G8 Summit: an unsightly family picture

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Relaxed, smiling, senior representatives from Japan, Russia, United Kingdom, United States, France, Canada and Italy, seven tieless men and one woman (Angela Merkel), accompanied at the ends, by the Presidents of the Commission and the European Union greet the public at the end of the of the G-8 summit in Northern Ireland.

Wish you were here: the G8 leaders at Lough Erne © The Guardian

Wish you were here: the G8 leaders at Lough Erne © The Guardian

Why do make fun the attendees of this ersatz, this inefficient and pretentious group of international multilateralism? After so many nonsense and crises they provoked they could be more circumspect when snapped. As a minimum.

Then it would be worthy to put the brakes on fanatic liberalism without further delay, to leave as soon as possible that shameful « invention » of the Reagan-Thatcher era. And start diligently rebuilding the United Nations authority provided with appropriate means (personal, financial and technical).

As always, the result of the meeting is a sum of platitudes and purposes that repeatedly let us down: powers « agree to fight tax evasion by strengthening EU proposals relating to tax havens and condemn the undiscriminating austerity » Remember when in 2008 G8 spoke of « rescue » at that auspicious times provoked by the « surprise » of financial crisis, and they solemnly promised regulation of financial flows and purging of tax havens. They are presently more satisfied than ever.

Moreover, all measures are listed in a conditional way as simple recommendation: « Countries should … multinationals should … (…) The restoration of financial stability needs to go hand in hand …fiscal policy should … »

Should … should … should …

How can 6, 7, 8 or 20 countries pretend running a world of 196 states? They did a good job: weakening the nation-state, transferring economic and political power to large financial institutions and speculative supranational consortia, sidelining the UN and its agencies, replacing ethical values ​​by the law of market.

Maybe their smiles indicate that « we are in command still enough. » as the United Nations were born to support – « We the people … » – the design and construction of a better world. And the G7, G8, etc. originated with large hegemonic ambitions to continue to strengthen their members’ prosperity and power.

If the G8 had little time, if this was its farewell…

How nice it would be if it was…

The political economy of networks

AN « EXCESS »  OF DEMOCRACY  (2/3)

Networked forms of the 1960s/70s were distinctive because essential to their origin, character and sustainability were values of solidarity, equality and democracy. Consciousness of these origins could help us now, when networked organizations are everywhere, to distinguish between the instrumental use of the concept of network in essentially undemocratic organizations (i.e. within states and corporations) and, on the other hand, as a way of connecting distributed activities based on shared values of social justice and democratically agreed norms.

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The latter possibility is radically enhanced through the new information and communications technology in its non-proprietorial forms. The new possibilities of systems coordinating a multiplicity of autonomous organizations with shared values, through democratically agreed norms or protocol, can help upscale economic organizations based on non-capitalist – collaborative, P2P (peer to peer organizations such as The Pirate Bay) co-operative or other social and democratic – forms of ownership, production, distribution and finance.

What enables us to make this apparently surprising dive from the forms of organization shaped by the consciousness-raising groups of the women’s movement (or indeed other civil society initiatives of the same period, such as the factory shop stewards’ committees combining against multi-plant, multinational corporations and developing alternative plans for socially useful production is the importance they give to practical, experiential knowledge and the need to share and socialize it.

The political economy of knowledge

The reason why this is important for the development of a political economy beyond capitalism is that behind the imposed choice between capitalist market and the state is the polarization between scientific, social and economic knowledge on the one hand and practical knowledge on the other. While the former was regarded as the heart of economic planning and centralized through the state, defenders of the free market sustained the latter as being held individually by the entrepreneur, capable of coordination only through the arbitrary workings of the market, based on private ownership. The relevant step forward of the women’s and other movements of the 1960s/70s was to make the sharing and socializing of experiential knowledge – in combination with scientific forms – fundamental to their focused, but always experimental, organizations. And to do so through consciously coordinated (networked) and self-reflexive relations between autonomous (distributed) initiatives.

Translating this into economics in the age of information and communications technology – a project requiring much further work – points to the possibility of forms of co-ordination that can include and help to regulate a non-capitalist market. A regulated, socialized market, that is, in which the drive to accumulate and make money out of money is effectively inhibited. It also provides a base for democratizing and, where appropriate, decentralizing the state, within the context of democratically agreed social goals (such as concerning equality and ecology).

It is over these issues concerning the sharing of knowledge and information and the implications for the relationship between autonomy and social co-ordination that the ideas coming from the Occupy movement can creatively converge with those of earlier movements. It is interesting in this context to read the economics working group of Occupy London describing in the Financial Times how Frederick von Hayek, the Austrian economist and theorist of free-market capitalism, with his ideas on the significance of distributed knowledge, is the talk of Occupy London. No doubt this was partly a rhetorical device for the FT audience. But the challenge of answering Hayek and his justification of the free market on the basis of a theory of distributed practical and/or experiential knowledge does provide a useful way of clarifying for ourselves the importance of the networked social justice initiatives of today and the anti-authoritarian social movements of the past for an alternative political economy. (http://www.tni.org/archives/books_arguments)
There is a point at which Hayek’s critique of the ‘all knowing state’ at first glance converges with the critique of the social democratic state made by the libertarian-social movement left in the 1960s/70s. Both challenge the notion of scientific knowledge as the only basis for economic organization and both emphasize the importance of practical and experiential knowledge and its ‘distributed’ character. But when it comes to understanding the nature of this practical knowledge and hence its relation to forms of economic organization, these perspectives diverge radically.

Whereas Hayek theorizes this practical knowledge as inherently individual and hence points to the arbitrary, unplanned and unplannable workings of the market and the price mechanism, the radicals of the 1960s/70s took, as we have just explained, a very different view. For them, the sharing of knowledge embedded in experience and collaboration to create a common understanding and self-consciousness of their subordination and of how to resist, was fundamental to the process of becoming a movement. In contrast to the individualism of Hayek, their ways of organizing assumed that practical knowledge could be socialized and shared. This led to ways of organizing that emphasized communication and shared values as a basis for co-ordination and a common direction. It provided the basis for purposeful and therefore more or less plannable action – action that was always experimental, never all-knowing; the product of distributed intelligence that could be consciously shared.

At the risk of being somewhat schematic, it could be argued that the movements of the 1960s/70s applied these ideas especially to develop an unfinished vision of democratizing the state. This took place both through attempts to create democratic, participatory ways of administering public institutions (universities and schools, for example) and through the development of non-state sources of democratic power (women’s centers, police monitoring projects and so on). It involved working ‘with/in and against’ the state, such as in the early 1980s when Madrid was handled by Enrique Tierno Galvan and the Greater London Council was led by Ken Livingstone.

Today’s movements are effectively focusing their energies especially on challenging the oligarchic market, and the injustice of corporate, financial power. Here the development of networked forms are increasingly linked to distributed economic initiatives – co-ops, credit unions, open software networks, collaborative cultural projects and so on. In this way, today’s movements are beginning to develop in practice a vision of socializing production and finance and creating an alternative kind of market, complementary to the earlier unfinished vision of democratic public power.

What they have in common, more in practice than in theory, is an assertion of organized democratic civil society as an economic actor, both in the provision of public goods and in the sphere of market exchange.

From social rebellion to transformation

AN « EXCESS »  OF DEMOCRACY  (1/3)

As we become increasingly dominated by the pursuit of economic growth, what campaigners can learn us from #occupy as well as previous radical movements in our attempt to forge a new kind of political economy based on a framework of equality, mutuality and respect for nature.

occupy-everything2The philosophy and experience of radical movements in the 1960s and 70s are complementary to the ideas of the direct action movements today. It is here to examine the possibility of forging a new kind of political economy by assimilating the best of both of them.

The Occupy movement’s ability to create platforms out of our closed political system to force open a debate on inequality, the taboo at the core of the financial crisis, is impressive. It is a new source of political creativity from which we all have much to learn.

One cannot fail to be impressed by the similarities between the late 1960s and 1970s and the current movement. There are both within the same strong feeling of power “from below” that comes from the dependence of the powerful on those they dominate or exploit. There’s the creative combination of personal and collective change, and proper rapport between resistance and experiments in creating alternatives here and now. There’s the repulse of hierarchies and the creation of organizations that are today described as ‘horizontal’ or ‘networked’ – and that now with the new technology tools for networking (Twitter, Facebook …) have both more potential –but it should also lend to greater distortion…

Here come back the same old problems: informal and unaccountable leaderships, tensions between inclusion and effectiveness. The Tyranny of Structurelessness, a strong assay of American feminist Jo Freeman inspired by her experiences in the 1970s in favor of the liberation of women and addressing, in particular, those unforeseen difficulties from the perspective of the movement women’s liberation, may be well read.

But that was 40 years ago – even before the widespread use of faxes, not to mention personal computers and mobile phones. Reflecting on these marginalized earlier movements possibly take forward the debates opened by Occupy and the Indignados.

From social rebellion to capitalist transformation

The fate of the energies and aspirations of that rebellious decade is a long and complex cluster of stories. Considering their relevance today, I want only to point to a historical process that was not generally anticipated at the time and still is not fully understood today. This was the ability of capitalism, which sought a way out of its stagnation and crisis, to feed opportunistically on the chaotic creativity and experimental culture-restless of the movements of the 1960s and 1970s.

For example, in the 80s while attacking unions, corporate management was also dismantling the military-style hierarchies characteristic of many leading companies and decentralizing the production process. A new generation of managers, especially in the innovative industries, assumed that more tacit knowledge by workers would infer a valuable source of increased productivity and higher profits – as long as workers have little or no power on their real redistribution.

Another prime example is how, in the endless pursuit of new markets, marketing experts were able to identify and anticipate business opportunities in the broad perspective and wants of a growing number of women with own income.

The key underlying feature of these and similar trends is that much of the innovative nature of capitalism’s renewal in the 1980s and 1990s – strengthened by the credit expansion– came from external sources to both the society and the state. In fact, frequently its origins lay in the resistance and the search for alternatives to both.

In other words, capital proved very much more agile in responding and appropriating the new energies and aspirations stimulated by the critical movements of the 1960s and 1970s than did the parties of the left – for which these movements could have been a force for democratic renewal.

Counter-movement

Now, with the credit that supported the social turmoil of this particular period of capitalism having become toxic, the search for alternatives is back again. Even the Financial Times, much to our astonishment, insisted in a series of articles on the crisis of capitalism to conclude that “at the heart of the problem is widening inequality”.

Are we witnessing in the combination – not necessarily convergence – of unease within at least the cultural elites, the growth of sustained popular resistance and public unhappiness, the emergence of what Karl Polanyi called a ‘counter-movement’ to the socially destructive consequences of rampant capitalism? And to what extent might the ideas of the movements of the 1960s and 1970s influence the character of that counter-movement?

A fundamental break

To answer this we need briefly to remind ourselves of the essential nature of the original social critique driven up by the 1960s/70s movements and in particular the nature of its potential break with the institutions of the post-war order: their paternalism, their exclusions, their narrow definition of democracy and the assumption that production and technology were neutral values.

Essential to the character of this assessment was its aspiration, more in practice than in theory, to overcome the deleterious dichotomies of the Cold War between the individual and the collective/social; freedom and solidarity/equality; ‘free’ market versus ‘command’ state – dichotomies that were refrozen through neoliberalism and the conditions in which the Berlin Wall fell.

The ideas and practices of the feminist’s movement are particularly explanatory. This movement arose partly from the gender-blind inconsistencies and from unfulfilled promises of radical movements of the time. It deepened and extended their transformation, adding ideas emerging from women’s specific experiences of breaking out of their subordination.

Especially important here was an emphasis on the individual as social and the collective as based on relationship between individuals: a social individualism and a relational view of society and social change. After all, the momentum of the women’s liberation movement was encouraged both by women’s desire to develop as individuals and their determination to end the social relationships that blocked these possibilities of progress. This required social solidarity: an organized movement.

The nature of its organization was shaped by a constant attempt to create organizational forms that combined freedom and autonomy – what every man struggles for– with solidarity, mutuality and values of equality. The result – cutting a complex and tense story short – was ways of relating that allowed autonomy, coordination and mutual support, without having to go through a single center. It’s what might be called an early solution, pre-ICT (*), a form of network organization.

The corporate capture of governments

The G20 — the most powerful summit of world governments — meets tomorrow to discuss the global economic crisis, and who is sponsoring the meeting? Banks and corporations.

No wonder the site of the meeting — the French city of Cannes — is completely locked down to any ordinary citizens, while banks and large corporate CEOs have all access passes to tell our governments what to do.

Corporations and banks have captured our governments, winning vast bailouts after helping to create the crisis. Now they are buying their way into the very meeting that could decide the world’s financial future.

The line between corporate power and responsible government has steadily blurred, undermining our democracies and our economy. Politicians take money from corporations for their campaigns, make policies that reward them when in office, and then take high-paid jobs with them after they leave. It’s venality, plain and simple.

Now Société Générale, a French bank that received a public bailout and has a vested interest in Europe’s financial policy, is an official sponsor of the summit. This bank and 20 other corporations have paid large sums of money in sponsorship for a seat at the table of our governments.

The only way to get policies that protect jobs, tackle speculators and guarantee a fair future for us all is to kick back against the lobbies and prise our leaders away from corporate interests.  The global economic crisis resulted in large part from reckless banks that were no longer regulated effectively by governments because of the control banks stress over our leaders. This corporate capture of government is the major threat today, both to democracy, and to an efficient and fair economy.

Northern Africa: A Choice between Reform and Stability

In the wake of uprisings in North Africa, West may be forced to make a choice between much-needed reform or stable dictatorships. NATO will need to reconsider its newest partnerships, beyond the interest of its allies, and start guaranteeing actual security.

Doused in paint thinner, Mohamed Bouazizi set himself alight in Tunisia on Dec. 17, sparking a string of protests throughout northern Africa. The 20-year old college graduate, angry after the government confiscated his source of income- a fruit cart- and beat him, has been credited as the beginning of a series of uprisings in North Africa.

Protests have now spread to Egypt, Libya, Syria and Yemen, as well as Morocco and Algeria. Citizens have taken to the streets in protest of high food prices, and even higher unemployment rates, and general discontent with, in many cases, decades of inefficient dictatorial regimes.

With protests mounting from country to country, igniting passion for reform in nations’ citizens, the uprisings of North Africa may be the 21st century’s Berlin Wall. NATO Secretary General Anders Fogh Rasmussen recognizes the potential effect the uprisings could have on the world order, but says, “The outcome of this turmoil remains unclear.”

Resource-rich North Africa has become a strategic battlefield among the US, Europe, China and Russia. The US and Europe seemed to prevail under two NATO initiatives: the Mediterranean Dialogue and a military alliance with the 53 countries of the African Union (AU).

Member nations of the AU and the Mediterranean Dialogue are believed to benefit from the initiatives under the broad public goals of countering security threats against Africa and using NATO as a model for the African Standby Force. But NATO members will receive more concrete benefits, such as limiting Russian and Chinese expansion and blocking arms suppliers of non-NATO members.

The interests of NATO fake ahead, devoid of serious regard to its public objectives. Rasmussen has outlined his concerns with the uprisings in terms of its impact upon the Middle East peace process and a possible increase of illegal immigration to Europe, validating NATO-centric concerns to the world under a “we don’t interfere in domestic politics” stance. Forget about partnerships, dialogues, and goals.

This lack of response from NATO is only amplified by a muted response from the US, with Europe following suit. Though Obama exercised caution in denouncing violence against peaceful protesters in Libya out of fear that the Gadhafi regime would target American nationals in Libya, Washington was also slow to react to protests in Egypt earlier in February.

Only after receiving strong criticism in the media did Obama denounce Mubarak, a long-time ally to the US, calling for transition “now.” Washington has supported up dictatorial regimes, such as that of Mubarak, for decades, benefiting from such stable relationships with dictators. In Egypt, which has been known to hold and torture terrorist suspects for the US, there has been a “protect us in our war and we will forgive your human rights abuses” policy. It seems US policy is in support of stable dictators, rather than fledgling democracies. Why would the US and NATO, which so avidly promote democracy, not have supported it in North Africa?

“The US and allies pull out no stops to prevent democracy because of major energy resources,” says Noam Chomsky, a well-respected American intellectual. In fact, as the protests spread to Libya, the major concern in the US was rising gas prices, not Gadhafi dropping bombs on his own citizens and executing Libyan soldiers who refused to kill their compatriots. Oil prices, which could reach $220 per barrel if Libya and Algeria, both dealing with internal protests, were to cut off oil supplies, could slow down economic recovery.

Both NATO and the US have screened selfish intentions behind national sovereignty, but after decades of support for allied dictators and more recent initiatives for a firm grasp on African affairs, perhaps it is not an honest stance to take. And if the US and NATO do not take a stance, we should hope they set aside potential gains and focus on allowing the internal movements of Africa choose the next step.

Recently, NATO has urged all parties to stop violence and ensure peaceful transition to democracy. A little less recently, Mubarak urged protestors for ‘orderly transitions’ that only served to postpone change. While we can hope and urge for peaceful transitions, we must remember that NATO should not be just a collection of military power, but also a political entity with a widely stated goal to “promote democratic values to build trust and prevent conflict in the long-run. To prevent conflict in the long run, might it be in the best interests of North Africa to allow reform?

West cannot both call for stability and advocate reform. It will need to reconsider its newest partnerships, beyond the interest of its allies, and start guaranteeing actual security.

Libyan costly battles

The battle in the Libyan desert lacks of cinematographic epics.

Neither “Rommel” Muammar el-Qaddafi withdraws as in Germanic retreat with his Jamahiriya’s Afrika Korps nor does Montgomery-champion-of-freedom conclude crushing the bad guys. But one thing’s for sure, we see how accurately are destroyed from the air some armored tanks that seem relics of the Second World War. We also perceive groups of insurgents, up the road, down the road, burning wheel on civilian vehicles with batteries of rockets that on no occasion will reach any target.

Clumsy images, testimonial prints, broadcasted and televised where the self-proclaimed members of the Libyan Free Army proclaim: « God’s with us. » Allah’s intervention must be prodigious, because only in this way insurgents have not been literally wiped out by the Muammar el-Qaddafi’s worshippers. But we do not see either pictures of massacres – unless the good old Tarantino is unable to record them.

It is a war of mirages, where the only unnatural gadget is the overwhelming war machine deployed by NATO, U.S., UK and France at the forefront. France which does not miss an opportunity, that’s why it is the third world’s biggest arms exporter. In fact, France sold military equipment to Libya up to yesterday. That may be, but our Odyssey Dawn is limited in terms of GDP. Nothing to do with the fireworks deployment that the American Tomahawk missiles display – hundreds of which have been released at a rate of 600,000 euros each. France is further unpretentious. Our tiny little Raffale fighters consume nearby 40,000 insignificant euros in fuel per flight hour. Best not to shoot or we sink our GDP.

Economic anemia and financial crisis (I)

First released in ‘Segunda Naturaleza‘ on 28 March 2009. Updated March 16, 2011

Prior to the financial crisis and as a prelude to the one we behold, we are witnessing a gradual but determined economic anemia. Since 2006.

The history of capitalism is marked by crisis. Definitely, since the 70’s we are witnessing a dip every 5 or 6 years. Systematically. Yet, the current one we endure, we ignore its internal mechanics: this is neither a cyclical crisis we ensue periodically nor a predictable structural collapse – so not analyzable in conventional terms.

Since capitalism exists per se in the dawn of the nineteenth century, the housing issue became a matter of essential focus. The issue is whether or not granting a mortgage to someone who has no assets, but offers reasonable assurance to invest the equivalent of 5 – 7 years earnings, which is the average housing cost. The loan is granted through a mortgage atop the object by itself, provided that the financial institution truthfully assesses the applicant’s income – say provided holder’s solvency. The financial institution does not usually covers further than 70 to 80% overall. The mechanism relies therefore on the holder’s complementary efforts.

However, in practice, since the late 90’s, the tendency in the United States has been encouraging a majority of citizens to become capitalist (whether they were solvents or not) and beginning with the house. The Bush administration pushed this ahead, banks operated with lax « after all, they said, why not lending to anyone. » Often, the assessment on the client’s financial coverage capacity depended if his face fitted, when not in practice, he was supposedly solvent. The bank saved itself because its solvency position no longer depended on the borrower’s sole creditworthy but especially on the intrinsic value of the property: so, if the holder failed to pay, the bank expropriated (sometimes people speak wrongly of seizure) and sold the house to redeem the debt. This system generalized up to December 2008. U.S. banks and European to a lesser extent, granted credit indiscriminately, especially low-income families and active minorities (Hispanics and African Americans), bestowing 100, 110 and even 120% of the property value with the reason that there is always some home remodeling to perform or new furniture to buy when you get settled in a new place. And in order to get a more tempting technique when possible, financial engineering used to propose a financial gimmick: namely, there was no capital refund thru the first 2 or 3 years, other than interests. The uncut gadget was escorted by variable interest rates, i.e. fluctuating, under the pretext that with time, « you’ll see your earnings will go up. » This is what has come to be called the doctrine of constant expansion.

Throughout the summer of 2007 roughly 1,700,000 American families loosed their homes, seized, evicted and their children threw out the street, frequently evicted from the school system. In fact expropriation measures were targeted at around 4,000,000 households, but the authorities responsible for executing the judgments of eviction – judges and police –refused regularly to enforce such unpopular measures. This impelled serious cash flow problems for a lot of credit institutions –to say bankruptcy as they were holding massive amounts of toxic loans (150 to 300,000 million dollars). The multiplier effect soon arose and the entire U.S. banking system realized it was holding failed, flawed, toxic mortgages: the so called subprime lending involved an extra interest rate, a bonus on the event of the loan holder was insolvent.

Yet we cannot talk of robbery; let us rather point to a cynical « brutalization » of the banking system inasmuch as the system decided not to deal with individuals (families, children and their risks), but with objects (the value of their risks). In an ethical and regular system, their loss statements should have been assessed, compulsory provision of funds required and finally the security authorities (central bank and stock exchange authorities) would have taken the necessary steps. Not so. Most financial institutions disguised toxic  loans with others who were not, creating packages, the perverted packages. These, in turn, were subject to new transactions targeted to other entities (which obviously did not warn the gambit). With it, banks got rid of noxious loans on their balance sheets while new (surreptitious) assets appeared healthy. This technique, called « securitization of credit », is perfectly legal but it has been denatured in those circumstances. In theory it happens to convert assets (loans, for example) in securities or bank values. In practice, the conversion was made ​​based on personal loans, thus giving rise to corrupted assets because the failed effects remained hidden behind the creditworthy assets. The hoax is unquestionable as long as the U.S. banks have accepted the situation and many Western banks assumed the subprimes without question. Since then the new titles became « marketable securities » throughout the world, ie they were admissible to official stock exchange quoting and were therefore transferable in the stock market. Titles invaded Western markets and, little by little, the deposit banks collapsed: some were aware of it and others suspected insolvent loans in their portfolio, but they were incapable to determine how many and how important they were. The perversion led to extreme fraud:  there were cases where the mortgage ownership on a home was split throughout several titles so as to detach and include them throughout different packages. Who bids higher?

Very few banks were clever enough to assess their risk or that of their neighbor whom, so far, traded cash daily. Mistrust among banks generalized and interbank credit was finished off.

As for Q4 2008, the real (productive) economy suffered strongly the bias effect of the increasing blockade of credit lines to businesses and small firms. From then on, banks do not guarantee their fundamental duty, i.e. the necessary cash « irrigation » in order to keep in force the levels of trade.

Next post: The imbalances in the spotlight