Posts Tagged ‘Capitalism’

Last Days of the Western Enlightenment

Sunday, December 18th, 2016

Taken from a conspiracy site on reddit, the post was wrong, predicting 8 years of Clinton, the sentiment in the cartoon, greatly influenced by Crumb’s visual style, is a widely held fear on the part of civil libertarians


I have been reading The Age of Wonder By Richard Holmes, a scholar of the Romantic Movement in late 18th and early 19th Century England. I am struck by the optimism and hopefulness for the future of humanity expressed in the views of the scientific tinkerers and poets of the age. It was a time when a gentleman, or talented craftsman, and some women, could participate the exploration of the physical, intellectual, and poetic realms in a relatively democratic and free spirited manner. The old authority of the King, Church, and Gentry was being pulled down in so many realms, with the American and French Revolutions presenting political dramatic change. Even though in England the old regime was not destroyed, this was largely due, in my view, to the fact that England had undergone its own revolution and liberalization in the previous century. But there was a strong movement in England to expand the franchise and there were those who avidly supported the actions of the French and the Americans. A strong abolitionist movement to took hold in Great Britain which led to the forward thinking abolition of the slave trade, the development of industrial capitalism and the liberation of the middle classes from dependency on the gentry and patronage of royalty as independent centers of wealth emerged.


Political cartoon by James Gillray (1757-1815)
From: Romantic Politics.

These ideals of liberty, and the Rights of Man come out of the period known as the Enlightenment. This period in which a more optimistic view of humanity arose, in which man became the measure of meaning and the ability of the intellect became predominant in finding a more just and affluent life for humanity came to the fore. Life, Liberty and Fraternity or the Pursuit of Happiness, became watchwords and represented the very real expectations of the mass of European humanity, as they spread and colonized across the planet. Not always seen as the bringers of light, often the bringers of oppression to the indigenous peoples to whom the Europeans purported to spread their enlightenment, but propelled by the newly released powers of the mechanical ingeniousness of the likes of James Watt, and the mechanisms of trade and capital concentration developed by adventurous capitalists, the imperial European age was impressed upon the world.


Painting by Benjamin West
William Penn’s Treaty with the Indians when he founded the Province of Pennsylvania in North America, 1771
Pennsylvania Academy of the Fine Arts, Philadelphia.
From: and

The industrial revolution and the enlightenment philosophy putting the desires of the individual in the forefront, combined with the Romantic ideals of the solitary genius extracting the secrets of life from a sometimes recalcitrant nature, provided a powerful force propelling the western Europeans into a predominance world wide that had been only preambled by the earlier European conquest of the Americas. Old civilizations in Asia, China, the Ottomans, and the Moguls in India, fabulously wealthy nations, run as empires in an older autocratic tradition were assailed and swept away under the force of the newly empowered Europeans of the relatively small nations of the Netherlands, United Kingdom, France, Spain and Portugal.


The East offering its riches to Britannia, painted by Roma Spiridone for the boardroom of the British East Asia Company 1778.

What we are seeing now is in the post modern period, a designation that will probably be replaced by some other historical reference as we get further away from the Twentieth Century by something more appropriate, after all what will Modernism mean to someone a century from now? But I digress, in a era in which the benefits of the Western Expansion has become assimilated and digested by the traditional centers of wealth and power, China, India and the Middle East, we are now beginning to see the emergence of the Oriental repossession of their traditional dominance. The Obama pivot to Asia and Trump’s fear mongering denigration of American infrastructure when compared to the marvels being constructed in Asia, are reflections of an awareness of this reality. Thus we come to the end of the era of the western Enlightenment, and are entering into uncharted waters. Are we entering a period in which the individualism of the last two to three centuries will be subordinated under a technocratic autocracy with a new imperial examination system to sift out the deserving elite aids to the autocrats? Certainly trends in economic imbalance seem to be headed that way. What with the massive focus on education as if that were the solution, indicates an end to the quality and fraternity inherent in the Enlightenment approach. Now we have the dictatorship of meritocracy as the gateway to enter the garden of earthly delights. Woe unto you who don’t achieve the holy grail of high grade point averages or are not inheritors of great wealth. For you there will be the universal basic income, and meaningless lives at the bottom of the new pyramid of wealth and power. But again I diverge, the oriental nations are not by nature autocratic, but because of the necessity to create hierarchies of meaning that can sift through the mass of humanity, and the algorithms created by the power of computer technology, there will be a rather extreme and undemocratic process of winnowing unless there is a wise emperor like Vespasian who rejected the labor saving machines of the clever Greek engineers, saying, to paraphrase What will my people do to earn their bread if I take away their ability to earn a living?


Textile Laborers in Lowell, Mass. early Nineteenth Century.
From: Opinions: American Technology and Human Welfare Part 2, Technology is Democracy 1800-1850
by Hugo Meier

Whether there is an alternative that is egalitarian, in which some pastoral or urban ideal can be implemented, whether in a form of cooperative industrial democracy as postulated by the IWW, the COOP movement or idealists in the sense of Owens, is to be seen. Certainly the pro-fascist protectionism and corporate nationalism proposed by the Trump group is predicated on a trade and probable war with China which is not going to be beneficial in the long run. Think of it this way, China is the international sleepy giant that the USA was before World War II. If they directed their industrial might to war industries, it might be impossible for the US to create an adequate embargo to prevent the oil and iron from reaching China unless the US can convince Russia to refuse access to its vast natural resources. I don’t think Putin is that stupid.


Missiles are displayed in a parade to celebrate the 60th anniversary of the founding of the People’s Republic of China in Beijing in this October 1, 2009 file photo. REUTERS/Jason Lee/Files


Saturday Meandering Thoughts

Saturday, September 4th, 2010

Saturday. For most of us it is a day off from the work routine. For me it is another day when I have to go in for dialysis. This means a four hour period sitting in a chair hooked up to a machine that cleans my blood and drains excess fluids from my body. I do this three times a week.
It has kept me from going back to work which is for me a mixed blessing. I was getting pretty tired of what I did for a living but I was good at it and it paid the bills although with the ongoing long term repression of wages in the USA, I could only make any real money if I worked long hours of overtime. That is one reason why I am in favor of unions.
Union dockworkers at the LA Harbor get $40 an hour to start. I only get that kind of money if I work double time which is exhausting. That is because my industry is non-union and also is under severe pressure to downsize. Prices have dropped due to undercutting by competitors to the point that many businesses have dropped paid holidays, sick pay, and even some have no paid vacations at all. The benefit packages have been slashed to the point where employees pay half or more of their monthly health insurance premiums if health insurance is offered at all. This has forced some businesses to hire undocumented workers to stay competitive which allows them to drive down the prices even more. This may be good for the consumer but it is not for the workers.
The USA has allowed free market capitalism drive whole industries out of business in the name of efficient return on investment for lenders and for share holders in public companies. Other industries have simply been outsourced to China or some other low wage country. What remains is a shell, a corporate headquarters. An old friend of mine did that. He took his manufacturing to China where he has a company produce his product that keeps its employees in barracks. There is no sense that what is good for America is what is good for the working citizen. It is as if the only citizens that matter are the mythical consumer, who is the subject of intense manipulation through advertising; but the real citizen is the share holder, banker and capitalist. They are the ones who have a place at the table and are able to get presidents go on business promoting junkets around the world, the so called state visits.
President Calvin Klein, oops I mean Calvin Coolidge, said “The business of America is business.” Or at least that is the popular understanding.
This is from a Coolidge website
“The real statement comes from a speech by Calvin Coolidge called “The Press Under a Free Government” which was given before the American Society of Newspaper Editors in Washington, D.C. on January 17, 1925. The quote is really: “After all, the chief business of the American people is business.” However, Coolidge goes on to say that, “Of course the accumulation of wealth cannot be justified as the chief end of existence.” He discusses journalism and the thought that the business interests of newspaper owners should not taint reporting. He continues, “American newspapers have seemed to me to be particularly representative of this practical idealism of our people.”

His last paragraph in the speech shows what he really believes motivate Americans:

“We make no concealment of the fact that we want wealth, but there are many other things that we want very much more. We want peace and honor, and that charity which is so strong an element of all civilization. The chief ideal of the American people is idealism. I cannot repeat too often that America is a nation of idealists. That is the only motive to which they ever give any strong and lasting reaction.”

That certainly is true to the extent that is is a platitude. We all love mom, some kind of pie, and the golden rule. But that misses the point. What has come down to us has been this rationale for business interests first and whatever is good for the people comes second if at all.
This leads me to my point that in the USA we have a corporate driven economy with a few restrictions and protections for the working people that are now under assault. The so called liberal Obama administration in the name of fiscal conservatism is now looking at dismantling portions of the safety net that Bush could not touch when in power. I am speaking of Social Security. Already they have raised the age at which one can retire which only makes it harder for young people to get into the workplace. Forcing elderly persons to continue working now until they are 67. Soon it may be 70 if Congress has its way. All in the name of fiscal responsibility. But since the USA prints money by fiat and we are still the most stable country to invest in, in the world, why should the government be concerned with forcing austerities on the backs of the working people now in their so called golden years? It is simply because the business of America is business and these business types on Wall Street can’t stand the idea that all these funds that could be potential investments are locked up in something as dowdy as a retirement plan. Hell what is a 401k but a play on the market. In my industry the companies rarely match funds if they offer a plan at all.
As a disabled person I have a state disability fund I have paid into that I can tap for a year. After that I either go back to work or have to depend on what social security provides. Not much. I could get by but just barley. I will have to develop some black economy skills if I am to survive on that. I have had them before, I can develop them again I suppose. Some golden years. But then I am not that old. I theoretically will be able to work again once I am done getting my medical problems taken care of. That is a big if the economy picks up enough to allow me to reintegrate into the work force.
Meantime I am going to the dialysis clinic and maybe out to a movie with my girlfriend and then perhaps I will get lucky. Life isn’t all bad.

Another Day Wondering

Saturday, November 7th, 2009

I was out for a walk. I do that on weekends. I was passing the local Christ Chapel and I noticed 3 or 4 attractive women going in, on a Saturday afternoon. I was tempted to follow, but the noise coming out of the place was daunting. It was a large party of some sort and they were all dressed to impress. I was sweaty in my tee shirt and shorts and decided to keep on walking. Perhaps that is where all the women are I mused. But these were all white girls and I like women of color or at least some interesting character.
My personal life sucks. I am in an ongoing debate with my seemingly ex girlfriend about what happens next. Is she coming back? Am I going to be perpetually alone again. Last time I went 8 years between relationships. If she and I don’t get back together I will probably hang the whole relationship business up and retire to a monastery or something. Problem is I don’t much care for organized religion. I do like ritual, and my life has a series of definite routines that I go through. It helps keep me out of trouble and from falling into despair. But I don’t exactly believe in anything other than the eventual evolution of mankind into some kind of space being or devolution into some sort of ape man. Other than that I go in for radical socialism with an anarchist streak, and an occasional gnostic insight into the deeper reality beneath the curtain of day to day existence, but mostly it is going to work and doing chores.
My first Jewish girlfriend said I reminded her of Woody Allen and thought I was a great lover. My second Jewish girlfriend had her dad call the DA on me and he told me to go back to her or I would face the consequences. I chose the consequences and they towed away my last VW Bug. I still have her black Lotus cup. My revenge I guess. I had to choose between a rich Jewish girl from Beverly Hills adjacent who believed the world portrayed on TV was real and a crazy French Hare Krishna girl who wanted me to help her get her daughters back from her evil Hare Krishna husband. I was in love with a third woman, a Filipino Punk rock Anarchist girl who ran the local Food Not Bombs, but she was not interested in me. But that was when I first moved to LA and was still a San Francisco romantic type of guy. Before the LA working and commuting grind had worn me down. I would get up at 6am and drive from Venice Beach to work in Santa Fe Springs, stop in downtown LA on the way home, then visit my Beverly Hills adjacent girlfreind, and finaly go home to my French girlfriend in Venice around 11 pm, five days a week.
I chose the French girl and ended up in India talking to her evil husband at the center of Krishna-land in Vrindaban. He asked me what sex with his wife was like. I thought that this was in bad taste and I changed the subject. Among the Krishnas adultery is considered to be a heinous crime, almost as bad as having sex period. But as a modern guy I didn’t even know about all the prohibitions until it was too late. I was damned for sure unless I drank the water of the Yamuna. That is the name of the river where Krishna bathed. It is supposed to wash away 10,000 years of bad karma. I drank. I got sick. There was cow feces in the water that I noticed after I had taken my sip. I grew up on a farm so I know about such things. Cow shit and horse shit are totaly different. Cows make large flat round things called cow paddies. Horses make round balls like meatballs that pile up in mini pyramids. As a kid I stepped in plenty of both.
The trip to India was taken to see if I could find the guru I needed to make my life right. My French girlfriend had just had a baby by another boyfriend and he was moving in. I switched from my French girlfreind back to my former hooker girlfriend from Oakland. Her mother was a Pentecostal and spoke in tongues. This girl was my favorite girlfriend but she could not stay away from the streets. She would come in at 3 am wake me up, we would make love or do drugs then she would go back out in the street and I wouldn’t know if she was coming back or not. I was in San Francisco then. I had moved back after a couple years in LA. Then I went to India and then I went back to LA. I left all those girls behind after my trip to India. I wanted to do the right thing. I was determined to live right.
In India I had met people who lived a life that was not based on making money. The value system was older, pre capitalist in many ways. I was impressed. People I met in the airport and on the trains would tell me they liked western technology but not western culture. They didn’t like all the drugs and sexual confusion and the decadence in general. After what I had just been through, I was wondering about the west myself. In the last couple of decades I had been through half a dozen serious relationships. I had a son by a woman who hated me and two women had had abortions. I had been through several religions and political scenes and although I still had a reasonably good self image, probably due to my mother telling me I was descended from the Pharaohs of Egypt, but I was shaken by the lack of any real constancy in my life. I had had a dozen jobs. None of them lasting more than a couple of years and watched two major corporations I worked for go out of business one after the other. Almost everyone I knew was taking serious drugs, or involved with heavy religious cults or both. Where was our world headed?
In India I had met quite a few gurus and even participated in a battle of the gurus when devotees of one guru stole devotees of ISKON and initiated them in to the other gurus group. This was one of the Gaudia Vaishnavite god brothers of ISKON founder Prabhupada. The Indian fellow believers in Krishna as the supreme Godhead were not allowed to initiate the followers of ISKON. There was a tension and rivalry between the groups. Wealthy westerners were in ISKON. ISKON is the name for the Hare Krishnas in the the world founded by Prabhupada who had gone to the west to preach in the 1960’s. I remember the first time I had met them in the streets of NYC when I was 14 and was on my first solo trip to the big apple. There they were a small group at that time. But by the time I went to India in 1993 they were a large international body with tens of thousands, perhaps hundreds of thousands of members from mostly wealthy and middle class backgrounds.
The Krisna religion originated in India and Prabhupada was a member of the Gaudia Vaishnavite tendency that traced its roots to Sri Krishna Chaitanya Mahaprabhu in the 15th century. He revitalized the existing Krishna cult and created the Hare Krishna chant. He is considered to be the most recent incarnation of Lord Krishna by the believers. There are millions of Indian Krishnas of various stripes and most of them are not rich westerners. That is where the conflict comes in. The Indian groups want some of the western money. ISKON temples are beautiful. Non ISKON temples often are run down. Some of them have been taken over by monkeys and you need guides to go with you to beat them off or they will steal your watches and jewelry. No joke monkeys like shiny stuff. They trade it for food.
In a historical context the time of Chaitanya Mahaprabhu was when Muslim religionists were ruling most of northern India and attempting to replace the Hindu gods with the universal faith of Islam. The Krishna movement with its emphasis on devotional service. chanting, and a reform of the caste system saying that all devotees would become Brahmin’s or upper caste upon initiation was a responce to the universal appeal and simplicity of Islam. The temptation to convert to Islam was a path out of the social constraints that had evolved with the rigid caste system that had developed over the centuries in Vedic Indian society. The Krisna religion offered another path out of the constraints of caste but within a more traditional Indian frame of reference. People would still have the rich culture of the Hindu religion with a focus on Krisna as the chief deity. This would offer an answer to Islam which insisted on dropping much of the culture of India by the converts in favor of Arabic rooted traditions. By choosing Krisna there would still be the traditional culture and reform of the caste system thus escaping the social bottleneck Caste created in Indian society.
Anyway when I went to India I was impressed with the ruins of a culture that had extended for centuries. The country was just then switching from its pro socialist, pro Russian orientation to one more open to western capitalism. But at the time India was still a country in which philosophy prevailed over money and people asked you what you thought not what kind of work you did. I liked that. I was also impressed with how the country was not overly sexualized like the west had become. In the west the culture had at least since the 1950’s been focused on youth and the hard and fast sex drive of adolescents. Sexual imagery prevails in the west. It is used to sell products in an off hand manner that simply did not exist in India at that time. Women were covered in saris, the sexes were segregated and boys held hands. It was not because they were gay but because the culture said it was ok for you to show public affection for members of your own sex but not for the opposite sex.
In some ways women were repressed in India but in others they were respected in ways that no longer existed in the west. The culture was much more traditional as in upholding the values as propounded by religious leaders. The west in contrast is modern, secular and our religious values are often a reaction to secularism instead of a reflection of tradition. At the time religion was traditional there. What has emerged since then, Hindu, Muslim and Christian fundamentalism are all reactions to modernism.
Some say fundamentalism is an extreme example of modernism. I say it is an extreme reaction to it. It is not traditional. Traditional culture is one that respects others and has developed over centuries as part of the slow moving currents of civilization. Modernism, the cultural attribute of industrialism that emerged in the last 3 centuries is something different. It is new in the world and represents a break from traditional culture. We are still thrashing out the consequences of modernism and its side effects. Perhaps that is what is meant by calling fundamentalism an extreme example if modernism. It is a consequence of it. Just as car bombs and aerial assaults and computers. These are all the consequences of modernism. The cultural confusion. breakdown of social relations such as marriage and such is a consequence of modernism. Some of it is not so bad, all of it is confusing and some of it is very destructive to the health of children and adults. We mostly see the negative consequences among the poor, young, sick and elderly. Because capitalism places emphasis on greed and greed is for the strong. Others suffer, the strong survive. It is a social system that breeds strong individuals and crushes the rest. It ultimately eats its children and forces its elderly to commit suicide.
Capitalist children to succeed are under pressure almost from birth to succeed. A successful capitalist child is surrounded by educators and specialists. It is only for the wealthy and it is a daunting system that leads to an extremely low birth rate because of the extreme cost of producing viable offspring. We can see that the countries that have most accepted capitalist relations have low birth rates even below reproduction having to import people from the non capitalist world to sustain the economic development. But this is a symptom of advanced capitalism. Primitive capitalism with its needs for many hands produces massive population explosions as what happened all around the world over the last three centuries.
The question there is can the world sustain much more primitive captialist growth? I don’t think so. The environment is thrown so far out of whack that another couple of billion people might do us in. I have been told there are only 8 billion individual souls for this planet. It will be interesting to see if that turns out to be true.
I have rambled quite far from my original tale of walking by a church on a Saturday afternoon. Perhaps my girlfreind and I will get back together, perhaps not. I started to say I went 8 years without anyone. It was not when I immediately returned from India. Back then I went back to San Francisco got that French girlfreind back and took her to France where I tried to live but could not get along with her. I came back here. She followed me and we had a son. We broke up again. I determined I would not get involved with anyone again. I tried to be a long distance dad. But eight years later I had a surgery and realized if I wanted to find love in this world I had better do it before it was too late. Maybe it is. But that is another story for another day.
Today I end up musing on the nature of culture in late capitalist America. We have been living through a period where the culture is driven by the technology where as the late Marshall McLuhan said “The Medium Is The Message”. In other words we are driven to wrap our cultural lives around a technology that is created by system that promulgates the new creations of industrial capitalism regardless of its effect. The majority of the world has been taken over by the capitalists and their agenda. New is good. Old is bad. But it is not even that. It is more like who cares about social relations as long as the rich get richer and the rest fend for themselves as best they can with the trickle down effect.
Ancient Rome when presented with labor saving technology refused it. The emperor at the time said what will I do with all these people if we throw them out of work? He was only speaking of the Roman populace. What about our world where as it stands 20% of the labor force is redundant. Growth might kill us all if it is done with nuclear power and is not green. We need to start thinking smaller, narrow our vision to what do we need to live as well as taking in the big picture. We can continue wreaking the worlds cultures in the name of modernism, capitalism and so called progress until the reaction becomes so strong that the fundamentalists blow us all up or take it over and place us in a new dark age. It could easily happen. Every day I meet angry people who simply want the pain to end. People that upset don’t want enlightenment, they want dictatorship. A new national socialism is not far from the surface. If we don’t come up with an enlightened solution we will get one from the well springs of hate and pain. We don’t have much time.
I am no member of the ruling class. But I grew up in the suburbs of New York, near where the masters of the universe lived. As children we were told we were going to take our place in the Corporations of New York. It didn’t happen for me, but I have that cultural background. I understand what they wanted us to do. I refused. I wanted a better way. I still do. What about you? Any ideas?

Socialism, Capitalism Or Another-ism, Which Is The Way Of The Future?

Sunday, September 20th, 2009

I think I will stick with this name. Sort of a hybrid of my old blog site name and this new one. ‘Gary Rumor’s Anti-Entropic Continuum’.
I am listening to the fundraiser on KPFK my local Pacifica station. Ian Masters is doing his fundraising bit. I am a big fan of community radio. I used to be a DJ on KGNU in Boulder, CO. They are always on the edge of being broke and struggle along with the aid of dedicated lefties. I gave my bit today. Second time this year. Incredibly they claim that the listener-ship is way down from where it was 10 years ago.
I was thinking about what is the matter with the left. The left has good ideas. It has solutions that are sensible and better than capitalism. So why don’t people trust them? It is probably because most lefties are perceived as being children of privilege. They are not working class people and if they are they are the smarter ones that got picked on as kids. In this day and age where being a nerd is the ideal, the less than genius level masses feel condescended to and living in a democracy, people are free to vote their resentments. So you find a smart operator like George Bush playing the everyman card, claiming I am one of you, just a regular guy who partied too much and then got religion and found his calling in the Presidency.
Lots of white males are able to identify with him. The script writers who did Harold and Kumar go to Guantanamo got it just right. They played on peoples fear of homosexual rape, they played on peoples love of partying and sex and they played up George Bush as an every man who had issues with his father and a scary vice president Dick Cheney.
My Jewish and Gay friends might be wondering what happened to me. Did I turn into a proto fascist? No, but I have been of late wondering why the left is so weak in America. I don’t care if you are a libertarian anarchist or a Stalinist workers world type. You are all marginal and I am out here on the margins with you. So why are we marginal? We like to think it is because of some conspiracy on the right to keep us down but when you think about it, even in the cultural milieus where we have dominated like the punk scene in the 80’s or the hippie scene in the 60’s, there has been no long term change brought about through anarchist communist thinking. People who are smart move on. People who are livestylers simply cocoon themselves around the symbols that make them feel comfortable and create a religious cult of the left.
We are left with the option of growing up and moving on or becoming cultists. I don’t like either option. I think we need to find a way to communicate to people on the level where they are. This means realizing people like to party when they are young. When they are older most people get tired of that or they become addicts like I did and then get sick of it much later. Older adults either keep trying to relive their youths or they accept adulthood and find the complexity of running the real world interesting. Or like me they are marginalized and frustrated by the pittance of control over my own life that I have and desire for an entry into the control room of this cosmic ship and my turn at the wheel. Now I do have a choice on certain levels. I could go into business as a capitalist and join the game on the terms that have been most optimally construed for participation. But I don’t prefer the capitalist mode of participation. I am not a good capitalist, not because I don’t understand how it works, my job is in estimating cost and assigning value. In the company I work that is exactly what I do and I am pretty good at it. But I find the capitalist system to be a wasteful use of human potential. I spend 8-12 hours a day, 5 days a week doing this work. There are millions of people who are doing almost nothing at all. I would prefer to work 2 to 4 hours a day and then pass the baton on to someone else so I could spend another part of the day working on policy issues and another part of the day working on research. I do that now, but I have to spend much too much time doing the estimating job and my blog time is more an exercise and my policy time is virtually a waste of time because it is not taken seriously.
But it is this sort of thinking that upsets many people. They work hard to have a piece of the pie, They may not like this system, but they have adjusted to it and are now functioning, if not as well as I can imagine people functioning, as well as can be expected under this system. So why rock the boat? Why does this guy talk about himself like he is somebody special? I am not any more special than anyone else. But I do believe that we are all functioning at a fraction of our natural capabilities. This is not new age nonsense. And there is almost nothing more irritating to me than some child of privilege playing at being a guru-vy enlightened being with their crystals and talk with space people and all cotton fabric clothes and veggie diets. I could go on but anybody who has been to the Bodhi Tree bookstore knows of what I speak.
I know of those types, and I know the pierced and tattooed alt lifestylers who wear their identities on their sleeves. This is not the way that working people with rents or mortgages and car payments and jobs will find their way to a transformed world. We can each of us drop out and live our version of the alt lifestyle. America is very generous in that way, allowing people to go crazy and get a minimal subsidy to get by on. Or be an alt capitalist and make a million bucks selling products to these alt types. Toilet paper with a green label sells for double the price. I buy all organic food at Trader Joe’s, stuff I used to buy at the Coop before private industry drove the coops out of business.
This is something to think about. If the private industrial model can produce the shopping experience that upscale conscious alt people want, with non union labor, who am I to complain that I no longer can spend 4 hours a month doing my part at the coop to get my organic peanut butter. I go to Ralph’s around the corner to relieve my guilt at shopping at a non union Trader Joe’s. But Ralph’s doesn’t have all the organics that TJ’s has. So I vote against my class interest in favor of my cultural taste for organic foods. This is something I would like to change and I encourage Trader Joe employees to unionize. It will mean higher prices, but then perhaps Ralph’s will start carrying more of these organics and that will make them more competative. This is the rubber meeting the road where people vote with their wallets or purses.
Under capitalism many people vote for fast food. This is where we need more regulation. It should be against the law to sell junk food that aids to obesity and health problems. Under a public health plan with our taxes paying for our health care the connection would be blatant. But that goes for cigarettes and unsafe workplaces and unsafe transportation. It all is connected to the health issue just as the gas guzzlers are connected to the green house gases that are connected to the environment and all of this is connected to heath care and we are faced with a one world that is all interdependent with factory farms polluting and feeding us toxic food products that make us obese that give us diabetes that causes our health bills to go up.
No matter which way you turn it is all connected up. When you pick up one part of the stick, you get the whole stick. Either the government decides it is not its job and backs off, like the libertarians would prefer, or we get in there and develop a new system that works based on the model of the latest understanding of how the world works. If we don’t and leave it all to private industry then we are basicly saying that a model that states profit making and the drive to make a profit is the supreme value in the land. If we decide that profit is not the value we prefer to determine how we run the world, then we have to make a good argument as to why it is not the best way to do things.
Self interest has been the main driver of capitalism. It is based on a philosophical model that states greed is good. It certainly is not the only model. Most religions except perhaps Satanism do not follow that model. The others follow a model that incorporates either a belief in compassion, detachment and renouncing worldly pleasure like Buddhism, or compassion, union and salvation as with Christianity. There is the model of much of the ancient world where ones status was not determined by wealth accumulation but by agrarianism and ones skills as a fighter in defense of ones community. The simple farmer with his family at his side and perhaps a few trusty slaves who could buy their freedom was the model for Rome. Even when they were reveling in decadence at the height of the empire, that was what Romans looked to as their model. Family and country.
Business was not a primary value in the ancient world. It was not really a value that was given predominance until the hold of agrarianism with its collective values of a village working together to bring the crops in, defend themselves from invaders and trade on market day. The main alternative value system was pastoralism or nomadism. These were herding people who rode horses and had cattle, goats, sheep and other animals as their primary source of sustenance. Cooperation among nomads was a more limited event, mostly for raiding other nomads or the agrarians.
The last great conflict between nomads and agrarians was in the American west of the 19th century and the wars in southern Africa between the white settlers and the African pastoralists. This was when the technology of capitalist industrialization was transforming the centers of population in western Europe and the east coast of the United States.
There is another social system, that of the hunter gatherers. This is a state that is possible in a situation when there is a very small population or a very abundant natural resource base. When there is no capability to support agriculture or pastoralism as in the arctic or certain desert environments then hunter gatherer society are able to exist. But in the face of capitalism even hunter gatherers are incorporated. This is something new in the world a system that demands universal acquiescence. The imperative of utility demanded by capitalist development, its incessant need for cheaper sources of raw materials and markets to sell these products created by the value extracted from the labor of the workers drives it to become universal. It will soon have absorbed the entire planet. As each territory is forced to take on the nation state structure and develop legal systems that respect corporate law and allow for international trade agreements, there remains only the Antarctic as a scientific reserve without a nation state base. The rest of the surface of the planet has been colonized by capital and its dependent legal structures.
It could be argued that democracy is a development of capitalism. The Chinese are attempting to develop a social model of capitalism without democracy but that is pretty tough. The democratic form with its emphasis on the autonomy of the individual is essential for a market based system that places importance on contractual arrangements between individual entities. That is one reason why coops and families don’t do well under the capitalist mode. Mafias are a form of family and they are persecuted under the capitalist system as a hold over from the feudal period when loyalty was to ones liege lord not to ones contractor. Mafias contrary to popular opinion are like gangs not primarily economic units of wealth generation. They are mutual aid organizations with a peculiarly hierarchical structure. They create conflicting values with capitalism, promoting the loyalty to the mafia family over loyalty to the marketplace and the contract.
Communism in China promotes a state that is theoretically engaged in the project of sharing the wealth of the people on the basis of from each according to their abilities and to each according to their needs. That these social planers have determined the quickest way to get to that goal is not through enforced social equality but through the market mechanism of capitalism is an interesting concept. They are attempting to push China through the capitalist development phase to generate enough wealth to then transform into a truly socialist society. They are attempting to ride the dragon of capitalist development without the legal structures of capitalism, or with the minimal portion of them that are required. The problem is that leaves no balance. The state planers cannot be in every place putting out every fire when there is a conflict between the needs of the people and the needs of capital. Without the legal frame work of the law suit and the redress mechanism of the vote to change leadership to make it somewhat responsive, the party has to run around playing cop and settling every dispute itself. This has led to an unbalanced system.
People are expected to live as entrepreneurs in one sphere but as good socialists in another. It causes contradictions that lead to a whole new series of social problems. I don’t see how the party will be able to come through this with its reputation intact as a legitimate body for the development of socialism. All I can see is it eventually becoming the party of the oligarchs that rule in every other capitalist country and it will either adapt democratic reforms or become some semi totalitarian hybrid. Communism in its germinal state cannot be kept like a precious child swaddled in the rags of capitalism in my mind.
The structure of government reflects the society and that means capitalist societies have capitalist governments. Semi socialist societies have semi socialist governments. That is why the right wingers are correct in the analysis that says Obama is bringing socialism. He is. But he is not doing it fast enough or consciously enough. He is trying to save capitalism by regulating it into being nice. Sort of like teaching a lion to not bite off your head when you stick your head into it. Eventually that lion is going to say fuck it and bit your head off or it is not really a lion any more but some sort of circus show hybrid. Capitalism breeds greed. That is how it functions. When you regulate it you are changing to another system. Some kind of hybrid. If you regulate it enough you will end up with socialism. That is a laudable and intelligent goal and we should be calming peoples fears by extolling the benefits of socialism not by pretending a lion is a pussy cat and a system set up to benefit all as socialism is, is something that is made to benefit capital which it is not. Trying to use socialist methods to salvage capitalism is irrational and ultimately will fail. You either revert to capitalism as we had under Regan, the Bushes and Clinton or you progress to the next step, socialism.
We really must boldly go where no man has never gone before and stop acting like a bunch of wimps who are afraid of being laughed at by the other kids. If we have a path that is a solution to the problems of the day we should be honestly presenting it and not pretending we are really trying to prop up capitalism and return it to its owners all shined up and good as new. It is a wreck we need to dump it and get the new model out and working. If we act with confidence and test this thing out to make sure it works properly then people will accept it like they accept everything else.
If aliens landed on the white house lawn and said that they are taking over on prime time TV, within a week or two people would act as if it has always been that way. We need to be confident in what we want to give people. Either we believe that socialism is the answer or we might as well shut up and go back to work. Go Green, go labor, go green socialist labor with a splash of liberty thrown in the pot to make it taste good.
There are a couple of contradictions in my argument that I am not sure how to clean up. One is the difference between essence and mutability. How much can capitalism be reformed before it becomes something else? How much variation is there is a type before it becomes other than what it is defined to be? When is it smart to play the wolf in sheep’s clothing and when do we stand boldly and announce that we have the solution? How do we know we are right? When do we give up on an idea that simply is out of sync with reality or be patient and wait for our time to come? These are all dilemmas and quandaries.
We live in a world where we have a population bombarded with information, so much so that many of us would rather just grab a cold one and zone out. After all how much is enough? When do we know we are simply hitting our head against the wall and when do we determine that one more try and we break on through? One never really knows. We can use educated guesses and inform ourselves to the best of our ability and then make our move.
I have waited until I was in my fifties before I felt that I knew as much as I thought I knew when I was a twenty. Now I know I know something, not much but it is something and I will do my damn best to do my part in keeping this world safe and livable for the next seven generations or so as the old tale of native american wisdom went, in that book Seven Arrows.
Oh back to my Jewish and Gay friends, I simply think you guys scare ths shit out of Joe Normal. Not that he thinks you are going to give him AIDS, but that he might be more like you than he would like to admit. I try to be aware of all sides of myself, the gay fairy side and the redneck proto fascist side. I am attempting to merge those 26 personalities into one as the Gurdjieff followers would put it, or at least to be able to appreciate the papal pageant as my various selves move on and off the stage of my personal existence. We are all much more than we pretend, but to take that lamp shade off might be dangerous. We don’t want to blind anyone with the brilliance and besides all that light will show off our defects. And I am a real Scarface when it comes to those.
Gary Rumor done for the day. This is another of my crusty love letters to the world.

Wallstreet, Anarchists And Reality

Friday, October 10th, 2008

Short and sweet. I have some friends who don’t work. They are among the leisured poor. They collect SSI and are active in radical politics. Most of them end up calling themselves Anarchists. It could be because no other group would have them, or it could be because they are so individualistic that they could not fit in anywhere else.
I couldn’t say for sure. I know when I was among the leisure classes, one of those who hardly worked, or worked as little as I could, I fit right in with my buddies. But over the years I went from somebody who almost never worked, to someone who worked as little as possible, then became a semi-fugitive from the working class who never used credit until now I have become an indebted member of the hard working class.
This progression has insured that while others are worrying over their stock portfolios, I am simply amused at all this, as I have no portfolio. From time to time this bothers me. I really own next to nothing, books, clothes some cds, a little furniture. I have no savings, some debt, overpriced rent and a more or less new car that I pay too much for.
At my age I should be looking forward to retirement, but my retirement will be probably accompanied with a room in an SRO hotel in some inner city, a small cottage in a reasonably remote third world country, or living with a wealthy spouse who did all the things I didn’t.
But my friends who are on the dole, they have been living that way for years already; they give me ample opportunity to study what life on a limited income could be like. It looks like fun from my perspective, lots of time to think about stuff, get involved with social projects that demand time, not money, and most of them seem to have very active lives, more active than mine, unless you count work, which I don’t.
That is the crux of it; I see work still as an interlude between lives. I don’t have a “fulfilling career” like some people I know. I have a job. I am a worker, a wage slave, a hired hand, or brain as it happens to be. My fulfillment comes in my free time, when I can play. And play for me is serious, that is when I get to try to make a difference.
So I take vacations to go to demonstrations. I go to the occasional political meeting where we rail against the state and the capitalist system. I scheme and plot and then I give up and look for some dumb mindless escape. And then I start all over again when the tedium of wage slavery gets to me.
Why don’t I simply play the game and get some thing? It goes against the grain of my life. I cannot force myself to exploit people for my own gain, at least not consciously. I don’t believe capitalism is the best or even a viable method of arranging the social order of the world. I would rather fight it and lose, than give up, so I participate grudgingly and seek my pleasures elsewhere, like a good working class hero.
At least I am not vested in the stock market like the repubocrats have been trying to foist upon us for the last 30 years.

The New Face Of The Capitalist Beast-Derivatives

Saturday, September 20th, 2008

This is a long article on the nature of the Finance markets. It starts out with basics, and moves to a beginning analysis. The conclusion, that in the third digree of separation, in derivatives is the actual beast of Capital, the real enemy exposed in all its glory, is an interesting proposition. I am an anti capitalist, and have been all my life, not because of any strong Marxist critique, but more because of a moral repulsion that may be more based in my class background than any intellectual pretensions.
I grew up on the last farm in a suburb of workers for the corporations in NYC. We were only a 45 minute train ride to downtown Manhattan. Yet we had a farm, raised horses and lived a life that could be called pre-industrial when I was growing up. The contradictions caused me to think long and hard about the world I lived in, and at an early age determined that there was something structurally wrong.
But this is not another tale of my personal life but an introduction to an article that has an interesting and critique of capital that may provide a springboard to consider what a radical anti-capitalist might hope to do in this time of financial instability.
If finance basics is not what you need then you might want to skip to the last part on Derivatives, which is where the author really begins to flex his intellectual brawn.

“ Financial Weapons of Mass Destruction by Paul Bowman (

This is the first part of a series of articles investigating the capitalist
financial markets from a critical perspective. With such a large topic it is
tricky finding a route into the subject and a plan of enquiry. The chosen road
is to start with a look at the financial markets, particularly focusing on the
mechanics of some of the instruments that have led to a momentous transformation
of the workings of global financial markets in the most recent decades.

At first sight, this approach may seem odd, perverse even, like examining the
internal workings of a clock as a prelude to discussion the social relations of
time. However this “inside-out” approach is justified by the fact that as well
as a system of social relations, capitalism is also a system with internal
mechanics. Those mechanics evolve in response to the historical development of
struggles over exploitation, but what new directions the new mechanics make
possible in terms of capitalist strategies, in turn, shape the new struggles of
today and tomorrow. The next article in the series will place these market
mechanics in their fuller historical context. But for now let’s start by
investigating the mechanics of capitalist financial markets.
Mechanics of the Markets
Commodity Markets
Commodity markets are the most direct descendants of the markets for physical
goods that long pre-existed the rise of capitalism. Capitalist commodity markets
are not, however, markets for all produced goods, but more specifically for
either food and agricultural products or industrial raw materials. These are
products that must be “commodifiable” in capitalist terms - i.e. the volume of
different batches of the same good must be interchangeable in usefulness and
value for all practical purposes. Such that one barrel of a particular grade of
crude oil is substitutable by any other barrel available in the market.
Similarly for bushels of wheat, tonnes of iron ore, coal or soybeans.
Commodities are traded in Commodity exchanges, historically physically located
at the major transport hubs where agricultural or raw materials were brought for
onward shipment. In modern times these physical located exchanges, with their
trading pits and shouting traders employing arcane hand-signals have been mostly
supplanted by electronic trading systems linking office-based traders around the
Capital Markets
Stocks and Shares

Capital markets are where capitalist joint-stock corporations go to raise funds
for investing in their business. To do so they sell equities or stocks in their
business. This is different from raising money by getting a loan in that the
sale price of the equities sold does not need repaying and does not enter the
company accounts as a debt - instead it is recorded as part of the company’s
capitalisation. In return for the money the buyer of company stock gets a part
of the ownership of the company and a periodic share of the operating profits
(what’s left over after all costs and loan debt repayments have been made) and
(usually) voting rights in the company’s annual general meeting which elects the
board and chief executives. There are many different types of stock which may
differ a bit from the above description, but the details are not important to
our investigation.

Generally speaking, buyers of stocks do so for one of three reasons. First to
get income from the shares of profit regularly paid out as dividends to
shareholders. Second, more rarely, as part of an attempt to get enough of the
companies shares to either take it over (by getting 51% or more of all available
shares) or to get enough to become a serious player in the big shareholders who
get to influence the direction of the company. Finally, and the most usual
motive for a lot of the day to day trading that goes on in stock exchanges, as
part of a speculation of the short-term future moves of the stock price up or down.

Leaving aside speculation, which we will return to later, and governance
matters, the feature of stock which most interests those long-term investors
aiming to own the stock for the income from dividends, is something called the
P/E ratio. This stands for the Price/Earnings ratio which is calculated by
dividing the price of the share by the annual earnings its owner is entitled to.
For example a share worth 100 euros which pays a annual dividend of 10 euros has
a P/E ratio of 100/10 = 10, that is it will take 10 years to get back its face
value in earnings. P/E ratios, also known as the “earnings multiple” or just
plain “the multiple”, can vary between different industries e.g. finance vs.
coal mining, due to the different periods investments take to deliver a return
for practical reasons, however the average P/E ratio across all stocks in a
given market is monitored closely by market watchers. If you’ve ever heard an
analyst or news reporter talking about a marker being “overvalued”, what that
means is that they reckon that speculative trading on the face values of stocks
has driven the price relative to earnings up to an unrealistic level. In this
case they will be looking at P/E ratios much higher than the average rate
predominant in the rest of the worlds markets. For example some over-exuberant
speculation in East Asian markets in the 1990’s drove some P/E ratios as high as
over 100 - i.e. it would have taken over a hundred years to earn back the face
value of the stock through dividends. Sure enough those markets crashed - or
went through a “market correction” in the panglossian jargon of the uncritical
market-fundamentalists. Currently the “rule of thumb” level for “correct” P/E
accepted by the commentators is 18, substantially higher than the 10 it used to
be in the 1980s.


However a company does not necessarily want to issue more equity every time it
needs a bit of extra cash. For one thing every time it issues extra equity it
dilutes the share of profit due to holders of existing shares as well as pushing
their face value down - a good way to piss off all your shareholders if you do
it too often. For another reason, needs for extra money can often be for
temporary measures, ranging from sums needed for a few extra months to cover,
for e.g. temporary increase in operating costs due to rise in input costs, to a
few years for projects like opening a branch in a new company or whatever.

One option for credit is to go to a bank or other financial lender and take out
an overdraft or loan like an ordinary punter. However, another option that large
and established companies have, one certainly not open to the ordinary
individual, is to issue debt securities or bonds. These are effectively IOUs due
to be redeemed in full at some fixed point in the future, called the “maturity”
date for the full amount of the face value or “principal”. The company who
issues the bond is the borrower, the buyer of the bond is the lender. In
addition to the promise to repay the principal on maturity the issuer also
agrees to pay regular interest payments to the bondholder. Bonds are freely
tradeable securities and their value relates to their face value, modified by
how much interest is still due to be paid before maturity (compared to other
rates of interest available) modified by any estimate that the issuer may
default on the bond. As well as corporations, bonds are also issued by
governments, both local and national, as well as supra-national bodies such as
the European Investment Bank for e.g.

The long and short of it

Having introduced our two basic categories of securities we need to look at the
way traders operate in the financial markets to make money from speculating on
the changes of the face-value of securities, be they stocks or bonds.

The first strategy is if a trader thinks the price of stock is going to rise
over the next period, he can buy at the current spot price and wait to see if
the price goes up. If the price rises, he picks a good time to sell and sells
the stock for the new, higher price, taking a profit from buying cheap and
selling dear. This strategy, in some ways analogous to backing a winner in
betting terms, is called “going long” or taking a “long” position on a stock,
for reasons that will become clearer in a minute. What are the potential losses
and gains with this strategy? The maximum possible loss is the loss of all money
invested if the stock should suddenly become worthless due to some catastrophe.
On the other hand, unlike in betting where the maximum win is fixed at the
outset, the maximum win on this strategy has no defined limit. Nothing prevents
the value of the stock tripling, expanding a hundred-fold or more. It’s rare but
there’s nothing preventing it from happening.

Similarly, just as in betting you can “pick a loser” and lay a bet - i.e. take
the other end of someone backing a horse (or whatever) to win, so in market
trading of stocks, a trader can “short sell” (or just “short”) a stock. To do
this he obtains some stock, usually by borrowing it for a limited period, (for
which he pays a small loaning fee), sells it in the market, waits for the price
to fall and “covers the position” by buying it back at the lower price, in time
to give it back to its rightful owner. If the stock has fallen in price then the
trader pockets the difference in price as profit. Of course, the other side is
that if the price unexpectedly rises rather than falling, the trader suddenly
needs to find additional money to that gained by the sell, to buy back the now
more expensive stock in order to return it to the lender. An important feature
of this strategy must be pointed out. Because “shorting” is the inverse or
“inside out” of going long on stock, the maximum loss and the maximum gain
position is reversed. The maximum a trader can gain on shorting a stock is
limited by the face value of the stock. However, the maximum he can lose on a
short sell, is unlimited. I’ll repeat that because it’s important. The maximum
amount of money you can lose on a short sell is unlimited.

So why is “long” called long and “short” called short? Well, because of the
activities of traders (and computer programs called “bots”) speculating on share
price make the face value fluctuate up and down a fair amount within the trading
day and over the week, people who are confident that the performance of the
company or the state of the surrounding global economy, is such that their share
price will rise on average over time, need to have a little patience in holding
that stock for that growth to happen. They’re in that position for the long
haul. On the other hand, traders looking to make some money over a temporary
fall in share price due to a planned company announcement expected to contain
bad news, may take a short position for only a few hours, until they reckon the
share price is going to start bouncing back. Having said that, the short in
short selling is commonly understood to refer to the fact that the seller is in
deficit to the owner of the stock, rather than the length of the time period
involved. Often short sellers are actually borrowing the stocks they are
shorting from people holding them as part of a long position (or for the
earnings, as many institutional investors like pension funds do). At first sight
this seems crazy. Why would someone owning stock that they want to rise, lend it
to someone trying to make money from the price going down? Because of the
different time-frames of the different positions. The holder doesn’t care if the
share price goes down temporarily today, as long as it has risen by the amount
they’re hoping for in six months time. Also the short seller has to pay them a
fee for the loan, so you’re earning additional income from your shares above the

One important consequence of this is that the naive hope that watching stock
market crashes on the news means that capitalists in general are losing money,
is sadly mistaken. Sure some individual capitalists may be taking a bath, but
that downward line on the graph is the effect of other capitalists making a
killing. Which ever way the market goes capitalists continue to make money and
capitalism is as healthy in a crash as it is in a boom. The same, unfortunately,
cannot be said for the working class, but I’m getting ahead of myself. However,
for this reason, short sellers are often singled out for particular ire during
market crashes as the “unacceptable face of capitalism”. This “good capitalist,
bad capitalist” dichotomy is completely baseless and is often cynical hypocrisy
on the part of those who wish to defend capitalism in general - by implying that
capitalism has an acceptable face, for example - by deflecting popular anger
onto an ill-defined set of “nasty capitalists”. Short selling is simply the
inverse operation of taking long positions on stock, to impute a difference of
moral reprehensibility on one and not the other is spurious.

Double or quits? The use (and abuse) of “leverage”

One of the effects of the gains from short selling being relatively limited, is
to encourage the use of what’s called leverage. Financial leverage is analogous
to physical leverage. You’re trying to set up a mechanism to magnify a given
movement by a order of magnitude or so. This can be achieved in financial
trading by a number of different means, some of which we’ll look at later in the
section on derivatives. One method is to borrow money to buy the shares you are
planning to go long or short on. This means you may be able to multiply the
shares you buy by, say, ten times what you could have afforded with your
original stake. So if things go the way you predicted you multiply your gains by
ten. However, if things go wrong, and bear in mind that they can go wrong by
many multiples of your shares original face value in a short position gone
wrong, the size of the yawning void is also ten times as bad.

Consider you start the day having spotted a stock in some third-world groundnut
co-operative that got overvalued last year due to being briefly the pet project
of some Hollywood starlet. Their quarterly results are due today and you’re damn
sure that the cold light of reality will bring their stock down from its current
100 per share. With your current stake (say half a million) you could afford to
just short 5000 shares (500,000 + 100) but that only gives you a lousy 50,000
return on a 10% drop (minus equity loan charges, brokerage, capital gains, etc.)
for your brilliant insight. BOoring! So you leverage your stake by ten times to
short 500,000 shares. Nice one! Time for a long lunch with your fellow “masters
of the universe”, something involving lobster, champagne and generous helpings
of Columbia’s finest. You return at 3:30pm to find that during its quarterly
results the groundnut people revealed that their attempts to cultivate peanuts
are not going as well as hoped, but let slip that in the process of trying to
plough their land they have unexpectedly struck oil. The share price has gone
crazy and now sits at 600 per share. You have to cover your position by 5pm
tonight, that’s 50,000 shares at 600, that’s, er, 30,000,000 you need to find,
or 25 million (minus the 5,000,000 you made selling the 50,000 shares at a 100
apiece this morning). Uh oh…

Of course real life trading doesn’t work like quite like this. For one thing
there are things called stop-loss orders which will try and set a level of
things going wrong that will automatically try an liquidate your position to
limit your losses. Also, given the risk of unlimited losses with shorts, they
are rarely taken out on their own. They’re more usually part of a hedge or
straddle or a component of more complicated instrument which we will look at
later in derivatives. Nonetheless numerous traders have demonstrated over the
years that its possible to lose a whole lot more than 25 million euros when the
game goes bad. Self-styled “Rogue Trader” Nick Leeson managed to land Barings
bank with $1.4 billion in debt it didn’t know it owed until the discovery of
that particular financial black hole killed it.
Currency Markets
Trade & balance of payments

It should always be remembered that the joint stock company, the origin of
stocks and bonds, were first created to service international trade.
Specifically, England invented the joint-stock company to finance its Virginia
colony in America and for the British East India Company, royally chartered to
manage the trade with India and the spice islands. The evolution of financial
markets then has always been alongside international trade.

International trade requires changing money from one national currency to
another, this was carried out in the past by money-changers in markets and
temples (religious centres have always been strategically placed on trade
routes) throughout the pre-capitalist world. In the modern financial order,
money-changing is carried out in an electronic, de-centred global market that
never sleeps and operates 24 hours a day, every day. The full story of the
historical development of the successive regimes of global financial orders will
be covered in more detail in the article to follow this one, but for now we want
to look at one recent feature of international currency and financial flows, the
rise of the Eurodollar.

Stateless Money - the rise of the Eurodollar

A Eurodollar is a US dollar that is deposited in a bank outside of US control.
In finance the prefix euro- to a currency means deposits of that currency
outside of the control of the regulation or control of the state or central bank
that issues that currency. It has nothing to do with Europe or the Euro
currency. As well as Eurodollars there are now Eurosterling, Euroyen and even,
since 1999 and the introduction of the Euro currency, the linguistically
abominable, Euroeuro.

The Eurodollar has its origins in the cold war. Due to import and export
business, the Soviet Union had stocks of US dollars. In the aftermath of their
invasion of Hungary in 1956 they were terrified that their deposits of dollars
in the states might be seized or embargoed in retribution. To avoid this they
moved all of their dollars out of US jurisdiction and into European registered
banks that they controlled. At this time banks around the world would only take
deposits in the national currency of the country they were registered in. The
Soviet-owned banks in Europe decided that they may as well put these dollar
deposits to work to earn some interest, so started offering them for loan to
corporations on an anonymous, no questions asked as long as you pay the interest
basis. The Moscow Narodny Bank, a soviet-owned British registered bank was one
of the main players in this activity and its telex address was “Eurbank” - hence
the name Eurodollars. Given the amount of US dollars outside the states due to
the Marshall Plan and a negative balance of payments (i.e. the US was paying
more dollars out for imports than it was receiving back in for exports), the
market, once established grew explosively.

The main activity in Eurodollar trading was inter-bank loans. Given the
volatility of these Over-The-Counter (OTC) loans, interest rates for individual
loans varied by the hour and the minute. Eventually there was a need for an
average interest rate measurement and this was set up by the biggest traders of
Eurodollars, who were based in London, and is known as the London Inter-Bank
Offer Rate or LIBOR. More on which later.

The importance of this Eurodollar, or more generically, Eurofinance market, was
that although based on currencies issued by state national banks, they were
outside the jurisdiction of any state monetary body. In other words they were
stateless money. The role of this state-control free money market in undermining
and helping the bring down the Keynesian Bretton Woods system will be told
properly in the article that follows this one. Our interest is in the impact the
Eurodollar money market had on the development of financial, as opposed to
commodity, derivatives. The first entirely cash-settled futures exchange was
opened in Chicago by the Chicago Mercantile Exchange (CME) to trade interest
rate futures in Eurodollars in 1982. Eurodollar futures are used to hedge
interest rate swaps, the first of which had taken place between the World Bank
and IBM in August 1981. As Eurodollar deposits are time deposits that cannot be
traded, Eurodollar futures were of necessity the first futures intended never to
result in actual delivery of the underlying asset.

The futures rates were set in relation to the LIBOR which has continued to this
day to be the main international reference interest rate. As national currencies
have their interest rate which is set by the national banks, so the stateless
currencies have their interest rates in the LIBOR, set by market trading.
Derivatives and Hedges
The future is unwritten - Risk

The warning on the adverts for investment trusts always say “remember that the
value of your investment may go down as well as up”. This is true of all
financial dealings so the twin to the capitalist obsession with profit is an
obsession with risk. Risk is always linked to time, so any financial contract
that involves an element of time (and they all do, otherwise there would be no
need for a contract, an immediate transaction would suffice) must, of necessity,
also involve an element of risk. The estimation of the probabilities of those
risks and their possible size is a continuing necessity for capitalists. What’s
more, the search for ways to guard against those risks and putting in place
damage-limitation measures to limit the impact of negative events, if they
occur, is an important, and these days profitable, part of financial activity.
Hedging is the process of putting in place damage-limitation instruments in case
the future moves of the market turn out to be against your best hopes. Hedging
is widely seen as one of those “good capitalist” or “legitimate” operations. It
is usually opposed to its evil twin, “speculation” carried out by those “bad
capitalists” who are motivated solely by seeking profit at the expense of
anything else. In fact, both the “good” capitalists seeking to hedge risk and
the “bad” capitalists seeking to make money through “speculation” are operating
in the same market, using exactly the same financial instruments and carrying
out the same operations. It is also the starting point of this article that in
fact all capitalists are motivated above all else by the drive for profit. But
before we can discuss sensibly on the validity or otherwise of the
hedging/speculating dichotomy, we must first look at the financial instruments
they use to trade in future profits and risk.

The derivatives revolution

Up until the 1970s derivatives were a marginal part of capitalist financial
activity, being limited mainly to guard against the risk of movements in future
prices of commodities. However from the late 70s and through the 1980s a radical
transformation came about. Derivatives moved out of being an adjunct to the
commodities market and proliferated in every area of financial trading. Further
the volume swelled enormously until it has now become by far the largest part of
financial trading activity. What was a marginal activity at the periphery has
moved into the very centre of the capitalist world financial system. What was a
side dish has now become the main course. This rapid and radical transformation
took place against the background of, and was driven by, the transformation of
the regime of global financial governance from the “Bretton Woods” or Keynesian
order, to the new order that we live in today, which has attracted various names
such as “neo-liberalism” or even globalism. But before we can look at the
meaning of the derivatives revolution and its relation to the big picture of
changes in regimes of global financial governance, we must first look at the
mechanics of derivatives.


Derivatives originated from the need to protect against the risk of
unpredictable rise or fall of prices of commodities, particularly agricultural
commodities whose annual production and price are at the mercy of the weather
and other unpredictable factors.

Consider the wheat farmer and the miller. Before sowing his fields with wheat
the farmer is faced with an uncomfortable risk, what if after all his work, he
finds at harvest time that the price of wheat has fallen so low that selling his
wheat will not cover his overheads and cost of living? On the other side, the
miller, who consumes wheat as an impute wants to protect himself against the
risk of the price of wheat rising.

The solution is what’s called a forward contract. At the beginning of the year
the farmer and the miller make a contract for a transaction of an agreed amount
of wheat at a agreed price, come harvest time. If at that later time the actual
current market price (called the spot price) of wheat is lower than the forward
contract then the miller is paying more for that amount of wheat, but at least
he has protected himself against the risk of the price rising and, more
long-term, he knows that the same farmer is going to be around to grow more
wheat next year. If the price goes up then the farmer has lost the difference
between the forward contract price and the spot price, but this is a small price
to pay for being able to plan your annual income and have certainty of still
having a farm next year.


These forward contracts have two disadvantages. First if the spot price moves
substantially away from the forward price, one side of the contract is always
tempted to break the contract. Secondly, there is the disadvantage of being to
tied to a direct relation between the buyer and seller, tied to particular
place, etc. This forces the seller to locate an individual end user before he
can fix a price.

By standardising amounts, quality and places for delivery, forward contracts can
be replaced by futures contracts. Futures can be bought by producers/sellers
without having to worry about who the eventual consumer/buyer will be. They can
be freely circulated and traded - that is to say they have “liquidity”. Further,
as they are a means of protecting the difference between the desired future
price and the actual spot price, they can be redeemed for the cash value of that
difference, independently of the actual transaction of ownership from seller to
ultimate buyer.

Historically the first futures to be settled by cash rather than physical
delivery of the underlyings, were the Eurodollar futures first traded in 1975 at
the Chicago Mercantile Exchange. These were also the first futures on financial
instruments rather than physical commodities. Chicago has played a central role
in developing the new futures and other financial derivatives based on their
historic role at the nexus between the agricultural produce of the mid-west and
the rest of the USA and the world. The first traders in eurodollar futures had
previously cut their teeth on trading pork bellies, mid-western grain and Great
Plains beef.

In our example above, the farmer buys a “put” future to sell his grain at
harvest time for a given price. The miller buys a “call” future to buy grain at
a given price come harvest time. When that later time comes, the farmer sells
his grain on the open market at whatever the current spot price is and, if the
spot price is lower than his future, gets cash payment from the holder of the
other side of the future for the difference (on the contracted volume of wheat).
Similarly for the miller, from the other perspective.

There are other technical differences between a forward contract and a future
(futures are “rebalanced” daily to stop large potential losses growing up
between start and finish time, also they are guaranteed by the exchange, rather
than having to seek costly redress through the courts in the case of a default
on a forward contract), but the separation of the ownership of the underlying
asset from the future-proofing against the risk of price change is what makes a
future specifically a derivative, as we will look at later.


Another disadvantage of forwards that also applies to swaps, is that both sides
are bound into the transaction. Wouldn’t it be nice if you could get a contract
that would fix a future price for either selling or buying that would protect
you against movements in price that would hurt you, but that you had the option
not to go through with if the eventual spot price turned out to be better than
the one you had fixed at the time you bought the contract. No surprises then
that financial markets came up with a forward-type contract with this optional
get-out clause called, perhaps inevitably, options. There are two types of
options - “call” options which allow you the option of buying in the future at
the agreed “strike” price, or “put” options which allow you to sell at the
strike price. Note, however, that for these contracts to work, one side must be
under an obligation to buy or sell at the agreed price if the buyer of the
optional side decides to exercise his option. So in our original example above,
the farmer could, at the start of the growing season, buy a put option for a
price he can live with. The cost of this option is a very small fraction of the
“principal” - i.e. the full amount to be paid if he exercises the put option at
harvest time. That initial price is not refundable. So if the farmer gets to
harvest time and finds that the spot price is now considerably higher than the
strike price for his put option, he has lost the price he paid for that option,
but counts it a small price not to have to sell his produce at a pre-agreed
price well below the current market rate. Should the spot rate turn out to be
lower than the strike price the writer of the farmer’s put option or the current
holder of the other end of it, if it has been traded in the meantime, is forced
to buy the agreed amount of grain at the strike price and take the loss.
Similarly for the Miller buying a call option.


The other main derivative is something called a swap. Unlike futures and
options, swaps did not originate from dealing in physical commodities, they are
specific to financial assets. Conceptually a swap is two cash-settled futures
contracts in succession. The first to set up the swap, the second to swap back
to the original status quo. What is swapped here is not rare stamps, football
cards or other collectors bric-a-brac, nor yet commodities, but cash payment and
income streams. Swaps started in the foreign exchange markets.

For example let’s take a US multi-national corporation wanting to set a branch
in a new South Asian country. It needs to raise finance in the currency of the
new country to hire premises, employ staff, etc. So it needs to borrow the local
currency. But it has no reserves of that local currency to repay the interest on
the loan. Now it could import dollars to the foreign market and buy the local
currency in a forex transaction, but if that country has exchange controls
stopping foreigners buying large volumes of their currency at market rates (or
is trying to impose some kind of Tobin tax) then this is inconvenient. If the US
company can find a company in the South Asian country that has similar but
opposite needs (i.e. it wants to get a loan in the US but has no dollars for
repayment) then they can set up an arrangement between themselves to each pay
the other’s loan repayments. Here both companies are not actually transferring
ownership of anything so no forex transaction costs occur and any exchange
controls or Tobin tax are evaded.

Following on from this, it’s no prizes for guessing that swaps were first set up
for the very purpose of multinationals evading the exchange controls under the
Bretton Woods system of global governance in place until the 1970s. From these
semi-clandestine origins, the abolition of Keynesian currency controls started
by Margaret Thatcher in 1979, allowed the first public swap to take place in
August 1981 between IBM and the World Bank, organised by Salomon Brothers.

To go through this first transaction as an example, the World Bank (which is
Swiss-based) wanted to borrow a sum in Swiss francs (Sfr) and IBM wanted to
borrow a similar value in US dollars (USD). They were both going to do this by
issuing bonds. At home in the US IBM would have had to pay a fairly poor base
rate plus 45 basis points (US treasury interest rate + 0.45%), but due to the
rarity of IBM bonds in Swiss markets, was able to issue bonds there for the Sfr
base rate. The World Bank could issue bonds at base rate plus 20 basis points (+
0.20%) in Switzerland and base rate plus 40 in the States. So IBM could borrow
SFr cheaper than the WB and the WB could borrow USD cheaper than IBM could. IBM
issued the bonds in Switzerland and the WB in the US. IBM loaned the WB the SFr
at Swiss base + 10 and the WB loaned the USD to IBM at US base + 30 bp - result
being, IBM gained 15 bp and the WB 10. The net repayment was transferred between
them for the life of the loans (and Salomon was paid an undisclosed amount for
setting it all up).

However, despite their origins, once concocted, swaps proved to be altogether
more potent than anyone initially could have suspected. The types of swaps have
proliferated greatly from the simple fixed-fixed interest swaps like the above
into a vast diversity of instruments.

Once again, like futures and options, swaps do not require any transfer of
ownership of the underlying assets they are deriving their payment flows from.

Swaps, however, bring something entirely new to the toolkit. Forwards, futures
and options, particularly in the commodity markets they originated in, each
remained tied to markets segregated by the underlying instrument. Futures or
options in pork bellies, could only really be compared against the spot market
for pork bellies. Of course you could liquidate - i.e. sell for money - you
position in pork bellies and invest in futures for grain, but you couldn’t rate
your pork belly future against the grain spot market directly. Similarly, the
old world, bonds were bonds, stocks were stocks and forex contracts were forex
contracts. Now, thanks to the power of swaps, all these segregating divisions
are dissolved. Swaps have the werewolf DNA that allow one type of financial
security to be mutated into another directly - or have the option to swap nature
by means of a “swaption”, combining an option and a swap. They allow direct
comparison of rates of risk, volatility and any other generic attribute to be
competitively compared across markets that, until now, had no means of directly
comparing themselves. Swaps are the philosopher’s stone of finance capitalism
that allows the direct transmutation of lead futures into gold options.


The four derivatives mentioned above are what’s called plain or “vanilla”
derivatives. In practice they are the basic building blocks which are assembled
into complicated arrangements linking different derivatives in different
underlyings to make more complicated instruments. There are a large menagerie of
different species of these compound or “exotic” derivatives in the modern
financial markets. However they can all be derived from these three basic types
of derivatives and the powers they embody - the time-fixing of futures, the
contingency of options and the mutability of swaps. Together the bestiary of
derivatives these three have spawned have broken out of their original pens in
the commodity and foreign exchange markets and spread across all financial
markets. These basic tools have created a strategies going by the names of Bear
Spreads, Naked Puts, Collars, Straddles, Strangles, Butterflies and even Vanilla
Options, a veritable explosion of polymorphous perversity creating a new Kama
sutra of financial positions.


The transformations that have taken place from the era of derivatives as a
marginal, commodity market-based phenomena, to its current role in transforming
capitalism’s international financial order can be looked at in the following areas:

* Volume
* OTC, State control and Market visibility
* Price setting
* Dis-assembling


The volume of derivatives trading has exploded by factors of 50 and more in the
last 15 years. From the position in the 1970s where derivative volumes were
completely marginal to total world trading, derivatives now account for a large
majority of the total volume of global financial trading. The largest global
financial market by far, is the foreign exchange market which, at the last
reckoning, does over 3 trillion dollars worth of trading every single day. Two
thirds of that is derivatives. To give you some idea of scale, the total value
of global international trade in goods and services in a whole year barely
reaches 6 trillion dollars - a mere two days of forex trading. The entire
aggregate gross national product of the Irish Republic amounts to 200 billion
dollars - that’s every single cent made by every man, woman and child in this
country, from the richest to the poorest, in a whole year - amounts to little
more than an hour and a half’s worth of trading on the global forex market.

Over The Counter - Under The Radar…

In our discussion of swaps above, there was one additional difference between
swap and futures and options that we have not so far mentioned. That is that
swaps are overwhelmingly not exchange-traded instruments like futures and
options. They are nearly exclusively arranged as what’s called “Over The
Counter” trades - that is, direct arrangements between the two counter-parties.
Naturally this was the only way to operate in the early days of clandestine
currency swaps undertaken to bypass currency controls. However, as the
instrument is for transforming the payment/income stream for an agreed period,
rather than hedging against (or taking a punt on) the future price movements in
an underlying, it has continued to be arranged almost exclusively by direct,
bi-lateral and customised agreements. Nearly 80% of all derivatives trades are
OTC swaps, 75% of them being interest rate swaps. In addition to this we have to
add the “off-balance sheet” nature of these arrangements. That is, that as no
actual exchange of ownership is taking place, no evidence of it need appear on
the companies audited balance sheets.

All of this has added up to a huge increase in the opacity of financial markets.
Far from increasing transparency and perfecting “market intelligence” (a
contradiction in terms, if ever there was one), the explosive growth of OTC
derivatives has meant that increasingly governments, regulators, risk assessors
and all market participants have less and less idea what the real exposures of
other players is. This is one of the major factors in the current international
banking crisis sparked by the sub-prime mortgage fiasco in the US. The actual
size of the sum at risk from bad sub-prime loans is relatively small, the fear
in the financial markets is a fear of the dark - no-one can see where the actual
bad debt is, they just know it’s out there somewhere.

Price Setting - The cart before the horse

One of the effects of derivatives trading that has been observed empirically has
been the apparent inversion of the price setting relationship between spot
market prices and futures prices. The conventional relationship is that the spot
market ultimately determines the value of futures at expiration time. However in
more and more markets the tendency is for the futures market to determine the
spot market price. The causation for this role reversal has yet to be determined
exactly but it appears to be an effect of the shift from physically settled
futures to cash-settled ones. With the dominance of cash-settled derivatives,
the ratio of volumes of physically delivered futures contracts to “paper”
derivatives, where no physical delivery of the underlying asset is ever
intended, has in many cases evolved to where the paper trades outweigh physical
trades by ten to one or more. The amount of trading going on creates a situation
similar to that of “if the mountain will not come to Mohammed, Mohammed must go
to the mountain”. In other words the force of derivative markets is determining
the price over the struggle over the cost for production. This represents a
major shift in the power of competition over future costs of production.
A deafening silence
Considering the scale and importance of the transformation that has taken place
in the last couple of decades, there have been surprisingly few attempts to
analyse its wider social implications. This becomes a little easier to
understand if we look at the groups that we might have expected to carry out
this analysis. On the one hand, the people with the most knowledge of the new
developments in derivatives are the professional traders and dealers in these
instruments. However, the interests of this group are limited to the narrow
perspective of the implications for the search for profits in capitalist
markets. So despite the proliferation of textbooks and courses on how to
understand, price and use derivatives, virtually none of this sector have any
interest in the wider social implications. The horizon of profit is a narrow one
relative to the full scope of the human drama.

The academic and professional economist sectors, who from the outside, could
have been expected to be interested in this question, are in practice crippled
by zealous adherence to the dominant economic dogmas. According to the dominant
neoclassical “perfect market” dogma, the entirety of derivatives trading amounts
to a zero-sum game which has no overall value. Further that with the increasing
perfection of markets, the need or opportunities for hedging or speculation will
increasingly disappear. In any case neoclassical economism tends to have a
knee-jerk reaction against any analysis containing the word “social” unless it’s
a Panglossian paean to markets delivering the best of all possible worlds. The
marginalised economist critics of such pro-capitalist positivism, are equally
blinkered by a slavish adherence to an orthodox Marxist dogma (not to be
confused with Marx’s actual contribution to the critique of capitalism which
still has useful material) which states that, as exploitation can only occur in
the sphere of production, the entirety of financial market operations, including
derivatives trading, is in the sphere of circulation and thus can be safely
ignored as either having no impact on “real” capitalist relations or being
“unproductive” - an orthodox Marxist swear word meaning “something bad that
should be got rid of”. If the Neoclassical’s position is a denial of reality on
a par with the man who sailed round the world preaching that the earth was flat
(true story), then the orthodox Marxist position is akin to closing your eyes,
sticking your fingers in your ears and loudly proclaiming “Nya, nya, nya, I’m
not listening!”. In between the dominant Neoclassicals and the marginalised
orthodox Marxists are the (neo)Keynesians. While not explicitly anti-capitalist,
like the ortho Marxists, they are advocates of the need for state intervention
and regulation to make capitalism run efficiently and with some vague concession
to popular needs. However, the Keynesians have no more idea what to make of
derivatives than their neoclassical or Marxist economist colleagues. If
anything, they tend to follow Keynes’ distinction between the “real economy” and
speculative market trading, thus siding with the Marxists.
Breaking the silence
Given the lack of interest or dogmatic inability of the bulk of professional
market traders and the partisans of the various economic orthodoxies, the work
of trying to analyse the social implications has been left to those few
economists critical or sceptical of capitalism as a force for good, but not
bound by the blinkers of orthodox Marxism. Among these contributions is last
years book by two Australian academics Bryan and Rafferty, referenced in the
acknowledgements below, and on which a lot of the following is heavily reliant.
Ownership & Competition
Bryan and Rafferty and a number of other authors they reference, liken the
recent takeover of financial markets by derivatives to the impact of the
introduction of the joint-stock company in the mid-nineteenth century.

Like the current rise of derivatives, the introduction of the joint-stock
company was seen by many commentators of the time as threatening the productive
economy with the disruptive and parasitic effects of speculators and bringing
with it the threat of volatility and new crises of instability. It was also an
innovation that transformed the scale that it was possible to do business on,
both in terms of capital and labour employed and distances covered, while
changing profoundly the relationship between the directing of production, its
ownership and the distribution of its profits. Corresponding to this was an
extension and intensification of the relations of competition between businesses
and between capitalists and labour.

In a similar fashion these commentators claim that the derivatives revolution is
introducing a similarly epochal change in these three aspects of capitalism. B&R
label this “Three Degrees of Separation”.

The first degree of separation is the separation of people from the land and the
means of self-sufficiency to create a class society of individual
owner-capitalists, rural or industrial, and a dispossessed class of
wage-labourers. In this stage of separation, control over production and
ownership of the means of production are united in the body of the “masters”.
Competition is primarily the direct conflict between master and “hands” over
profit versus survival.

The introduction of the joint stock corporation transforms this network of
relationships. The process of incorporation gives a degree of legal recognition
of the business as a legal entity having rights. Ownership is now spread amongst
the shareholders who have no individual rights to the property of the
corporation. The direction of production is entrusted to a person demoted from
the condition of being a “master” into being a mere “boss”, themself an employee
capable of being fired by the concerted will of the shareholders. While the
conflicts between bosses and workers are equally capable of ferocity, the effect
of ownership by stockholders who can compare the return of their shares in a
given company, to that of a competing firm in the same industry and, if
profitable, transfer funds to find the most profitable, means that competition
now extends between firms within a given industry. The conflict between boss and
workers is mediated by the conflicts and conditions of production in all the
competing firms in that industry. Much has also been written about the possible
conflicts of interests between bosses and shareholders. Shareholders may often
find short-term gain in courses of action that may be damaging to the firm or
even lead to its premature extinction. Similarly bosses may find to enrich
themselves at the expense of the shareholders and workers. But both, to some
extent, find their freedom of movement and power over the enterprise constrained
by the legal recognition of the corporation as an entity with rights and the
intensified conditions of competition with other players in the market.

The third degree of separation through derivatives involves a further loss of
power and autonomy by both bosses and shareholders in the face of a third body,
the derivatives dealers who derive profit from the performance of their
corporations without having or needing any legal ownership claims at all.
Further the ability of derivative instruments to relate and compare performance
across different industries. The joint-stock corporation had made it easy to
compare productivity and profitability between different firms in a given
industry (in a given currency area) but difficult to relate the productivity of,
say chalk miners with cheese-makers without selling out of the chalk mining
industry and investing in the cheese business. Derivatives have evolved
specifically to relate previously incommensurable activities directly, without
any need for change of ownership in underlying stocks. With derivatives chalk
and cheese can be compared directly and the achievements in advancing
productivity in one industry can be set competitively against the other.

At this stage it must be mentioned that B&R are not proposing that these be seen
as “stages” in the sense that one gives rise to, and is replaced by, the next.
Although each has provided the basis for evolving the next level, each prior
level continues to co-exist with the later ones. Along with the 21st century
“third degree of separation” of derivatives-dominated financial capitalism, the
east Asian “enterprise zone” clothing factory owners whose sweated workforce
make the sportswear for the post-industrial workers of the west, are operating
very clearly in the framework of the first degree. Derivatives feed off the
multinational joint stock corporations they evolved to serve.
Implications for the class struggle
The Left Bereft
Ever since the fracturing of the nascent socialist movement in the late 19th
century, the non-anarchist fractions of the left, despite other agreements on
doctrine and methods, have been united by a common belief in the nation state as
the indispensable tool for delivering socialism.

This fervent belief in the nation state as the sole possible means of our
collective deliverance has given the state socialist left an huge emotional
investment in denying the possibility that the power of the state to
substantially limit or manage the flows of contemporary capitalism has been
fatally undermined by the developments of the 1970s and 1980s. Many of them
still cling to the belief that the deconstruction of the Keynesian international
financial order that took place in that period was entirely the result of a
purely political “neoliberal” conspiracy or coup that can simply be rolled back
when truly social-democratic governments come back into power.

As we have seen in the section on interpretations above, most of these state
socialists or social democrats are aided and abetted in this position in a
Keynesian or Marxist (the two are in practice much closer bed-fellows than
either would care to admit) economic dogmas which prevent them from even looking
at the mechanics of the systemic changes that have taken place, never mind
trying to analyse them.

The fact is that the Eurodollar money markets and clandestine currency swaps of
the 1970s were not just attempts to get around the regulatory architecture of
the Keynesian world order, they were successful attempts. Today’s proponents of
measures like the Tobin tax have yet to explain how they will tax operations
like currency swaps or other derivatives based operations which achieve the same
end as foreign currency transactions but without any actual taxable exchanges
taking place. The same logic applies to the arguments of those who propose the
re-imposition of Keynesian exchange controls - how to prevent them being
bypassed by the very mechanisms that evolved specifically for that purpose? The
state socialist dream of using the power of the capitalist state to discipline
and control capitalism for the benefit of workers is definitively dead. They are
a Left bereft.

But more importantly, from an anti-capitalist point of view, is that the “lost
paradise” of Keynesian social-democracy that these nostalgics long to regain,
was a deal based on workers accepting their place within capitalism and
submitting to wage-restraint deals. It was worker’s smashing of these wage
restraint deals in the late 60’s and 70’s that drove the inflation that in turn
pushed up the interest rates in Europe that sucked dollars out of the US and
into the Eurodollar market. Keynesianism was not simply undermined by capitalist
innovation in the area of derivatives, but by worker’s struggles in Western
Europe and, on a global level, by the heroic resistance of the Vietnamese people
to US imperialism. We will cover this history in the next article in the series,
but the point remains - will the state socialists in their turn adopt the
position taken by the Western European Communist Parties in the 60s and 70s that
workers must accept wage restraint “in order to build the productive forces”, in
the Marxist jargon? This line has nothing to offer the struggle for the
break-out from the prison of capitalist social relations.
Beyond Industrial Unionism
Under the first two degrees of separation the class enemy directly visible to
the struggling masses were first the masters and then the corporations with
their bosses and shareholders. Even today in the anti-globalisation movement,
the majority of the non-communist activists see the “bad guys” as the loathed
MNCs - the Multi-National Corporations. From the beginning the analytical
communist tendency was able to say that the ultimate enemy was neither the
masters, the bosses, the shareholders or the corporations, but capital. Yet
capital remained a theoretical abstraction only, inferred as an emergent
tendency of the collective action of the actual, visible class enemies. Now with
the rise of the financial derivatives capital markets, before which the
corporations, even the multi-national ones, are expendable pawns, a new
situation has arisen. As people witness the increasingly visible power of this
new actor, they will ask us, “What is it?”. We will finally be able to respond,
“It is the enemy of whom we have long spoken. It is Capital made flesh”. No
longer an abstraction, the rise of the third power makes capital a concrete,
directly visible enemy. And an enemy we can see directly, we can fight directly.
The outlook for the future of the class war
So in summary, while the state socialists may either mourn or remain in denial
about the passing of the nation state as a platform for reforms to mitigate the
evils of capitalism, we communists see the developments for what they are. We
see that we will need increasingly to link our struggles across industries,
across borders and across identities. That with the increasing impossibility of
fighting for reforms and half-measures, we will be forced more and more to
confront a newly visible capitalism itself directly. Then we must say, without
under-estimating the likely savagery of some of the struggles to come, that this
is a most excellent development.
Acknowledgements & References
To try and properly footnote and reference the above text would have been too
intrusive for what is, after all, not an academic text. Nonetheless some
acknowledgements and references are both proper and handy as guides for further

For general “unpolitical” reference material on financial markets (and much of
the glossary) I have made extensive use of the open source Wikipedia
( In the category of copyrighted but freely available on
the web material, I must also mention the extremely well-informed and lucid For pure statistics the Bank for Internation Settlements
(BIS) produce the best available estimates of derivative volumes (
and the OECD ( are good for general global financial statistics.

In the category of works contributing to a critical and political perspective,
as already mentioned above, the best book available is “Capitalism with
Derivatives”, Dick Bryan & Michael Rafferty, Palgrave Macmillan, 2006. I would
particularly also like to acknowledge the influence of the work and generous aid
of my comrades Dave Harvie and Massimo de Angelis, many of whose texts on this
and related topics are freely available at

Some Figures and Statistics

Global equity capital $51.2 trillion (wikipedia: Reuters March 2007) $165
trillion “total traded securities” (Economist, 19/01/2008)

Global physical trade
Daily ForEx trade volume $3.2 Trillion (BIS 2007)
Total Derivatives Nominal $516 trillion (BIS 2007)
Total Derivatives Value $11.1 trillion (BIS 2007)
Total Swaps Nominal $408 trillion, 79% of all derivatives
% Interest Rate Swaps 75 (BIS 2007)”

Ok if you are still reading, then you are a dedicated soul indeed. I would appreciate any comments you might make. I am not an expert on economics by any means, but I am interested in understanding the nature of the beast and that requires some theoretical overview. We must understand the beast if we are to prevail.

Is History Real? Will Anarchy Replace Christianity and Communism?

Sunday, July 27th, 2008

Are we living in a universe where linear logic and historical truth can have meaning or are we in a chaotic quantum apocalyptic place where time can run backwards as well as forwards and logic and proportion has as much relevance as the abacus does to today’s computing technology? We act as if the sun rises when we very well know that the earth rotates on its axis. We act as if we are the center of the universe when we very well know that humanity is a small spec in the vastness of the cosmos.
Anyway I wrote this bit earlier today for a debate on whether or not Christians can be Anarchists and Anarchists Christians.
We can see that there is in the life of Jesus a model for rebels that do not take the tact of state seizure. He specifically stated that his kingdom was not of this world. But what was he preparing humanity for then if not a political liberation of the Jews from the domination of the Romans? It seems he was almost indifferent to the Romans and had a much stronger antipathy to the local Jewish hierarchy. These immediate dictators of the strictures that a good Jew lived by were more concerned with keeping the populace docile and in line, partially to prevent further Roman intrusion into their affairs and to keep the more radical elements among the populace from aggravating the situation and provoking a confrontation with Rome. Some may have been advocating a return to the rule of a member of Herod’s family. Others simply desired to keep things as they were with the priests left in charge of the day to day lives of the Jewish populace. At least this is my reading of Josephus, the pro roman Jewish writer of the later part of the 1st century AD. There were also Hellenic elements of the Jewish population who appreciated the Greco-Roman rule and the expanded view of the world it gave them outside the more restricted view of the Jewish priesthood. But these were more to be found among those with an economic tie to the capitalist economy that existed at that time. Capitalism, one must remember has at times been seen as a force for liberation from limiting agrarianism, although most of what we are familiar with in terms of capitalist developments have been in the last three centuries. There was a primitive capitalism in the Greco-Roman world also as well as state socialism if you accept some of Rostovtzeff’s writings about Hellenistic Egypt in particular.
But to place Jesus, if he did exist, in a historical context, is to place him in a land that had recently been taken over by direct Roman rule and had gone back and forth between rule by a Herodian descendant and that of the Roman State. The Jews had a surprising level of influence in the Roman Imperial circles considering what an insignificant area of the empire it represented.
Here was this guy advocating a general renouncing of all the rules of conduct that were being imposed on the Jewish people by a frustrated leadership caught between a rock and a hard place. This guy was not advocating fighting the Romans, but revolutionizing the Jewish religion. He was a threat to their authority, and who knew if he would become a threat to the Romans. The Romans certainly didn’t see him as a threat. He was a local problem for the priests and they were the ones who insisted on his being taken care of, especially after the episode in the temple where he kicked out the money changers. He must have seemed like some one possessed by devils or even more threatening, some one who might have been a prophet of god. In any case he was too dangerous to be allowed to go around spouting his communistic nonsense.
As it turned out the priests were not able to keep a lid on the situation and there was a revolt in the 60’s AD and the temple was destroyed, the money taken by the Romans and the enslaved resistance fighters built the Coliseum an edifice that has stood as a symbol of Roman grandeur through the centuries. Unless you believe with certain Gnostics like Philip K. Dick that we are really living in about 96 AD and the history we have lived for some 2000 years is an illusion. But then that is irrational, but based on quantum physics a possibility as the old Donavan song about electrons goes “First there is a mountain, then there is not”…
As to whether there is any reason for anarchists to be Christians, well that is for each person to decide for themselves, nobody, certainly not an anarchist could tell someone what they can or cannot believe and still call themselves an anarchist.
That may be a problem for those who romanticize the revolutionary execution of priests as was done in Spain during the revolution. But not everything anarchists have done in the past was perfect. Priest killing may have been excessive, or it may have been justified, but we cannot use past prejudices as a guide for current realities, some of the most fervent opponents to the state are Christians and they cannot be discounted by so called anarchist purists who want to relive the last six months of 1936 over and over again. We certainly do not any more than we want to relive the punk rock era with its incredibly bad music and rude posturing. I was one of its most fervent proponents at the time. We are living in a time when anarchists have taken up the mantle of leading the way into the Promised Land that the communists dropped. Like it or not Anarchists are the new Moses’ and they have got to get over certain childish attitudes if they are to take on the serious business of destroying mammon.”

Personally I believe that there is a separation taking place, those who insist upon maintaining the old order are getting their way in spades. The rich are getting so impossibly rich that it will soon become evident to even the most simplistic believer in getting material wealth, that money does not buy happiness, it only brings a certain level of comfort that can rapidly turn to discomfort, as the cartoon about the pig forced to eat pies until he exploded was a graphic reminder of the evils of consumerism gone wild. Stewardship is the key; we must take our place among the elders before they all die out from our consciousness. They do not live on the same plane in three dimensions, they are perceived in another level of reality, and life only makes sense on that higher plane or alternate reality. It certainly doesn’t make dollars and sense. Leaders like Jesus understood that, but how many of his followers did? Certainly it is not those believers in prosperity Christianity. Praying for material wealth is a child’s game, not something for an adult, unless he or she has been deprived all their lives, or forced to live in fear. An adult who has any self respect understands that they are here to provide purpose, that is what a real anarchist does, provides a focus of purpose in a world where purpose and focus has disappeared in the noise of consumerism. Let us take some time out to listen to the sound of the voice that nature has been calling to us, and go on our own vision quests and ask for meaning and truth and purpose in a world on the brink of going mad with materialism.
Let us take care of those less fortunate, give every human the basics for life, a shelter, food, clothing and medicine, and then let the values in our society change, so that it is meaning and purpose we seek, not wealth and position. Simple enough, Lol.

Biofuels Cause World Food Shortage

Saturday, July 5th, 2008

I heard this on the radio this morning. It shows just how interdependent we have become. NPR was reporting that a British newspaper received a suppressed report from the word bank about western biofuel policies causing the increase in world food prices. Here is an excerpt and my own analysis.

“Secret report: biofuel caused food crisis Internal World Bank study delivers blow to plant energy drive

Aditya Chakrabortty The Guardian, Friday July 4, 2008 Article
Biofuels have forced global food prices up by 75% - far more than previously estimated - according to a confidential World Bank report obtained by the Guardian.
The damning unpublished assessment is based on the most detailed analysis of the crisis so far, carried out by an internationally-respected economist at global financial body.
The figure emphatically contradicts the US government’s claims that plant-derived fuels contribute less than 3% to food-price rises. It will add to pressure on governments in Washington and across Europe, which have turned to plant-derived fuels to reduce emissions of greenhouse gases and reduce their dependence on imported oil.
Senior development sources believe the report, completed in April, has not been published to avoid embarrassing President George Bush.
“It would put the World Bank in a political hot-spot with the White House,” said one yesterday.
The news comes at a critical point in the world’s negotiations on biofuels policy. Leaders of the G8 industrialized countries meet next week in Hokkaido, Japan, where they will discuss the food crisis and come under intense lobbying from campaigners calling for a moratorium on the use of plant-derived fuels.
President Bush has linked higher food prices to higher demand from India and China, but the leaked World Bank study disputes that: “Rapid income growth in developing countries has not led to large increases in global grain consumption and was not a major factor responsible for the large price increases.”
Even successive droughts in Australia, calculates the report, have had a marginal impact. Instead, it argues that the EU and US drive for biofuels has had by far the biggest impact on food supply and prices.”

This report was leaked to the Guardian while the G8 conference in Japan is determining the future policies of the 7 seven most industrialized nations and Russia. It would seem to me that this ought to include China and India at least and probably Brazil in an expanded G11. The whole G8 concept is part of the old new world order that reflects a 20th century world view of who is a player on the world stage. It also allows certain of the newer world players off the hook when it comes to sharing in responsibility for cleaning up the world environment and dealing with the multiplying problems that are being caused by the rapid industrialization that has taken place over the last 2 and a half centuries.
This is not a matter simply of the bad influence from the rapacious days of western imperialism, when a few European powers dominated the rest of the world and the American Europeans exploited the western hinterlands of the United States. China and India have both got ancient cultures and imperial powers existed there that were simply unable to exploit the technological advances made in the west. The Japanese tried at first to cut out the western influence by limiting trade to a single port. This was ended by American gunboat diplomacy in the middle of the 19th century, when American ships imposed terms on the Japanese in which they were forced to trade. They rapidly realized that they would have to catch up with the west or be dominated and the Japanese rapidly modernized in the course of the later part of the 19th century. Beating the Chinese and Russians in a series of turf battles over who would dominate the north east pacific. They even occupied Korea, an act of aggression that is conveniently forgotten when negotiating with the North Koreans over a few hostages taken during the height of the cold war. For over half a century the Japanese ruled Korea with an iron fist, even notoriously forcing Korean woman to act as prostitutes or ‘comfort women’ as they were called, for the Japanese Army in World War Two.

Korean Comfort Woman-from

The Chinese did not fare as well as the Japanese. They had misfortune of having been forced by British opium dealers to allow a trade in narcotics that was enforced by the British Navy in the infamous Opium Wars of the early 1840’s. As a result of the war the British were allowed to sell opium to the Chinese and they were given a long term lease for Hong Kong. It wasn’t until the Communists took over and forcibly ended the opium trade that the Chinese largely ended addiction. Interestingly it was at that exact same time that the British gave up control of India. Could the loss of the lucrative Opium trade have anything to do with the decision to give up the Jewel in the Crown of the British Empire? Opium was grown in India and sold in China.
Is it any wonder that the Chinese don’t feel any strong compulsion to agree to the same terms of restriction on its economic growth? They feel that they were forcibly stunted by British policy. Opium is a good pain killer and allows one to tolerate intolerable conditions over a long period of time. When an entire nation is subject to that narcotic for a full century, the effect can be devastating if not carefully monitored and kept to its socially appropriate usage, pain killing, and the occasional revelation of an opium dream. But extended use over a vast swath of the population will cause a certain lethargy and lack of initiative that could be responsible for the inability of the Chinese to modernize adequately until after the communists enforced stern social control measures.
The situation in India is complicated by direct control of at least half of the country by the British in the 18th and 19th centuries. Taking advantage of the weakness of the Moguls and the antagonism between Hindus and Moslems, the British were able to get rid of their French rivals and then exploit the situation in the country to exert direct and indirect control. The British took Indian raw materials for processing of materials in British Factories and then exported finished goods to India for resale. This kept British factories busy and Indians dependent on British manufacturers.
Gandhi and his fellow nationalists tried to get the Indian people to boycott British manufacturers and to weave their own clothes out of their own home manufacturing. It was an attempt to break away both from British control by non violent methods. It met with mixed results until world war two when under the threat of attack by the Japanese armies in Burma the British essentially promised independence if the Gandhi led movement would not interfere with the British war effort which depended on Indian cooperation since the British military could not have coped with a revolt in India and they were deathly afraid of an Indian Army that had been formed by the Japanese out of Indian prisoners of war captured with the fall of Singapore in early 1942. It was dedicated to the liberation of India from British rule and worked with the Japanese in Burma.
The capture of masses of Japanese military supplies by the Russians in 1945 from Manchuria immensely aided the Chinese Communists in their take over of China from the Nationalists. So did the British fear of an Indian resistance armed with Japanese weapons lead to the independence of India. Both situations, that in India and that in China, were ones in which the new leaders did not have any reason to be particularly fond of the western powers. And as such they now have a commitment to their peoples to catch up with the west economically after over a century of exploitation by the west. They now feel they are in position to participate as full fledged players in the international economy. From their perspective the arguments from the west that they now have to accept the same standards of pollution controls seem disingenuous. They want us to lead the way. If they have to tie one arm behind their back economically speaking, they want to make damn sure the G8 are already doing it and in spades.
That is essentially the situation, People in Asia and the rest of the world have long memories and we in the west, especially Americans, have none. What memories we do have conveniently portray the last three centuries as ones of almost total material improvement world wide lead by the west. It does not mention that fact that the development of the west came at the expense of the rest of the world.
Slave labor, especially from Africa and coolie labor from China, developed America on the backs of these exploited people. The Chinese were kept in line through a steady supply of Indian Opium in conjunction with racist policies on the part of the White Californians. The African peoples were enslaved in the American South until the Civil war ended direct enslavement but did not end intimidation and racist exploitation until very recently. Even 50 years ago there were lynching in the American South of American Blacks and to this day they are disproportionately incarcerated in the United States. This is a direct legacy of slavery and racism in America. Africa itself was conquered in the course of the 19th century by European powers seeking cheap resources to fuel their own industrialization to emulate the British who had a half century or so head start. They rapidly destroyed their own natural resource base to develop the industrial powerhouse that they became. Enclosing the common lands, impoverishing the average British citizen, forcing them into the new factory towns where they found themselves working for pennies in dank conditions that became the source of the Marxist analysis of Capitalism. Marxism is the child of capitalism. Capitalism is the reason the world is in the mess it is in now.
As we work out the means to save the planet we have to face the facts, that our ruling classes have screwed things up good, just for a fist full of Dollars. Now the rest of the world wants their turn at the good life, and we have to tell them there isn’t enough to go around. The only way they will buy that is if we cut our consumption down radically. Force them to find ways to develop their own national resources without going through the materialist binge we have in the west. Good luck to that. First we have to stop telling the world how great it is to be rich. Then we have to start walking the talk. It’s that or, we will have hell to pay when the food riots spread past Haiti and the other lands of the very poor. Is anyone ready to give up their fat SUV lifestyle? Let’s start with our own rich. If we don’t put them on enforced diets, how will the rest of us ever want to give up anything? It has to start with the next president; He must know that the people demand a curb on the excesses of capitalism. It has to be shown that the problems in the environment come from the conspicuous consumption that capitalism encourages. It is not merely a matter of moving a few things around. We can see from the food crisis around the world caused by our attempts to use food for fuel that we have to change our ways, and soon. Starting today! It is called simple living, or the new American dream.

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