Syrian nerve gas attack authorized by Bashar, the Russians would be 10 times as upset as anyone in the West. Russia’s strategy against ISIS, which involves getting American cooperation, would have been destroyed and Bashar would be responsible for pissing off Russia, with unknown consequences for him. Bashar would do that? When he’s on the verge of winning the war? Are you kidding me?”

Trump, a constant watcher of television news, said, while King Abdullah of Jordan was sitting next to him in the Oval Office, that what had happened was “horrible, horrible” and a “terrible affront to humanity.” Asked if his administration would change its policy toward the Assad government, he said: “You will see.” He gave a hint of the response to come at the subsequent news conference with King Abdullah: “When you kill innocent children, innocent babies – babies, little babies – with a chemical gas that is so lethal  ... that crosses many, many lines, beyond a red line . ... That attack on children yesterday had a big impact on me. Big impact ... It’s very, very possible ... that my attitude toward Syria and Assad has changed very much.”

Within hours of viewing the photos, the adviser said, Trump instructed the national defense apparatus to plan for retaliation against Syria. “He did this before he talked to anybody about it. The planners then asked the CIA and DIA if there was any evidence that Syria had sarin stored at a nearby airport or somewhere in the area. Their military had to have it somewhere in the area in order to bomb with it.” “The answer was, ‘We have no evidence that Syria had sarin or used it,’” the adviser said. “The CIA also told them that there was no residual delivery for sarin at Sheyrat [the airfield from which the Syrian SU-24 bombers had taken off on April 4] and Assad had no motive to commit political suicide.” Everyone involved, except perhaps the president, also understood that a highly skilled United Nations team had spent more than a year in the aftermath of an alleged sarin attack in 2013 by Syria, removing what was said to be all chemical weapons from a dozen Syrian chemical weapons depots.

At this point, the adviser said, the president’s national security planners were more than a little rattled: “No one knew the provenance of the photographs. We didn’t know who the children were or how they got hurt. Sarin actually is very easy to detect because it penetrates paint, and all one would have to do is get a paint sample. We knew there was a cloud and we knew it hurt people. But you cannot jump from there to certainty that Assad had hidden sarin from the UN because he wanted to use it in Khan Sheikhoun.” The intelligence made clear that a Syrian Air Force SU-24 fighter bomber had used a conventional weapon to hit its target: There had been no chemical warhead. And yet it was impossible for the experts to persuade the president of this once he had made up his mind. “The president saw the photographs of poisoned little girls and said it was an Assad atrocity,” the senior adviser said. “It’s typical of human nature. You jump to the conclusion you want. Intelligence analysts do not argue with a president. They’re not going to tell the president, ‘if you interpret the data this way, I quit.’”
President Donald J. Trump with some of his closest advisors at Mar-a-Lago on April 6, 2017 at a top secret briefing on the results of the missile strike on Shayat Air Base
President Donald J. Trump with some of his closest advisors at Mar-a-Lago on April 6, 2017 at a top secret briefing on the results of the missile strike on Shayat Air Base
Quelle: picture alliance/ASSOCIATED PRESS/AP Content
The national security advisers understood their dilemma: Trump wanted to respond to the affront to humanity committed by Syria and he did not want to be dissuaded. They were dealing with a man they considered to be not unkind and not stupid, but his limitations when it came to national security decisions were severe. "Everyone close to him knows his proclivity for acting precipitously when he does not know the facts," the adviser said. "He doesn’t read anything and has no real historical knowledge. He wants verbal briefings and photographs. He’s a risk-taker. He can accept the consequences of a bad decision in the business world; he will just lose money. But in our world, lives will be lost and there will be long-term damage to our national security if he guesses wrong. He was told we did not have evidence of Syrian involvement and yet Trump says: 'Do it.”’

On April 6, Trump convened a meeting of national security officials at his Mar-a-Lago resort in Florida. The meeting was not to decide what to do, but how best to do it – or, as some wanted, how to do the least and keep Trump happy. “The boss knew before the meeting that they didn’t have the intelligence, but that was not the issue,” the adviser said. “The meeting was about, ‘Here’s what I’m going to do,' and then he gets the options.”

The available intelligence was not relevant. The most experienced man at the table was Secretary of Defense James Mattis, a retired Marine Corps general who had the president’s respect and understood, perhaps, how quickly that could evaporate. Mike Pompeo, the CIA director whose agency had consistently reported that it had no evidence of a Syrian chemical bomb, was not present. Secretary of State Tillerson was admired on the inside for his willingness to work long hours and his avid reading of diplomatic cables and reports, but he knew little about waging war and the management of a bombing raid. Those present were in a bind, the adviser said. “The president was emotionally energized by the disaster and he wanted options.”

He got four of them, in order of extremity. Option one was to do nothing. All involved, the adviser said, understood that was a non-starter. Option two was a slap on the wrist: to bomb an airfield in Syria, but only after alerting the Russians and, through them, the Syrians, to avoid too many casualties. A few of the planners called this the “gorilla option”: America would glower and beat its chest to provoke fear and demonstrate resolve, but cause little significant damage. The third option was to adopt the strike package that had been presented to Obama in 2013, and which he ultimately chose not to pursue. The plan called for the massive bombing of the main Syrian airfields and command and control centers using B1 and B52 aircraft launched from their bases in the U.S. Option four was “decapitation”: to remove Assad by bombing his palace in Damascus, as well as his command and control network and all of the underground bunkers he could possibly retreat to in a crisis.

“Trump ruled out option one off the bat,” the senior adviser said, and the assassination of Assad was never considered. “But he said, in essence: ‘You’re the military and I want military action.’” The president was also initially opposed to the idea of giving the Russians advance warning before the strike, but reluctantly accepted it. “We gave him the Goldilocks option – not too hot, not too cold, but just right.” The discussion had its bizarre moments. Tillerson wondered at the Mar-a-Lago meeting why the president could not simply call in the B52 bombers and pulverize the air base. He was told that B52s were very vulnerable to surface-to-air missiles (SAMs) in the area and using such planes would require suppression fire that could kill some Russian defenders.  “What is that?” Tillerson asked. Well, sir, he was told, that means we would have to destroy the upgraded SAM sites along the B52 flight path, and those are manned by Russians, and we possibly would be confronted with a much more difficult situation. “The lesson here was: Thank God for the military men at the meeting,” the adviser said. "They did the best they could when confronted with a decision that had already been made."

Fifty-nine Tomahawk missiles were fired from two U.S. Navy destroyers on duty in the Mediterranean, the Ross and the Porter, at Shayrat Air Base near the government-controlled city of Homs. The strike was as successful as hoped, in terms of doing minimal damage. The missiles have a light payload – roughly 220 pounds of HBX, the military’s modern version of TNT. The airfield’s gasoline storage tanks, a primary target, were pulverized, the senior adviser said, triggering a huge fire and clouds of smoke that interfered with the guidance system of following missiles. As many as 24 missiles missed their targets and only a few of the Tomahawks actually penetrated into hangars, destroying nine Syrian aircraft, many fewer than claimed by the Trump administration. I was told that none of the nine was operational: such damaged aircraft are what the Air Force calls hangar queens.

“They were sacrificial lambs,” the senior adviser said. Most of the important personnel and operational fighter planes had been flown to nearby bases hours before the raid began. The two runways and parking places for aircraft, which had also been targeted, were repaired and back in operation within eight hours or so. All in all, it was little more than an expensive fireworks display.
“It was a totally Trump show from beginning to end,” the senior adviser said. “A few of the president’s senior national security advisers viewed the mission as a minimized bad presidential decision, and one that they had an obligation to carry out. But I don’t think our national security people are going to allow themselves to be hustled into a bad decision again. If Trump had gone for option three, there might have been some immediate resignations.”

After the meeting, with the Tomahawks on their way, Trump spoke to the nation from Mar-a-Lago, and accused Assad of using nerve gas to choke out “the lives of helpless men, women and children. It was a slow and brutal death for so many ... No child of God should ever suffer such horror.” The next few days were his most successful as president. America rallied around its commander in chief, as it always does in times of war. Trump, who had campaigned as someone who advocated making peace with Assad, was bombing Syria 11 weeks after taking office, and was hailed for doing so by Republicans, Democrats and the media alike. One prominent TV anchorman, Brian Williams of MSNBC, used the word “beautiful” to describe the images of the Tomahawks being launched at sea. Speaking on CNN, Fareed Zakaria said: “I think Donald Trump became president of the United States.” A review of the top 100 American newspapers showed that 39 of them published editorials supporting the bombing in its aftermath, including the New York Times, Washington Post and Wall Street Journal.
The Tomahawk missiles only did little damage to the Syrian air base
The Tomahawk missiles only did little damage to the Syrian air base
Quelle: AP Photo/HM BH
Five days later, the Trump administration gathered the national media for a background briefing on the Syrian operation that was conducted by a senior White House official who was not to be identified. The gist of the briefing was that Russia’s heated and persistent denial of any sarin use in the Khan Sheikhoun bombing was a lie because President Trump had said sarin had been used. That assertion, which was not challenged or disputed by any of the reporters present, became the basis for a series of further criticisms:
     - The continued lying by the Trump administration about Syria’s use of sarin led to widespread belief in the American media and public  that Russia had  chosen to be involved in a corrupt disinformation and cover-up campaign on the part of Syria.
     - Russia’s military forces had been co-located with Syria’s at the Shayrat airfield (as they are throughout Syria), raising the possibility that Russia had advance notice of Syria’s determination to use sarin at Khan Sheikhoun and did nothing to stop it.
      - Syria’s use of sarin and Russia’s defense of that use strongly suggested that Syria withheld stocks of the nerve agent from the UN disarmament team that spent much of 2014 inspecting and removing all declared chemical warfare agents from 12 Syrian chemical weapons depots, pursuant to the agreement worked out by the Obama administration and Russia after Syria’s alleged, but still unproven, use of sarin the year before against a rebel redoubt in a suburb of Damascus.

The briefer, to his credit, was careful to use the words “think,” “suggest” and “believe” at least 10 times during the 30-minute event. But he also said that his briefing was based on data that had been declassified by “our colleagues in the intelligence community.” What the briefer did not say, and may not have known, was that much of the classified information in the community made the point that Syria had not used sarin in the April 4 bombing attack.

The mainstream press responded the way the White House had hoped it would: Stories attacking Russia’s alleged cover-up of Syria’s sarin use dominated the news and many media outlets ignored the briefer’s myriad caveats. There was a sense of renewed Cold War. The New York Times, for example – America’s leading newspaper – put the following headline on its account: “White House Accuses Russia of Cover-Up in Syria Chemical Attack.” The Times’ account did note a Russian denial, but what was described by the briefer as “declassified information” suddenly became a “declassified intelligence report.” Yet there was no formal intelligence report stating that Syria had used sarin, merely a "summary based on declassified information about the attacks," as the briefer referred to it.

The crisis slid into the background by the end of April, as Russia, Syria and the United States remained focused on annihilating ISIS and the militias of al-Qaida. Some of those who had worked through the crisis, however, were left with lingering concerns. “The Salafists and jihadists got everything they wanted out of their hyped-up Syrian nerve gas ploy,” the senior adviser to the U.S. intelligence community told me, referring to the flare up of tensions between Syria, Russia and America. “The issue is, what if there’s another false flag sarin attack credited to hated Syria? Trump has upped the ante and painted himself into a corner with his decision to bomb. And do not think these guys are not planning the next faked attack. Trump will have no choice but to bomb again, and harder. He’s incapable of saying he made a mistake.”

The White House did not answer specific questions about the bombing of Khan Sheikhoun and the airport of Shayrat. These questions were send via e-mail to the White House on June 15 and never answered.   

Monday, June 26, 2017

Britain: Save the NHS.

Felicity Dowling

Changing the NHS to Accountable Care Organisations is re structuring the NHS on USA models and will facilitate restrictions on treatments, risk conditions of employment and put it up for auction in free trade deals. This is under way in Merseyside and Cheshire now as part of putting the STPs in action. The conservative manifesto said they would implement it if it was locally supported; so why is it being locally supported by the council? Why?

This from the Conservative manifesto; "It is NHS England that determines how best to organise and deliver care in England, set out in its own plan to create a modern NHS – the Five Year Forward View. ,... We will also back the implementation of the plan at a local level, through the Sustainability and Transformation Plans, providing they are clinically led and locally supported.
...............we will make non-legislative changes to remove barriers to the integration of care"

In Liverpool at key meetings with the NHS the introduction of this scheme was reported, and reported for action not discussion local councillors( who should know better) claimed the use of these terms is nothing to do with Conservative plans for the NHS.

We know local NHS trusts have been to visit Kaiser Permanente in the states.

We know USA health care is expensive, inefficient and for profit

The NHS is the biggest cash cow the big corporations can dream of.

Ideas please to get the reality of this through to those councilors making these decisions.

Sunday, June 25, 2017

Undocumented Immigrants are skapegoats. Deport Trump and his Gang.

It's just not fair. They get all the cushy jobs
By Richard Mellor
Afscme Local 444, retired

I posted the piece I wrote on the sorry state of US dams on Facebook and pointed out that the wealth of three Americans was about three times greater than the cost of repairing our dams.  The wealth of one American would cover it.  Making dams, and millions of people safe is delayed or put off entirely because of “lack of funds” and labor power according to the official sources.  The real reason as I pointed out in my article is not a lack of capital but its allocation. Which section of society owns it and determines how it’s used.

One response I received in the comments section was from Jim Johnson, a retired bookseller, I think he lives in Boston or New England somewhere. Johnson writes: You can fix your infrastructure, or spend the bundle on illegal aliens. Take your pick.”

Assuming Johnson read my article I have to wonder what it is that drives a human being to think that a society in which one person possesses more than enough wealth ($64 billion) to finance a much needed national infrastructure repair project that is held up due to lack of funds, is a not a dysfunctional one, and instead blames the failure to come up with the funding, on people he refers to as “illegal aliens”. Is it racism pure and simple? Is it nationalism? Is Johnson so enamored with the geo-political boundaries of the modern nation state that he cannot abide by a human being crossing them without permission? Maybe it’s all these things or perhaps he’s just an idiot.

Leaving aside that I am an immigrant from Europe myself and would not have the nerve to claim any person with an ounce of indigenous blood doesn’t belong here, immigrants, undocumented or otherwise, don’t cost US society money, they add value, they contribute to our society. The undocumented among them, about half the US agricultural workforce, do this as the suffer daily discrimination and abuse due to their status and never know from one minute to the next if, as one immigration lawyer puts it, “…every little traffic ticket’s going to turn into detention.”

The attacks on immigrants by right wing politicians like Trump and his equals in Europe and England where I was last week, has emboldened racists and xenophobes leading to violent assaults and harassment. It has given Nazi’s and fascists more confidence. Also, many backward thinking workers have been fooled by these arguments. I have had to unfriend a few people on FB due to their forwarding of anti- immigration meme’s from Nazi, Fascist and white nationalist sites, sometimes not even knowing the source. I am unfortunately about to unfriend another. There are genuine questions and concerns around immigration and the massive influx of what are economic refugees or those fleeing western backed regional wars, but there’s no excuse for giving audience to racists and attacking immigrants as opposed to building class solidarity with them. Workers and the labor movement must have an independent position on this issue and one the unites across borders.

Trump’s climate of fear has reduced apprehensions on our southern border with Mexico by 47% as economic migrants are concerned about entering the US. But the xenophobic climate is having a disastrous affect on employment in the low paid difficult working environment that Latino’s from the south occupy.  Bloomberg BusinessWeek points out in its latest issue how the crackdown on undocumented workers is causing a labor shortage. In one county in Kansas, the agricultural industry is suffering.  For one feed yard in Haskell County, the nation’s fifth largest and the county’s largest employer, the issue is acute as 86% of its workers are Latino. 77% of the voters in Haskell county voted for Trump. I do not see these people rushing to fill those jobs or any of the other 375,000 agricultural jobs in the US that are filled by undocumented workers according to the Pew Research Center.

BusinessWeek quotes a 215 study claiming that the price of milk would rise to $6.40 a gallon if dairy farms were “deprived access to immigrant workers” and that many dairy operations would simply go under. In April and May of this year, California growers discarded portions of their harvest due to the immigration policy.
Going after workers when the real criminals roam free.

Trump’s executive order on immigration also called for the deportation of any undocumented immigrants that have been convicted, or simply charged with a criminal offense. Anyone who has had dealings with the cops in one way or another, especially on picket lines like I have, is aware that the person holding the pen decides on the nature of the offense. “The language is so broad that all the estimated 11 million undocumented immigrants in the US could be targets.” BW says.  The reality is that despite many undocumented Eastern European and Irish works in the US, it is Latinos that will bear the brunt of the offensive. If you are brown skinned, indigenous looking, you are a target.

US workers are not looking to fill these jobs at the hog farm, meatpacking plant or feed lot, certainly not under the same conditions and wages. They are no threat to us, just the opposite. The undocumented are overwhelmingly working class and poor. They are forced north in search of the basic necessities of life and to feed their families. The Irish played the same role with regard to England and suffered the same racism and abuse as our Latino brothers and sisters from the south.  The addition of these workers to the labor force makes us potentially stronger.

So working people and the labor movement must develop our own response to these issues rather than allowing big business, through the two political parties that it controls to set the ground rules. We must support immigrant rights domestically and not fall in to the skape-goating trap while at the same time assisting the growth and development of labor organizations in other counties where poverty is rife. Most people emigrate because they can’t feed their families we join with them to raise their standard of living and ours.

But even If these workers and peasants don't come here to the US, staying in their home countries will have basically the same effect. It will increase the supply of labor, further driving down wages (Labor’s price) and increasing the rate at which capital invests since there would be even greater profits to be made there. We see it today as Ford has just opted to send production to China as opposed to Mexico. Even engineers jobs can be exported to India for example as technology has made the transfer of documents faster and more efficient.

Obviously this would mean further job losses here in the U.S. So we cannot escape the affects of the conditions of those workers and peasants, no matter if they come here or stay in their home countries. The only real difference is that if they come here, the effects of this forced competition are more visible to us.

Saturday, June 24, 2017

Damn the US Dams as US infrastructure takes a back seat to war.

Oroville Dam last winter.  A near catastrophe averted: this time
By Richard Mellor
Afscme Local 444, retired

A damning report on the condition of US dams has been released by the American Society of Civil Engineers according to today’s Wall Street Journal. According to the report, 30% or 27,380 of the nation’s 90,580 listed dams are rated as “posing a high or significant hazard” and more than 2170 of that 30% are “deficient and in need of upgrading”

The WSJ article gives the Calaveras reservoir dam as an example. This dam is 10 miles from the city of Fremont a little south of where I am sitting right now. The Calaveras dam, like many of California’s 1585 dams sits next to an earthquake fault, somewhat scary given that almost three quarters of the state’s dams are rated as “having high or significant risk of failure.” The reader is probably aware of the events at the Oroville dam, the nation’s tallest, here in Northern California earlier this year when some 200,000 people were evacuated after the dam spillway developed a hole during heavy rains.

In that case, three environmental groups — Friends of the River, the Sierra Club and the South Yuba River Citizens League filed a complaint with the Federal Energy Regulatory Commission that warned about a possible failure with the emergency spillway 12 years earlier. As is more often the case, that advice was ignored.

A new Calaveras dam is being built to replace the old one but is four years behind schedule after seven years of work so far. “The issues hampering the Calaveras reservoir project show how difficult it is to replace an old dam…” the Journal writes.  And what might these issues be I wonder?  Of course; what a silly question.  As with all the dams that have the potential to bring catastrophe to unsuspecting residents “funding and inspection staffing are considered inadequate” the report said.

Ivan Wong, a seismologist in the Bay Area says that “It’s a huge problem with limited resources…..We can barely pay our schoolteachers, but if a dam fails and there’s a population downstream we’re talking about a disaster.”.  The total estimated for upgrading the dams in question is $64 billion and included in that figure is $22 billion for those posing the highest risk according to the Association of State Dam Safety Officials. This is equal to the net worth of one very rich human being in this country, Bill Gates. Gates, Buffet and Jeff Bezos of Amazon are worth more than $233 billion between them. In all honesty, do workers actually think this is a good thing? Is this civilization? Is it that obscene comparison of wealth and how its spent what makes America great?  Surely not.

So there are no "limited resources" in the real sense. Society has the labor power and capital. The only issue delaying the repairs to US dams, and failing teachers and the education of our children and other social needs in general, is not a lack of funding but the allocation of the wealth of society that is created by the working class. Labor is the source of all wealth remember. 

When a catastrophe happens like Katrina or the poisoning of the Eel river in Virginia, the BP spill in the gulf or the explosion in West Texas that just about blew up a whole community, the cause is the political system and those that govern it; they are market driven disasters. The tragic fire in a block of council flats in London last week was another system failure as the political representatives of the capitalist class made decisions about housing that placed profits, investment and land speculation ahead of social needs. It sort of sickens me to see the Queen down at the tragedy when she lives in the same borough. Did she never wonder why her neighbors had to live like that?

The people that make these decisions are murderers. The people, regulators and politicians that allowed energy companies to write their own regulations and rules for deep water drilling that led to the Gulf spill are murderers.

People understand this in a way. But the overwhelming obstacle is our own consciousness-----that “stop in the mind” that the historian Christopher Hill wrote about with regard to the revolutionists that challenged the feudal aristocracy and system in the English revolution. In that instance people believed that the king was king by divine right. How can one kill the king?  Cromwell proved that idea bankrupt. Today people feel powerless, particularly so in the US where we have no political party of our own and where the heads of the organized workers’ movement are wedded to the market and capitalism and act as agents of the capitalist class in our movement. Propaganda about the efficiency of the market and that there is no alternative to capitalism spews out of the mass media, the mouths of the trade union hierarchy and the thousands of churches on Sundays. We are in a struggle for the conscious of the working class.

To challenge the status quo, the power that rules and that responds to challenges to its rule with violence, seems such a daunting task. I was just in London and talked with young Poles and other Eastern Europeans what it was like for them, the uncertainty of their lives now since the passing of Brexit. Will they be allowed to stay or forced to leave? On more than one occasion the response was that it didn’t matter, there was nothing they could do.

It is rare if not impossible for there not to be something one can do in any situation. Doing nothing keeps us trapped as victims of forces we think we cannot control but we can affect the world around us, it's how society advances. In the absence of a social force that we can turn to, join, and use as the instrument to fight back, we close our eyes to it all. But Katrina showed, as the attacks on 9-11 showed, we close our eyes to the actions of our own government and those that control it at our peril.

As Socrates wrote, "Just because you don't take an interest in politics doesn't mean politics won't take an interest in you."----and take an interest it will. The Trump health care bill is an example of it.  There will be some fierce fighting in the streets and the workplaces of America at some point as an overconfident US bourgeois intensifies the war against the US working class. It might take a serious environmental catastrophe or an event like a dam disaster or some other social infrastructure failure, to kick it off or it might be a seemingly spontaneous outburst that has been festering beneath the surface of US society that can be contained no longer, diverted by 24 hour sports, religion, mindless mass media and other diversionary clutter.  But happen it will.

Friday, June 23, 2017

Europe’s crisis: the Cluj debate with Mark Blyth

Another brilliant  analysis from Michael Roberts on how the capitalist economy functions. I am not an economist, but through my association with people like Michael Roberts, Mick Brooks and others that are, not least Marx himself, I have a fundamental grasp of how production takes place and surplus value and wealth accumulation occurs in a system of production in which the means of production are privately owned and set in motion on the basis of profit. That this profit, has its source in surplus value produced during the labor process that the capitalist controls and is value for which the capitalist returns no payment (wages), it is stolen in that sense. In other words, profit has its source in the unpaid labor of the worker.

It is not possible to reach conclusions Robert's reaches if one doesn't understand this basic fact and the contradictions and consequences of such social organization like the tendency of the rate of profit to fall due to what Marx called the rise in the organic composition of capital.  Working people can grasp the fundamentals of this economic world view as it really does objectively merge with our life experience. Understanding the general processes at work in any science, including social science, can ground us in reality and assist us down the revolutionary path to change objective conditions, alter the world around us. Building a living breathing social force (organization) that can assure a correct idea becomes accepted by millions in society is the task facing us and all workers must play a role in that.  Like all phenomena, there are the general processes at work and more complex aspects of it that must be studied if we are to fully understand it. Understanding the former is enough up to a point, for the moment, the latter I will leave to Michael Roberts and his colleagues. RM

by Michael Roberts

I’ve just returned from Cluj, Romania’s second largest city, where I discussed the Euro crisis and the future of Europe with Mark Blyth of Brown University.  Mark Blyth has published a number of books, including Austerity: a dangerous idea, which covers the history of the austerity doctrine as he sees it and its impact on the global financial crisis and on Europe’s economies.

The intellectual think-tank, Tranzit, organised the event brilliantly and it was very well attended.  The discussion was billed as a debate between a Keynesian and Marxist analysis of Europe’s economic crisis.  But, of course, there were many areas of agreement between Mark and myself on the events leading up to the global financial crash and subsequent slumps particularly in the periphery of the Eurozone and on the impact of the policies adopted by the European leaders and the Troika with the distressed states of Ireland, Portugal, Spain and Greece.

In my presentation, I argued that the great European project that started after the second world war had two aims: first, it was to ensure that there were never any more wars between European nations; and second, to make Europe as an economic and political entity to rival America and Japan in global capital.  This would be led by Franco-German capital.

The move to a common market, customs union and eventually the political and economic structures of the European Union was a relative success.  The EU-12-15 from the 1980s to 1999 managed to achieve a degree of harmonisation and convergence: the weaker capitalist economies growing faster than the stronger.

But the move towards further integration with a single currency and the enlargement of the EU to now 28 (soon 27) countries was not so successful.  Now it was divergence, not convergence that was the result: the weaker capitalist economies (in southern Europe) within the euro area lost ground to the stronger (in the north).

Franco-German capital expanded into the south and east to take advantage of cheap labour there, while exporting outside the euro area with a relatively competitive currency.  But the weaker states built up trade deficits with the northern states and were flooded with northern credit and capital that created property and financial booms out of line with growth in the productive sectors of the south.

This divergence was exposed in the global financial crash and the ensuing Great Recession.  The banking system of the southern states was driven to bankruptcy as property prices collapsed and companies and households were unable to meet their debt servicing costs.  This also put French and German banks at risk.  The weaker governments could not bail out their own banks without help and that meant agreeing to drastic austerity measures from the EU’s stability funds and the IMF.

At debate in Cluj, in my view, were two things: why did the period of success for the EU project turn into failure with the global financial crash?  And was the imposition of austerity programmes the main cause of the depression after the collapse in Portugal, Greece etc; or at least, would a reversal of those Troika-style measures have got Greece etc out of trouble?

My view was that the cause of the change from fast growth and convergence from the 1970s to slow growth and divergence from the 1990s can be found in the sharp decline in the profitability of capital in the major EU states (as elsewhere) after the end of the Golden Age of post-war expansion.

This led to fall in investment growth, productivity and trade divergence.  European capital, following the model of the Anglo-Saxon economies, adopted neo-liberal policies: anti trade union laws, deregulation of labour and product markets, free movement of capital and privatisations.  The aim was to boost profitability. This succeeded at least for the more advanced EU states of the north but less so for the south.

The introduction of the euro added another limitation on growth in the south and convergence with the north.  The euro was not an ‘optimal currency union’ (to use the mainstream economics term) because of this.  A strong euro was bad for exports in the south and gave investment power to the north.  The debts being built up by the south with the north were exposed in the crash and sparked the ‘euro crisis’, but only after the global financial crash.

The EU leaders had set criteria for joining the euro, but these criteria were all monetary (interest rates and inflation) and fiscal (budget deficits and debt).  They were not convergence criteria for productivity levels, GDP growth, investment or employment.  Why? Because those were areas for the free movement of capital (and labour) and capitalist production for the market; and not the province of interference or direction by the state.  After all, the EU project is a capitalist one.  Thus some countries clearly unable to converge were still incorporated into the euro area (Greece, Italy).

The imposition of austerity measures by the Franco-German EU leadership on the distressed countries during the crisis was the result of this ‘halfway house’ of euro criteria.  There was no full fiscal union (automatic transfer of revenues to those national economies with deficits) and there was no automatic injection of credit to cover capital flight and trade deficits – as there is in full federal unions like the United States or the United Kingdom.  Everything had to be agreed by tortuous negotiation among the Euro states.

Why? Because Franco-German capital was not prepared to pay for the ‘excesses’, or the problems of the weaker capitalist states.  Thus the bailout programmes were combined with ‘austerity’ to make the people of the distressed states pay with cuts in welfare, pensions and real wages, to repay (virtually in full) their creditors, the banks of France and Germany and the UK.  Eventually, this debt was transferred to the EU state institutions and the IMF – in the case of Greece, probably in perpetuity.

But would a reversal of austerity on its own have turned these economies around without the pain of huge cuts in living standards?  In the debate, I argued that it would not.  The evidence shows that there is little correlation between faster growth and more government spending or bigger budget deficits.  Indeed, during the Great Recession and subsequently, many countries with faster economic growth also had low government spending and budget deficits (see the graph below – if austerity causes poor growth, the line should be sharply from bottom left to top right, but it is nearly flat).  It seemed that faster economic growth was more dependent on other factors – in particular, more investment and in turn higher profitability.

The evidence shows that those EU states that got quicker recovery in profitability of capital were able to withstand and recover from the euro crisis (Germany, Netherlands etc), while those that did not improve profitability stayed deep in depression (Greece).

Reversing austerity or leaving the euro and devaluing would not do the trick.  I used the example of tiny Iceland that did renegotiate its debts and devalued its currency, but it made little difference to the hit that the Icelandic people took in living standards, because, in this case, inflation rocketed to eat into real wages.  In contrast, Estonia and Ireland adopted austerity measures.  But what enabled these economies to turn round and raise profitability was mass emigration of their workforces, which drove down the costs of capital (internal devaluation).

But so weak and corrupt was Greek capital that even drastic austerity and mass emigration have not raised up the economy on a capitalist basis.

Thus my argument was that we can look for the main cause of the crisis in the euro in the falling profitability of capital in Europe prior to the crisis, which was then triggered by the global financial crash and Great Recession.

Now Mark had a different analysis.  First, he pointed out that profits as a share of GDP in the US are near record highs, so how could the crisis be caused by low profitability or profits?  The American multi-nationals are rolling in money and cash; and tax havens are bulging with hidden profits.

Sure, we could agree that the undeniable drop in profitability in the 1970s played a role in the growing difficulties for the EU project and the introduction of neo-liberal policies.  But, in his view, as I understand it, it was these neo-liberal policies attacking real wages that caused the crisis of 2008-9, not falling profitability.  Real wages were held down and so the rising gap between production and consumption had to be filled by a huge expansion of credit (financialisation).  This eventually came tumbling down and kicked off the financial crash.

This analysis is basically the ‘post-Keynesian’ one in economic parlance and Mark mentioned several times the leading post-Keynesian Michal Kalecki in this context.  In this theory, crises are the product of the change in the distribution of product between profits and wages.  The crisis and stagflation of the 1970s was ‘profit-led’, when strong and confident labour forces forced up wages and squeezed profits and full employment led to inflation (Phillips curve style).  But the crisis of 2008 was ‘wage-led’, as wage share in the economy had plummeted and excess (household) credit designed to sustain consumption led to financial instability and collapse (Minsky-style).  Marx’s law of profitability of capital based on a rising organic composition of capital (not the distribution between profits and wages) was irrelevant to this narrative.

The 1970s was an era of profits squeeze and inflation.  According to Mark, this period of ‘stagflation’ (low growth and inflation) was ‘abnormal’; it did not fit into the post-Keynesian analysis that argues that only a full employment economy would generate inflation – as measured by the so-called Phillips curve that shows a trade-off between full employment and inflation.  But by the end of the 1990s, inflation had returned to ‘normal’ levels and now the problem was the post-Keynesian one of ‘wage squeeze’ and ‘underconsumption’.  In this period of ‘secular stagnation’ huge injections of credit did not drive up inflation as the monetarist economists expected but merely fuelled financial speculation and instability.

Now, in my view, this post-Keynesian analysis fails theoretically and empirically.  Was the 1970s collapse in profitability caused by wages rising too high and squeezing profits?  The empirical evidence shows that profitability was falling by the mid-1960s, well before any perceived rise in ‘wage share’ in the major economies.  And this coincided with a rise in the organic composition of capital, as in Marx’s law of profitability.  Profits squeeze only came later in the early 1970s. As Marx said in Capital Volume 3 (p239): “The tendency of the rate of profit to fall is bound up with a tendency of the rate of surplus-value to rise, hence with a tendency for the rate of labour exploitation to rise. Nothing is more absurd, for this reason, than to explain the fall in the rate of profit by a rise in the rate of wages, although this may be the case by way of an exception.”

If profits are the result of the exploitation of labour power and not merely the result of the distribution of production between wages and profits, then it is profits that matters for capital, not wages.  Keeping wages down and profits up is good for capital accumulation.  The contradiction does not lie in the wage-profit nexus but in the limitation in the increase in the productivity of labour as a counteracting factor to the tendency of the rate of profit on overall capital to fall.

Profit share in GDP may be at highs (at least in the US) – although its has been falling back recently.  But this only measures profit per output or profit margins, not profits against the stock of capital accumulated and invested in an economy.  Rising profit margins show capital is making bigger profits; but that can still mean overall profitability is falling.  Yes, many large multinationals are ‘awash with cash’, but there are also many more companies making only enough profit to service their debts (zombie companies) and corporate debt to GDP in most economies is at record high levels too.

Yes, corporations squeezed the share of value added going to wages from the 1980s to boost the rate of surplus value and reverse falling profitability.  But it only had limited success.  By the early 2000s as the euro area started, profitability was falling across the major economies.  Indeed, far from wages and consumption collapsing prior to the Great Recession, as the post-Keynesian thesis would suggest, it was profits and investment that did so, as the Marxist thesis would argue (graph shows inv in green and cons in blue).

Actually, over the period from the 1980s, wage share in most economies did not decline that much.  And when adjusted for social benefits, the share of total value going to labour was pretty stable.  In the graph below, the wage share for the US is measured against GDP and against national income.  Following the blue line, we can see that the ‘profits squeeze’ only began in the early 1970s (well after profitability fell).  Following the average black line, we can see that employee compensation to national income was pretty stable, if not rising in the post war period.

US personal consumption to GDP rose, not so much because of rising household debt filling the gap between output and wages, but because wages from work were supplemented by health and social benefits (so the green line below more than matches the blue line of personal consumption share).

Finally, there are policy implications from these rival theses.  If the euro crisis and the Great Recession were the product of wage compression and too much credit, then the solution for the EU project may just be better taxation of profits, more wage increases and public spending.   In other words, we need a return to the social democratic consensus of the Golden Age, when apparently the right balance between profits and wages was achieved.

Indeed, this scenario is exactly the view and policy objective of post-Keynesian analysis.  Two leading post-Keynesians summed thus up in a recent paper, when they said: “in contrast to other heterodox economists, especially from the Marxian tradition, Post-Keynesians believe that it is possible even within a capitalist economy to counteract effectively these destabilizing tendencies through appropriate macroeconomic policy actions of the state, as long as the political conditions are in place, as it happened to some extent during the early post-World War II “Golden Age”, especially as implemented by certain social democratic regimes, which had held power on the European continent and who were committed to full employment.” I assume this was at least one reason why Mark Blyth, when asked in Cluj, said that “je ne suis pas Marxist”.

However, if the cause of the euro crisis is be found in the main contradiction within capitalist production for profit, namely the law of the tendency of the rate of profit to fall (which brings about recurring and regular slumps in production whatever the ratio of distribution between profits and wages), then a managed solution within capitalism is not possible.  Crises would still re-occur.  And indeed, austerity then has a certain rationality in the very irrationality of capitalism, as it aims to raise profitability, not production or wages.

It is a vain hope that we could return to the golden age where wages and profits were ‘balanced’ (apparently) to avoid crises.  Modern capitalist economies are not generating high levels of profitability, full employment and investment as in the 1950 and 60s – on the contrary, they are depressed.  And they are depressed not by the lack of consumption (US personal consumption to GDP is at its height), but by the lack of sufficient profitability, notwithstanding Apple or Amazon’s huge cash piles.

If there was an abnormal period, it was not the ‘stagflation decade’ of the 1970s where the Phillips curve did not operate, as Mark argued.  It was the Golden age of the 1950s and 196os, when profitability was high after the war and capital could make concessions to labour (under pressure) for higher wages and a welfare state.  Indeed, the Phillips curve is still not operating as Keynesians and post-Keynesians expect.  Where is that curve?; it should be from the top left to the bottom right, but it was nearly flat in the 1970s and it is even flatter now.

Japan, the US and the UK now have record low unemployment rates and yet wages stay low and inflation is virtually non-existent (speech984). Instead of stagflation, economies have stagnation.  Now capitalism is in a new ‘abnormality’, if you like, a long depression, where it can concede nothing to labour, certainly not a social democratic consensus to balance profits and wages.