Uniting the Black Left Everywhere

Black Radicalism for the 21st Century

The Koch Brothers Exposed- A VideoDoc

Arkansas Blog: Koch brothers exposed; questions for Cliff Clavin
September 17, 2012
By Max Brantley

I wrote earlier this week that the Koch Brothers-financed Americans for Prosperity, at work trying to buy a Republican majority in the Arkansas legislature, is bringing Cheers barfly Cliff Clavin to Arkansas on bus tour this week that will pass through South Arkansas to drum up enthusiasm to beat the black man in Washington and elect people friendly to increasing Koch wealth in Arkansas.

Good time for a link to Koch Brothers Exposed, a website aimed at looking at some of the effects of giving the billionaires freedom to profiteer with a minimum of government environmental oversight. The film linked below is about cancer in Crossett, home to a major installation of the Koch-owned Georgia Pacific. G-P dumps wastewater into area waterways.

Maybe somebody should ask Koch shill John Ratzenberger about his patrons' good works when he's in Monticello and El Dorado. Or maybe talk to industrialist Mike Akin, one of the Republicans the Kochs hope to see elected to look after their interests in the Arkansas Senate. If nothing else, tell voters about this film. Tell them about the candidates, like Akin, that the Kochs are backing in Arkansas. Let them decide if this is a good thing.


Koch Brothers Looking At Massive Media Buyout
From DeSmogBlog: 18 march 2013

Rumors are swirling around the Internet that Koch Industries is hoping to acquire a powerful new asset: The Tribune Company. The Tribune Company owns a large swath of newspapers across America, including the Los Angeles Times and the Chicago Times, two papers with an extraordinary reach.

According to the Hollywood Reporter, Koch Industries is considering purchasing Tribune because they are intensely interested in the clout that could be gained through the editorial pages of their papers. However, Think Progress notes that a spokesperson for the company refused to confirm or deny the rumors, stating that they cannot comment on "deals or rumors of deals," so there is no official word on a buyout at this time.

The decision to purchase a large media outlet like The Tribune Company would be a logical one for the Koch Empire. They would be following in the footsteps of oil giants Chevron, Exxon, and Halliburton, who have all at some point sat on the boards of major media outlets.

A media buyout for Koch would allow them to control the message machine, which could be a disaster for America. In the past, corporate-controlled media outlets have been forced to shelve or otherwise censor stories that could damage the reputation of prominent board members and advertisers, thereby withholding valuable, pertinent information from the American electorate. Owning their own media outlets would effectively silence any critical voice against the Koch brothers in those markets.


The Left's Crisis and Capitalism's Debt Crisis

NOTE: A good and necessary analysis- but not sufficient. Leo Panitch does not deal with race/racism either within the Left or within the central core of the capitalist-imperialist system (nor does Panitch deal with patriarchy/gender issues). Unfortunately, this indicates that The Achilles heel of Left Praxis is still alive and well in these most critical of times. To really have a revolutionary impact upon capitalism-in-crisis, racism and sexism must be addressed.

Brother Prof Horace Campbell's analysis (see below: The Chickens are Coming Home to Roost) of the US debt crisis helps us see the urgent need to build a powerful national and international Revolutionary Opposition to Capital's path down the fascist road. The masses of working people everywhere are in some form of uprising- spontaneous, weakly organized or strongly organized- with the US workingclass being the least organized yet sporadically and disconnectedly resisting US-styled austerity policies and union-bashing.

We of the Left inside the Belly of the Beast have a lot of work to do in such a short period of time before new forms of fascism become the rule of the land!

Organize & Unite across race and nationality lines so that Black and Latino workers can take the Revolutionary lead inside the US!

-- Sam Anderson

The Left's Crisis

by Leo Panitch
Socialist Project - The B u l l e t
E-Bulletin No. 536 August 15, 2011

A common response of the left to the financial crisis that broke out in the USA in 2007-08 was often a kind of Michael Moore-type populist one: Why are you bailing the banks out? Let them go under. This kind of the response was, of course, utterly irresponsible, with no thought given to what would happen to the savings of workers, let alone to the paychecks deposited into their bank accounts, or even to the fact that what was at stake was the roofs over their heads. On the other hand, the even more common response was all about asserting state responsibility: This crisis is the result of the government not having done its duty: governments are supposed to regulate capital, and they didn't do so. But this response was in fact fundamentally misleading. The United States has the most regulated financial system in the world by far if you measure it in terms of the number of statutes on the books, the number of pages of administrative regulation, the amount of time and effort and staff that is engaged in the supervision of the financial system. But that system is organized in such a way as to facilitate the financialization of capitalism, not only in the U.S. itself, but in fact around the world. Without this, the globalization of capitalism in recent decades would not have been possible.

It was indicative of the left's sorry lack of ambition in the crisis that its calls for salary limits on Wall Street executives and transaction taxes on the financial sector were far more common than demands for turning the banks into public utilities. It was, of all people, the mainstream LSE economist Willem Buiter (the former member of the Bank of England's monetary policy committee, appointed in November 2009 by Citibank as its chief economist) who in his Financial Times blog on September 17, 2008 a few days after Lehman Brothers' collapse endorsed the "long-standing argument that there is no real case for private ownership of deposit-taking banking institutions, because these cannot exist safely without a deposit guarantee and/or lender of last resort facilities, that are ultimately underwritten by the taxpayer." And he went further: "The argument that financial intermediation cannot be entrusted to the private sector can now be extended to include the new, transactions-oriented, capital-markets-based forms of financial capitalism... From financialisation of the economy to the socialisation of finance. A small step for the lawyers, a huge step for mankind." Credit in the Hands of the State?

Well, this sounds a little bit, if you've ever read The Communist Manifesto, like the call that Marx made - among his list of ten reforms - for the centralization of credit in the hands of the state - which just goes to show that in a crisis you don't have to be a Marxist to have radical ideas if you have any sort of ambition or self-confidence. Most Marxists don't have that ambition and self-confidence today. But you do have to be a Marxist to understand that this is not going to happen by bringing some lawyers into a room and signing a few documents. What Buiter was putting forward was the technocratic notion of how reform happens. But fundamental change can only really happen through a massive class struggle, which would involve a massive transformation of the state itself.

Even in terms of calls for better regulation, with a working-class that is not mobilized to put pressure on, you can't expect this state to simply follow policy guidelines that come from technocrats, progressive liberals or social democrats. So we at least ought to be using our opportunity to do more than offer left technocratic advice to a policy machine; we ought to be trying to educate people on how capitalist finance really works, why it doesn't for them and why what we need instead is a publicly owned banking system that is part of a system of democratic economic planning, in which what's invested and where it's invested and how it's invested is democratically decided.

The sort of bank nationalizations undertaken in the wake of the fallout from the Lehman's collapse - with the lead of Gordon Brown's New Labour government in the UK being quickly followed by Bush's Republican administration in the U.S. - essentially involved socializing the banks losses while guaranteeing that the nationalized banks would operate on a commercial basis at arm's length from any government direction or control. All they asked was that these nationalized banks seek to maximize the taxpayers returns on their 'investment.' As sagely put in the 2010 Socialist Register essay on "Opportunity lost: mystification, elite politics and financial reform in the UK," this really represented "not the nationalisation of the banks, but the privatisation of the Treasury as a new kind of fund manager."

The most important reason for taking the banks into the public sector and turning them into a public utility is that you would remove thereby the institutional foundation of the most powerful section of the capitalist classes in this phase of capitalism. That's the main reason for nationalizing the banks in terms of changing the balance of class forces in a fundamental way. Build Socially Useful Commodities

A second socialist reason for nationalizing the banks would be to transform the uses to which finance is put. Let's take an example. Where I come from in Canada, the backbone of the southern Ontario economy, apart from banking, is the automobile industry. With the layoffs that occurred and the plants that have been closed (this has been going on for three decades, but it was heightened during this crisis very severely) you are not just losing physical capital you're losing the skills of tool and die makers. A banking system that was turned into a public utility would be centrally involved in transforming the uses to which credit is put, so those skills could be put to building wind turbines, so they could be used to develop the kind of equipment we need to harness solar energy cheaply rather than expensively.

We cannot even begin to think seriously about solving the ecological crisis that coincides with this economic crisis without the left returning to an ambitious notion of economic planning. It's inconceivable. It can't be done. We've run away from this for half a century because of command planning of the Stalinist type, with all of its horrific effects - its inefficiencies, but even more its authoritarianism. But we can't avoid any longer coming back to the need for planning. The allocation of credit is at the core of economic planning for the conversion of industry. When we on the left call for capital controls, we can't just think about that in the sense of capital controls that would limit how quickly capital moves in and out of the country. We need capital controls because without them we can't have the democratic control of investment. It's not just capital controls at the border that matter; what matters all the more for socialists is control over capital to the end of directing, in a democratic fashion, what gets invested, where it gets invested, how it gets invested.

Now, people often say that socialists in the last 20 or 30 years have not laid out a programmatic vision. I don't think that's true. As the Socialist Register 2000 volume on Necessary and Unnecessary Utopias showed, there were more writings on what a future socialism would look like in the last two decades of the 20th century than probably ever before. But the detailed pictures of a socialist order they painted - whether involving some combination of plan and market or participatory economic planning - have been exceedingly sketchy on two crucial things. One is immediate demands and reforms. And the other is how the hell would we get there. What are the vehicles? What are the agencies? How are the vehicles connected to building the agencies?

It is certainly very true that, whatever the vehicle or the agency, you are never going to mobilize people simply on the basis of the need to nationalize the banks for economic planning, when they know that can't come for decades, given the lack of political forces to introduce it. People need to be mobilized by immediate demands, as they were by the demands for trade union rights, a reduced workweek, a public educational system a welfare state, etc.

Some 15 years ago, when the FMLN in El Salvador after the settlement of the civil war turned itself from a guerrilla army into a political party, I was one of the people invited to help them set up a party school. And I had a conversation there with Fecundo Guardado who had been subcommandante on the San Salvador Volcano, and who later ran for president under the FMLN banner. He said to me, everybody thinks that the long term is the next election, (which since this was in 1995 would have been in 1999 there). He said: they're completely wrong - in fact, that's the short term. What we have to hope is that by 1999 we will be strong enough, have a strong enough base, to be able to make a decent showing in the next election. The medium term is 2010, when we have to hope that we will have a broad enough representation and a deep enough development of our members' capacities that we actually could have an influence on the direction of the country. The long-term is 2020, when we will be able to get elected as a government that can actually do something, that can transform the state. Angela Zamora who as the head of party's educational program was hosting me, sat there and listened to this and suddenly said, in that case I'm leaving the party. I can't go back to the people who I've been leading in struggle for 15 years and tell them they have to wait for 2020 for immediate reforms. It's impossible. I can't do it. Immediate Demands and Longer-Term Vision

So one needs to figure out how to combine a clear, ambitious sense of immediate demands with this longer-term vision. But in the current crisis the Left's immediate demand could and should have centered around bringing the banks into public ownership. The case for this could have been made in terms of the need for a massive program for public housing. After the Great Society program in the 1960s left-wing Democrats, rather than calling for more public housing to rebuild America's cities instead called for the banks to lend money to poor black communities - in other words, for the problem to be solved by letting black people, who had been largely excluded from the banking system, into it. It was similar to liberal feminism's demand that women should be able to get credit cards, which they were largely not allowed to do by the banks until the 1970s.

Well, you should be careful what you hope for. One of the effects of winning those demands was a channeling of those communities more deeply into the structures of finance, the most dynamic sector of neoliberal capitalism. Clinton carried those reforms much further in the 1990s, appealing to the Democratic Party constituency (Clinton was known as 'the black President' for this) on the basis of we're going to let you succeed at the capitalist housing game. And then Bush, of course, let every crook that he could find into the mortgage business. Of course, there's no reason why black people or women shouldn't want the same rights as everybody else - why shouldn't they look forward to their homes appreciating in market value? But you need to understand the dynamics and contradictions that are involved in trying to win reforms for people through integrating them more deeply into capitalist credit relations. And the results are now clear.

We should be also demanding universal public pensions, as the private pension plans won by trade unions now are coming unraveled for both public sector and private sector workers. And that would contribute to strengthening the working-class, because it would eliminate the kind of competition amongst workers that employers have played on with their private pensions. Indeed, increasingly we see that even the unions in largest corporations today as well as unions of public employees cannot sustain their member's pension plans.

We should also be calling for free public transit - to be available like public libraries, public education and public health care. All of this involves trying to take a crucial portion of what we need for our livelihood, our basic needs, and decommodify them as far as possible within capitalism.

People respond positively to such demands even in North America. The trouble with them, however, is that there's not that much room for manoeuvre left for reform in today's capitalism, because in order to have a major program of public housing, in order to have free public transit, you very quickly run up against where are the funds going to come from? It's possible to argue, given how cheap public bonds are today, that you can go to the bond market, but that also means that you become subject to the kinds of pressures from bondholders that is requiring the Greek and the Portuguese and the Spanish states to do what they're doing to their public sector in order to guarantee that they won't eventually default on those bonds. So you come back fairly quickly to the need to at least begin a process of socialization through taking the banks into the public sector.

We need to try to see this moment of crisis from the perspective of what openings it could create. The limitations of a purely defensive response to the crisis lie in not taking advantage of the opportunity that the crisis creates. Despite the 'Another World Is Possible' rhetoric, the left has been more oriented to attempting to hold on to things than to taking things in a new direction. Whether the struggle has been to prevent water privatization, or whether it's been to protest at G-7 and G-20 meetings, however militant the action, it's often primarily defensive in the demands that are articulated.

This is, oddly enough, one of the limits of a perspective that says you can change the world without taking power, without engaging on the terrain of the state, without transforming the structures of the state. What is on the agenda is mainly to prevent the state doing certain things and what is off the agenda is to change the state in such a way that ensures that when new progressive reforms are won they lead on to further structural reforms. We need to appreciate the reasons for the anti-statism that is so on the Left today; the suspicion of talking in terms of building new parties or transforming the state is understandable. But we need to go beyond protest, or we will be trapped forever in organizing the next demo.

And as this current crisis is transferred down to the regional and local levels, which every central state will try to do, we will run up against the limits of what can be secured in struggles at those levels. We have to learn how defensive and localized struggles can be linked up, and how they can be transformed so they are directed into a struggle for state power. Otherwise, all the protests will run up even more quickly against the kind of limits of the immediate reforms that don't lead on to more fundamental ones.

This is enormously important because we probably are facing the destruction of public sector trade unionism unless there's a shift in the balance of forces in the context of this crisis. Capitalism can only go on so long with the private sector being as limited in its unionization, its density being so low, in terms of collective bargaining rights and recognition, and the public sector being almost universally unionized. It can't continue. Part of the onslaught on state expenditure that is taking place now is to destroy public sector trade unionism. The ability of public sector unions to resist in this crisis is being very severely tested. That's how serious this is.

Speaking more generally, it is increasingly clear that trade unions, as they evolved through the 20th century, not only in the advanced capitalist countries, also in most of the countries of the South, are no longer capable of being more than defensive. They are not able to win new gains, and they are not able to organize in ways that develop the capacities of their members. The challenge now is to build a trade unionism that is actually a class organization, one that goes beyond organizing people by the workplace alone and organizes people in relation to the many facets of their lives touched by this crisis. *

Leo Panitch is a political economist and theorist based at York University, Toronto, and is co-editor of Socialist Register. His most recent book is In and Out of Crisis: The Global Financial Meltdown and Left Alternatives (with Greg Albo and Sam Gindin). This article is a revised version of a presentation at the Delhi University symposium on "Globalization, Justice and Democracy," November 11, 2010.

The Chickens Are Coming Home to Roost-- US Credit Downgrade
Horace Campbell
2011-08-11, Issue 544

<<The 'downgrade of the US credit rating is part of the forward planning by the top capitalists to guarantee the political and military hegemony of the richest one per cent of the US population,' writes Horace Campbell.>>

On Friday 5 August 2011, one of the world's leading credit rating agencies, Standard & Poor's (S&P), downgraded the United States' top-notch AAA rating for the first time ever in the United States' history. S&P cut the long-term US rating down to AA+ with a negative outlook, citing concerns about budget deficits and political gridlock. In their statement justifying the downgrade S&P stated that:

'The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government's medium-term debt dynamics.

'More broadly, the downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges.'

Additionally, Standard &Poor's indicated that it might further lower the US long-term credit rating to AA within the next two years if the United States' deficit reduction measures were deemed inadequate. These are strong statements from a private agency bent on disciplining the government of the United States with the threat of a further downgrade. What gives this agency such power? In answering this question, we would seek to understand what is a credit rating agency; the source of a credit rating agency's power; what is S&P's track record and what implications do its decisions have for the international political system, especially for humanity.

In all major capitalist countries, the power of the dominant faction is hidden behind ideology (free market), law (protection of private property), propaganda (corporate-controlled media), the coercive organs of the state (military, police and prison) and the power of finance capital (banks, insurance and financial instruments). Credit rating agencies represent the power of financial capitalists and are usually held in the background to discipline corporations and governments. In moments of crisis these agencies show their hand.

These agencies along with the International Monetary Fund (IMF) and the US military have been the weapons against the true self-determination of humanity. United States citizens are now beginning to pay attention to the power that the IMF, credit rating agencies and the military wielded over most countries in the world. US Treasuries (or T-bills) are traditionally considered to be a risk-free investment precisely because in the country's 200+ year history, its rating has never been downgraded and the securities are backed by the government.

The downgrade of the credit rating of the United States by Standard & Poor's is much more than a psychological blow to the prestige of the imperial overlords in the United States. This is a sign of a power shift and another blow to the position of the US as the sole superpower. The most oppressed must organise to break the power of capital and the imperial overlords or humanity will pay a high price.


Credit rating agencies provide information on issuers of securities whether the issuers are corporations or countries. A credit rating agency informs investors whether issuers of securities (such as debt obligations, fixed income securities) can meet their obligations to those securities. The top three credit rating agencies with international influence are Standard & Poor's, Fitch Ratings, and Moody's Investor Services. The job of these agencies is to provide an analysis of the risk posed to investors by bonds, companies and countries. The risk analysis provided to investors by the credit rating agencies is supposed to be objective. However, the credit rating agencies are private entities owned by profit-making companies performing what is essentially a regulatory role. Thus, the credit rating agencies cannot truly serve the investing public because they have a fiduciary obligation to their shareholders to maximise profit.

The rating agencies achieved their influence over time since the capitalist depression of the 1930s but have become more important to the US economy in the era of financialisation, commencing on 15 August 1971. It was from this date that the US gave unlimited rights to the currency speculators after it reneged on the Articles of Agreement of the IMF that had placed the convertibility of the dollar on par with US$35 for one ounce of gold. This departure from the gold standard, called the 'Nixon Shock' after the president who authorised it now backed the US dollar with the military might of the United States. During the Cold War, international capitalists were willing to shelter under the US military umbrella and one price for this shelter was to accept the political power of US credit rating agencies.

These private corporations were issued permits to be credit rating agencies by the United States Securities and Exchange Commission through the Nationally Recognized Statistical Rating Organization (NRSRO) therefore turning rating agencies from solely private entities into regulating bodies.

In the past 20 years, the business of credit rating followed the path of centralisation and concentration of capital so that the rating business fell in the lap of the three big firms, affording these organisations the power to make life and death decisions about corporations and countries.

The subjective nature of their ratings will be brought out later but in the aftermath of the clear theft and fraud of the capitalist organization called Enron, the rating agencies in public hearings held by the SEC in 2002 insisted that credit ratings were only opinions and should have a limited role which is to assess the creditworthiness of issuers on an ongoing basis, and the 'likelihood' that debt will be repaid in a timely manner. The fact that ratings are 'opinions' is important in the US legal context in that these big three capitalist corporations seek to be protected by the First Amendment and from civil and criminal liability.


These credit rating agencies earn their power from the fact that they are owned by the top financial institutions on Wall Street. For example, S&P is owned by McGraw Hill Companies, one of the United States' big media and publishing conglomerates. The board of directors is comprised of the top individuals of finance capital with a few academics thrown in. The shareholders of McGraw Hill are from the top financial houses. McGraw Hill owns 'Aviation Week', which is one of the prime advocates for a section of the US military. Though S&P is a wholly owned subsidiary of McGraw Hill, Moody's, on the other hand, is a publicly-traded corporation. Its largest single shareholder, with 12 per cent of the company's shares, is Berkshire Hathaway, Warren Buffett's company. Fitch is more transnational with roots in French finance capital.

Thus, we know that the shareholders of McGraw Hill can ensure that their ratings are sanctified by governmental authorities and most importantly, by the IMF. The power of these credit rating agencies has accumulated over time and has been consolidated within the context of the power of finance capital over the international capitalist economy. By seizing a regulatory role while eschewing clear liability, these agencies gained the political power to be whatever they wanted to be.

Since the Depression of the 1930s, statutes and rules required that mutual fund and money managers of almost every stripe buy only those bonds that have been given high grades by a Nationally Recognized Statistical Rating Organization. The effect was to make the three certified rating agencies an oligopoly. It was this power that these agencies used against Asia by providing cover for US companies to buy up assets cheaply in the aftermath of the Asian financial crisis (1997-98). This power also played a role in the recent intimidation of European countries, including Greece, Portugal, Ireland, and Iceland, to launch austerity measures against workers by downgrading the ratings of these countries.


There are numerous commentaries on the downgrade of the US but the one commentary that caught my attention was that of Paul Craig Roberts, former assistant secretary of the Treasury in the Reagan administration and associate editor and columnist at the Wall Street Journal. This is a civil libertarian who was arguing that there is a struggle between the military and Wall Street for power in the USA. In an article published on counterpunch.com, after quoting from the statements of Dwight Eisenhower on the rise of the military industrial complex, Roberts opined that from the time of Dwight Eisenhower till today, the United States has been dominated by the military security complex. According to this analysis of the downgrade, the only challenge to the military was Wall Street and Wall Street was using this downgrade as its leverage to fortify its challenge:

'The main power rival was Wall Street, which controls finance and money and is skilled at advancing its interests through economic policy arguments. With the financial deregulation that began during the Clinton presidency, Wall Street became all powerful. Wall Street controls the Treasury and the Federal Reserve, and the levers of money are more powerful than the levers of armaments. Moreover, Wall Street is better at intrigue than the CIA. The behind the scenes fight for power is between these two powerful interest groups. America's hegemony over the world is financial, not military. The military/security complex's attempt to catch up is endangering the dollar and US financial hegemony.'

Roberts explained that the security establishment has been trying to catch up with the power of the lords of finance by launching wars to enrich themselves and to gain more power in the society:

'The country has been at war for a decade, running up enormous bills that have enriched the military/security complex. Wall Street's profits ran even higher. However, by achieving what economist Michael Hudson calls the 'Financialization of the economy,' the financial sector over-reached. The enormous sums represented by financial instruments are many times larger than the real economy on which they are based. When financial claims dwarf the size of the underlying real economy, massive instability is present.

'Aware of its predicament, Wall Street has sent a shot across the bow with the S&P's downgrade of the US credit rating. Spending must be reined in, and the only obvious chunk of spending that can be cut without throwing millions of Americans into the streets is the wars.'

While notable, what this analysis by Paul Craig Roberts fails to recognise is the rapid integration between finance capital and the military, as manifest by the fact that companies that profit greatly from militarisation, such as Boeing has an established financial arm called Boeing Capital Corporation. Most of the big investment and derivatives firms have established links with the private military industry. All the top private military companies and the military hardware manufacturers that are woven into the military-industrial complex are traded on Wall Street. Many of the top private military companies are subsidiaries of Fortune 500 companies that are also traded on Wall Street. In fact, the intricate web of alliance between finance capital, the military and the corporate media/information mind control is now so dominant that we can talk of the finance-military-information complex, instead of the military-industrial complex. McGraw Hill is a poster child of the relationship between the military, finance and information/media. McGraw Hill is the owner of Standard and Poor's, and it is directly owned by some of the biggest bankers of Wall Street. McGraw Hill is also in the TV and media business, with stations across the country. It owns 'Aviation Week' and 'Space Technology'. The latter has been the publication that has been the mouthpiece for the US Air Force, and has been an advocate for high military spending and the acquisition of expensive military aircrafts.

As promoters of the ideology of free market and deregulation (even in the military), the McGraw Hill Companies is also a cheerleader for private military corporations. These private military corporations are involved in protecting international capital in all parts of the world The New York Times reported as far back as 2002 that one such private contracting firm 'boasts of having "more generals per square foot than in the Pentagon."' As a militarist state where all is subordinated to the needs of the financial/military interests, there is no contradiction between the two as Roberts claims.

As international capitalists with no cut-in-stone loyalty to the US state, the financial-military complex is now ready to do to the US what it had been doing to the rest of the world since 1945, intervening to discipline governments to do the bidding of big capital. Temporarily, these financial and military oligarchs need to work through the US government because it is the government that carries the authority to print dollars as long as the dollar remains the reserve currency of the world. This downgrade of the US credit rating is part of the forward planning by the top capitalists to guarantee the political and military hegemony of the richest one per cent of the US population. As the dollar loses its status there will be consequences for the global position of American capitalism. The moguls of Wall Street want to ensure that the political leadership in the United States is sufficiently intimidated so that as the position of the dollar deteriorates and there are deepening crisis for capitalism inside the US, the government will take measures to continue to ensure that wealth is transferred from the working peoples to the capitalist class. Hence this downgrade is part of a long term plan to discipline the working class and the politicians within the United States, just as how the IMF has been used in the past against the rest of the world.


It is now known that Enron was one of the most corrupt capitalist corporations in the US. Yet, Enron had a triple AAA rating by these credit rating agencies until four days before the company went bankrupt. When the full extent of the fraudulent activities of Enron were revealed, President George W. Bush claimed that this was one 'bad apple', implying that Enron was an aberration. But soon thereafter the duplicitous dealings and accounting practices of WorldCom and Global Crossing were revealed – WorldCom fudged accounts to show inflated profits. Up to the day that Enron sought bankruptcy protection, none of the three rating agencies caught the fraud and corruption of Enron.

Throughout the period of the power of the financial houses, the blatant conflict of interest was too hard to ignore so in the aftermath of Enron and WorldCom, there has been some regulatory response. Congress passed the Credit Rating Agency Reform Act of 2006, ending a century of industry self-regulation. The purpose of this law was to promote competition in the rating industry by establishing a transparent and rational registration system for rating agencies seeking NRSRO status. It was also designed to enhance industry transparency, address conflicts of interest, and prohibit abusive practices.

But the Securities and Exchange Commission (SEC) was itself impotent as the world saw from the financial crisis of the collapse of the investment banks in 2008. Bear Stearns and Lehman Brothers had enjoyed top ratings from these agencies and the sub-prime products called Credit Default Obligations (CDOs) were given triple AAA ratings, even when these products turned out to be garbage. Of course, this garbage was held by the same bankers who own the rating agencies.

In the aftermath of the fall of Lehman Brothers and the fact that the sub-prime mortgage crisis exposed the securities fraud by the financial houses, for a short time Wall Street was on the defensive. There were dozens of lawsuits filed against the credit rating agencies. Citizens were calling for the fraudsters to be incarcerated but the rating agencies went back to their old line that their ratings are merely opinions and are protected by the First Amendment.

It was then left to Congress to Act and after the public outrage, the financial regulatory reform law adopted in 2010, known as Dodd-Frank Law, directed the SEC and other agencies to undo that link between the 'opinions' of the credit rating agencies and the claim that they could regulate themselves.

The Dodd-Frank Wall Street Reform and Consumer Protection Act enhanced the SEC's enforcement mechanisms, and added a number of requirements on NRSROs that are immediately effective (i.e. do not depend on SEC rulemaking). The Dodd-Frank Act also required the commission to adopt a number of new rules concerning conflict of interests.

According to the US government and their news sheet, 'the Dodd-Frank Act requires every federal agency to review existing regulations that require the use of an assessment of the credit-worthiness of the security or money market instrument and any references to credit ratings in such regulations; to modify such regulations identified in the review to remove any reference to, or requirement of reliance on credit ratings; and substitute with a standard of credit worthiness as the agency shall determine as appropriate for such regulations.'

What this meant was that from June 2010, the SEC unanimously approved a plan to erase references to credit ratings from certain rulebooks. The agency also adopted a substitute to the ratings, the first of several such changes the commission had to enact. Dodd-Frank created a laundry list of new regulations for the industry, including proposals to make it easier for investors to sue the agencies. The SEC must also create its own Office of Credit Ratings to police the raters, though the agency has yet to open its doors as it struggles to scrape together the needed money.

Since the passing of the Dodd-Frank Act, Wall Street has been pushing back, spending millions of dollars to reverse Dodd-Frank and to ensure that the law is whittled away until it is meaningless. However, while the bankers were seeking to protect themselves, the fact that they were holding on to garbage since the financial crisis was becoming clearer. This is because the depth of the financial crisis was so much that the bail-out could barely touch the surface of the problem. In the past year, the vulnerability of the banks has been heightened by the capitalist crisis in Europe. As a means of pressuring the states of Greece, Portugal, Ireland, Iceland and others to implement austerity measures against workers, these rating agencies downgraded these countries' ratings. These downgrades exacerbated the class struggles in Europe where the bankers and the bond-holders wanted to be paid. For the US capitalists, the crisis in Europe threatened the future of the Euro and the collapse of the Euro in the short term would serve the interests of the capitalists on Wall Street. This would ensure that there was no clear challenge to the dollar and the US could continue the military occupation of many countries in Europe, especially Germany.

However, some of these US capitalists were also exposed by the crisis in Europe and US banks wanted to ensure that the European Central Bank imposed austerity measures so that the full exposure of US banks would not be known. However, this crisis is not a simple one; it is structural and systemic and needs fundamental changes in how society is organised. This crisis has intensified in the past three months with the knowledge that states and societies such as Italy and Spain will also need the iron hand of international capital to impose harder burdens on the workers to transfer wealth from the majority to a minority. French banks are loaded up with the debts of Italy and Greece, and American banks are holding positions in these same French banks. Hence, US banks are not immune to the crisis in the Euro zone.


There are some who have stated that the downgrade is cosmetic because the other two rating agencies, Moody's and Fitch, have retained the AAA rating of the USA. This may seem to be the case but those who have been following the troubles of the banks and the fake stress tests know better. The timing of the announcement of the downgrade has some significance in the sense that it followed the false debate and conclusion of the debt deal.

By coming out after hours on Friday night when they knew the state of the markets, the downgrade also provided a false 'public' cover for the well-publicised subsequent fall and rise in global stock markets. Political spinners were able to point to the downgrade as the 'spark' for the drop in stock prices (particularly for the banks). In reality, the true causes are the growing risk and troubles in Europe, the continued lack of growth in the US, and the fact that in spite of all the trillions in bailouts of the banks, accounting rule changes, and the fake stress test exams to show that the banks are doing well, the market participants who understand the true status of the banks revealed that the banks are still in danger of collapsing.

Millions of persons around the world are paying attention and there are already signs that these foreign forces are losing confidence in the safety of US securities by the rise in the price of gold. The other point is that the political alliance that paved the way for this conjuncture is being strengthened by the power brokers in the Treasury/Wall Street/IMF relationship. It is this alliance that will work for the transfer of wealth to the top one per cent and will not countenance increased revenues from this small class.

As we have argued before, ultimately the question is not simply one of revenues and taxing the rich, but a fundamental restructuring of the system. However, in the short run, the call for more taxation and regulation of off shore accounts serve to expose the ways in which the capitalist class is above the law. Yet, these capitalist have to live somewhere and they do not want to live in the offshore sites of money laundering and lawlessness. Hence, they need laws to suppress workers, take away collective bargaining and the safety nets of social democracy.

The downgrade will raise the cost of borrowing; this in turn could trickle down to higher interest rates for local governments and individuals. The iterations of decline and deficits will increase the government debt and the deficit, and S&P has issued the clear threat that another downgrade will be coming after 18 months, if Congress does not follow its advice to impose austerity measures.


US government officials are calling the methodology of the rating agencies flawed and some are calling for nationalisation of the agencies and/or the establishment of an international rating agency under the United Nations. There was no such call when the same agencies were working with the IMF to impose hardships on the rest of the world. Now, we are told that the rating agencies cannot do maths. But the destructive structural adjustment maths that the IMF-rating agencies alliance have used to destroy economies and livelihoods in the global South over the past 30 years were never questioned by those now calling out the S&P for its US$2 trillion error in its computation used to justify the US downgrade. The complaint was that a treasury official had spotted a US$2 trillion mistake in the agency's analysis. Whether it was a mistake or not, a psychological barrier has been breached. The US is no longer beyond the sanction of agencies that it unleashed against other societies.

Since the fall of Lehman Brothers in September 2008, politicians have sought to cushion the blows to capital by making band-aid remedies. For some, the issue was one of regulation and more control over the financial institutions. There were hearings in the US Congress and the Dodd-Frank law came into being. Through the media, the financiers went on the offensive about a recovery, but there has been no recovery because there was no fundamental alteration in the way capitalist ensured that wealth was transferred from the poor to the rich.

More, importantly the limits of US military power has been put on full display in Iraq and Afghanistan. The center of the world economy shifted to Asia while the USA and Europe were fighting in the Middle East. The ten biggest economies in Asia ring-fenced themselves against the USA and the instability of the dollar. This downgrade will reinforce this need for protection against the dollar. From China there was the warning that:

'International supervision over the issue of US dollars should be introduced and a new, stable and secured global reserve currency may also be an option to avert a catastrophe caused by any single country.'

This call for international supervision did not include any statement on the conditions of working peoples who are suffering at present. Inside the USA, the political choices have been sharpened. It is either the articulation of democratic control by the people or oligarchic control by the banks and financial houses. The downgrade was not a challenge to the government but to the working peoples of the USA and the world.

Youths in the streets of Greece, London and Cairo are giving one response. The challenge is to coordinate these responses for a prolonged and sustained struggle to break the power of the financial-military-information complex. Those who have been following the gyrations of the capitalist debacle since 2007 will note that the events associated with the 2011 downgrade are simply precursors to what will continue to happen as the last 20 years of debt-driven growth in advanced capitalist nations unwinds. In the midst of this protracted crisis the rich will seek to transfer wealth from the poor as the only means of sustaining their accumulation of wealth as year 4 unfolds of what is likely to be a 7-10 year recession/depression. The financial-military-information complex will continue to ensure that austerity to manage government debt falls on the backs of working people. Corporations will continue to claim that the only way they will invest some of their trillions in cash to create jobs and lower unemployment is to reduce regulations, lower corporate tax rates and perhaps even lower minimum wages. The American people must realise that the chickens have just come home to roost. The people must organise more and more to link up with working people's struggles around the world to break up the banks, IMF-rating agencies alliance and their military enterprise. Financial institutions should be made to serve the people, not vice-versa.


* Horace Campbell is professor of African-American studies and political science at Syracuse University. He is the author of 'Barack Obama and 21st Century Politics: A Revolutionary Moment in the USA'. See www.horacecampbell.net.

Sabotage The International MotherF*%#$$r!!

Time to bury the IMF-- Towards an International Bank for Reconstruction and Reparations
Horace Campbell
2011-06-02, Issue 532

The demise of the IMF's former managing director Dominique Strauss-Kahn is an opportunity to dismantle the fund and replace the current financial architecture with one that 'invests in the repair and reconstruction of livelihoods and the planet' instead of 'destruction, dehumanisation, exploitation, and rape,' writes Horace Campbell.

It was a fitting metaphor as Dominique Strauss-Kahn, managing director of the International Monetary Fund (IMF) was arrested on charges of assault, attempted rape and sexual abuse. The charges were brought after Strauss-Kahn allegedly assaulted an African woman from Guinea, who worked as a housekeeper in a hotel in New York City. The image of Strauss-Kahn in handcuffs was fitting insofar as this is the image that should be presented of the entire international financial system that is anchored in the Bretton Woods Institutions. For over 60 years, these institutions (the IMF and the World Bank) raped citizens of the world, especially the citizens of the poor countries, on behalf the United States and the top capitalist nations in Europe. The IMF has been a front for the lords of finance of Wall Street in the USA, and the linkages between the IMF/Wall Street and the US Treasury ensured that the poor of the world subsidised the US military. As junior partners in the imperial chain of domination, the Europeans worked with the Wall Street-Treasury alliance to ensure that despite presenting arguments about free market competition, agriculture in Europe and the USA was subsidised. In pursuit of the alliance of financial rapists and economic terrorists, it was an unwritten rule that the managing director of the IMF should be a European.

The current French finance minister is campaigning hard to becoming the next managing director and has received the support of an institution that is as moribund as the IMF, the Group of 8 (G8). It is a measure of the disrespect that the capitalists have for Africa that they could propose Christine Lagarde as the candidate to be the next managing director. France has been at the forefront of the massive plunder of Africa by European states, and the IMF has been complicit in this plunder. France continues to be a safe haven for the money stolen from Africans by African kleptocrats and Western elites and corporations. The IMF has assisted in granting immunity to Europeans and North Americans for crimes of economic rape against Africans.

Many in France who call themselves socialists have been in denial about the rape of Africa. Instead of supporting activists such as Eva Joly who have been exposing the fraud and corruption of France in Africa, these 'socialists' are claiming that Strauss-Kahn was set up. A former culture minister Jack Lang described the treatment of Strauss- Kahn as a 'lynching' that had 'provoked horror and aroused disgust'. Clearly, these members of the French socialist confraternity do not understand the real lynching that is part of the racist structure of western capitalism. Indeed, this moment of the prosecution of the French-born high priest of the IMF over the allegations of physical sexual assault of an African is an opportune moment for persons who have been affected by the decades of economic rape perpetrated by the IMF around the world to call for the dismantling of the Bretton Woods system and set about the establishment of a new international financial architecture dedicated to repairing the planet earth and for the reconstruction of livelihoods.

There were some commentators in parts of the BRICS (Brazil, Russia, India, China, and South Africa) countries who were calling for the new managing director to be recruited from the 'developing' countries. Such a proposal is only one expedient for prolonging the life of the IMF when regional institutions are springing up in Asia and Latin America to disengage from the Bank. In fact, the pervasiveness of regional currency projects and the moribund stature of the Bretton Woods global financial architecture challenge Africans to remove the present crop of wheeler-dealers who pose as leaders, and to create a new leadership in order to get serious about the consolidation of the African Monetary Fund. Such seriousness will strengthen the local forces all over the world that have been campaigning against the IMF and for the creation of a new financial system.


The Bretton Woods financial architecture, which gave birth to the IMF and the World Bank, is predicated on the strength and dominance of the US dollar, the US financial system and capitalist ideology of free market. But the slow death of the IMF began after the ending of the fixed rate regime that had been established at Bretton Woods in 1944. When the system of fixed exchange rates ended in 1971, the US dollar was no longer backed up by gold but by the military might of the USA. Previously, the US hid behind the idea of trilateralism, meaning cooperation in the management of the global system with Europe and Japan. It was in this period when the US established the meetings of the G-7 in 1976. After the rise of Ronald Reagan, the US capitalists opted for the military management of the international financial system. This was most graphic after the Plaza Accords of September 1985, when Ronald Reagan literally told the Germans and Japanese that they had to support US financial hegemony because the US had troops stationed in their countries. Following the fall of the Soviet Union in 1991, the Russians were invited to these G-7 meetings and the group was then called the G-8. The US capitalists moved in to dismantle the Soviet economy and paved the way for a new regime of looters and money launderers in Russia. These barons of Russian capitalism were integrated into an international system that supported the dollar.

The Russians opted to join the international capitalists instead of joining voices with the G-77 (Brazil, India, China, Malaysia, Mexico, South Korea and other countries) to change the rules of the system where the US dollar had a preeminent place in the international political system as a reserve currency. A major concession was made in 2008 after the fall of the US investment houses and the details of the depression had become too obvious to be covered. A hastily convened meeting of the G-20 was held in November 2008, following the collapse of the Lehman Brothers investment bank and subsequent daily fear of an international financial collapse.

Throughout the years of the Bush administration (2001-2009), the principal questions related to the future of the International Monetary Fund (IMF) and the special status of the dollar was placed on the back burner by the brazen military adventure of the US. At the start of the Bush administration the crisis of the US economy had become a threat to the IMF itself, to the point where the IMF cautioned the US on the unsustainability of the debt and deficit. During the Bush administration, the New York Times published a report on 8 January 2004, revealing that the 'IMF Warns That U.S. Debt Is Threatening Global Stability.'

15 September 2008 exposed to the world the hollowness of the US financial system and the duplicity of the neoliberal ideologues that have been campaigning for free markets. When Lehman brothers collapsed and there was the meltdown of the system, the US government did not go to the IMF but unilaterally pumped more than US$25 trillion into the financial system to maintain US imperial hegemony. Today, as the figurative rape of Third World economies is now reinforced by the actual rape and sexual assault from the high priest of the IMF, capitalist forces inside the United States of America nervously balance at the apex of this international political crossroads with a mode of economic organisation and a consumer led form of economics which is creating insecurity in all parts of the globe.

The international contamination from this crisis in the United States has elicited anxiety in all parts of the world. Whether it is the ruminations of the oil producing states of the Gulf Cooperation Council on the creation of a single currency, or the energetic efforts to establish the Bank of the South in Latin America, there are differing measures by states who seek protection from the volatility of the depression and possible impact on the dollar as the currency of world trade. The rising competitors of Asia are seeking ways to reduce their deposits held in dollars in favor of the new financial arrangements in order to limit their exposure to the toxic economic conditions of the USA. Chinese leaders, in particular, have been organising currency swaps to limit their exposure to the dollar while some sections of the Chinese leadership are calling for a tricolor currency system anchored in the Dollar, the Euro, and the Chinese Renminbi (Yuan).

Under the subtle yet clear dominance of the German bankers and the German rulers, the European Union has sought to strengthen the economic integration of Europe as one pole of the competition with the US-based capitalists. However, the crisis of the financial system has intensified resistance from European workers who are opposing the austerity measures proposed in order to pay banks while people suffer. In the midst of these protests in Europe, US strategists are wishing for the collapse of the Eurozone so that the Euro does not immediately become an alternative to the collapsing dollar.

Of all the regional initiatives to challenge the US economic dominance, it is in Latin America where there is an explicit statement that the initiative of the Bank of the South contains a vision 'to liberate the region's countries from IMF, World Bank and Inter-American Development Bank (IBD) control that condemn millions to poverty.' The region of Latin America was one space where the crystallisation of popular forces (women, youth, shack dwellers, environmentalists, peace activists, indigenous persons and anti- racist forces) forced through counter proposals to begin to break with dollar hegemony. Within Latin America, the radicalisation of the electorate brought to the centre of power parties and leaders who see the Bank of the South as one step towards economic and political integration in that region. This vision is articulated in the creation of the Bolivarian Alternative for Latin America and the Caribbean. It is not by accident that France's candidate to head the International Monetary Fund travelled to Brazil to drum up support for her bid, but her hosts are still on the fence about whether to back the European candidate or throw their weight fully behind alternative proposals, including supporting a contender from the developing world.

In terms of regional alternatives to the IMF, the area where the break is most urgent is in Africa where there is tremendous wealth in the midst of appalling pauperization. Like the ruminations of the Gulf Cooperation Council, there is currently an effort by the African Union (AU) to establish a single currency. In Africa, there had been a long tradition of opposition to the policies of the colonialism and neocolonialism, crowned with the end of apartheid in 1994. Though outnumbered by a class of complicit leaders, African spokespersons such as Julius Nyerere had called for a dismantling of the institutions of international capitalism. Nyerere was quite outspoken when he asked, 'Must we starve our children to pay our debts?' It was in Tanzania where there was the most determined opposition to the policies of the IMF.

From ordinary folks in Bamako in Mali to the shack dwellers of South Africa, there are social forces opposing the looting of African resources and calling on the working poor to 'fight against all manifestations of injustices, and protect their human dignity by direct action.' Scholars who have been theorising the interconnections between gender, care and economics have been able to shatter neo-classical, Marxist and liberal understanding of economic relations that excluded the labour power of women. These challenges from the grassroots women are most evident in the rapidly growing societies that have internalised the idea that neoliberal economic practices form the basis for prosperity. Women of the global South have however been the most forthright in their articulation of the multiple forms of oppression that emanate from the structural adjustment policies of the IMF. Gloria Thomas-Emeagwali's book, 'Women Pay the Price of Structural Adjustment in Africa and the Caribbean', represented an explicit exposure of the interconnections between racial, economic and gendered exploitation. Her work and those of other African women could be drawn upon to contextualise the actions of Dominique Strauss-Kahn.

The metaphorical economic rape that the peoples of Africa and the global South have endured for decades is now not only manifesting in the literal sense with Strauss-Kahn's actions; it is also no longer limited to the Third World as it spreads across Western societies, in form of austerity measures that have sparked off resistance. By the start of 2009, the demonstration effect of the youth rebellion in Greece was inspiring strikes and protests from Guadeloupe in the Caribbean to Iceland and Ireland. By the time of the outbreak of the revolutions in Tunisia and Egypt, international capitalism was on the defensive. With Strauss Kahn caught, literally, with his pants down, the nervousness of capitalism has led to a closing of ranks behind the French candidate to pre-empt serious discussions of the restructuring of the IMF.

This is the current climate of opposition to neoliberalism and to the Bretton Woods austerity measures in which there is the discussion on the successor to Strauss Kahn. The British Guardian had summed up the new developments on 31 January 2009: 'Europe's time of troubles is gathering depth and scale. Governments are trembling. Revolt is in the air.' No less a person than Mervyn King, governor of the Bank of England encouraged workers in the United Kingdom to rise up and protest against the bankers. He said that he was surprised the ordinary people were not angrier with the banks. King said that people made unemployed and businesses bankrupted during the crisis had every reason to be resentful and voice their protest. He told a Treasury select committee that the billions spent bailing out the banks and the need for public spending cuts were the fault of the financial services sector.

We will add that behind the financial services industry is the IMF.


With each passing day there are clear signs of the depth of the international capitalist crisis. Austerity measures to save banks in Europe have intensified resistance by workers, youths and students. Inside the USA, the debt ceiling has now placed the US system in a precarious state while the treasury secretary, Timothy Geithner (a member of the Board of Governors of the IMF) fiddles the books to postpone the need for tough decisions to rein in the system where the US can spend a trillion dollars on the military while schools and hospitals are starved of funds. Economists, financiers, journalists, policymakers, politicians and speculators draw attention to the fact that the entire international financial system is now in its death throes. Whether it is the warnings of George Soros who continuously cried that, what we are going through is the crisis of the 'gigantic circulatory system' of a 'global capitalist system that is … coming apart at the seams,' or economists and activists from the south, there are voices that have made it clear that capitalism is going through a defining moment.

A former chief economist of the IMF, Simon Johnson, argued that the financiers are now using their influence to prevent precisely the sorts of reforms that are needed. Johnson, who wrote about the 'Quiet Coup' in relation to the political power of the bankers and financiers in the United States, observed later in his book, '13 Bankers: The Wall Street Takeover and the Next Financial Meltdown', that the financial oligarchs cannot halt the rush to a new financial meltdown. The question is whether societies all over the world, especially Africa are ready for alternatives when this meltdown takes place.

According to Johnson, 'What we face now could, in fact, be worse than the Great Depression—because the world is now so much more interconnected and because the banking sector is now so big.' On the complexity and depth of the crisis, Simon Johnson is not alone. Writing in the London based Financial Times on 8 March 2009, Martin Wolf held that:

'It is impossible at such a turning point to know where we are going. In the chaotic 1970s, few guessed that the next epoch would see the taming of inflation, the unleashing of capitalism and the death of communism. What will happen now depends on choices unmade and shocks unknown. Yet the combination of a financial collapse with a huge recession, if not something worse, will surely change the world. The legitimacy of the market will weaken. The credibility of the US will be damaged. The authority of China will rise. Globalisation itself may founder. This is a time of upheaval. Technical arguments abound in relation to the necessity for regulation of the financial markets but these interventions fail to grasp the political nature of the depression and the need for a fundamental break with the social production of wealth by the majority and the accumulation by a few.'

These warnings from mainstream commentators seek to divert attention from those in the oppressed South who are calling for the dismantling of the Bretton Woods system and plan for increased taxation of the bankers, especially in the short run with a financial transaction tax.


From both sides of the Atlantic there are calls for the breaking up of the big banks to make them more accountable. These calls must be linked to the popular power in the streets to connect the opposition to the banks to opposition to the IMF. During the anti-globalisation protests, connections were made between all forms of oppression. The United Nations World Conference against Racism (WCAR) held in Durban in September 2001 brought to the forefront the need for a repair of the human relations in the process of combating racism in the world economy. In the programme of action, this conference proposed legal measures, educational measures and reparations as one component of a phased program to halt the inequalities and the iterations of warfare. In so far as the proposals of the WCAR challenged the power of the leaders of NATO, the ideas were shelved while the leaders of the USA intensified the militarization of the planet.

Samir Amin grasped the limits of the technical responses to this crisis and correctly grasped the reasons why the Unites States and the NATO powers (called the international community) supported a G20 meeting but opposed the reconvened Durban 2 conference in Geneva at the end of April, 2009. It is in Latin America among African descendants where there is now a movement to link racism clearly with the crimes of capitalism to racism.

The Barack Obama administration in Washington recognised the limitations of the 'total war' concept that was embedded in the 'war on terror' and has sought a more conciliatory relationship with the rest of the world. This conciliatory approach has not, however been backed up a demilitarisation of the globe; and it has not addressed the fundamental inequalities in the international system. In fact, the conciliation, is, in part, aimed at finding new ways to extend the life of the IMF and to maintain the hegemonic position of the dollar. The Obama administration supports a strong military and is therefore committed to supporting the financial oligarchy, irrespective of the social costs to the rest of humanity.

Sixty-five years after the formation of the Bretton Woods institution and in the midst of a new depression, the challenging question for most people, especially those in the exploited world is the issue of whether we have come to the end of the Bretton Woods system. Is it now time for the establishment of the International Bank for Reconstruction and Reparations? This question must be placed on the table in order to reorganise the priorities of activism and to define new goals for the reconstruction of humanity, so that the diminution of the dollar does not engender 'abrupt, agonizing and brutal change.'

Investment in humans at this period in human history is not an intellectual question that comes out of the right or wrong analysis. It is a fundamental requirement, so that the majority of the 6.9 billion persons on earth can have access to health, food, clothing, shelter and the conditions for generating wealth in a way that will increase the quality of life for all the peoples of the planet.

The collapse of some of the US speculative companies and the current decomposition of the hedge fund and derivatives traders point to the fact that the financial meltdown and bank failures in the USA were not conjunctural or episodic events but reflections of the deep contradictions of the capitalist system. The crisis of the capitalism is systemic and cannot be reformed. Among some South Africans who supported the call for a new managing director from the developed nations, there were calls for Trevor Manuel to be named head of the IMF. Such a proposition diverts attention from the need for a rigorous discussion on the timetable for dismantling the IMF. In this death pang situation, one US strategist called for the Chinese to be co-imperialists with the USA. Zbigniew Brzezinski called for the establishment of a G2 between the USA and China.

Radical environmentalists, feminists and the peace activists are building a movement where the needs of humans come before profit and the wellbeing of a small minority. I will agree with those who argue that the IMF and the World Bank should be abolished. There has been a reform discourse for the past ten years but the reform has simply strengthened the position of the Anglo-Saxon capitalists. Strauss-Kahn had been called a reformer and now the world understands what reform looks like for the IMF. It now time to bury the IMF with the leadership of Strauss-Kahn and build a new financial architecture that invests in the repair and reconstruction of livelihoods and the planet, away from the destruction, dehumanisation, exploitation, and rape that have been the hallmark of the extant architecture.


* This article was amended on 3 June to 'The charges were brought after Strauss-Kahn allegedly assaulted an African woman from Guinea, who worked as a housekeeper in a hotel in New York City.'
* Horace Campbell is professor of African-American studies and political science at Syracuse University. He is the author of 'Barack Obama and 21st Century Politics: A Revolutionary Moment in the USA'. See www.horacecampbell.net.
* Please send comments to editor@pambazuka.org or comment online at Pambazuka News.

  Gangsta Capitalism: Quantitative Easing V.2        

Must See Chart:

This Is What Class War

Looks Like

This chart puts the class war in simple, visual terms. On the left you have the "shared sacrifices" and "painful cuts" that the Republicans claim we must make to get our fiscal house in order. On the right, you can plainly see WHY these cuts are "necessary."




 Emerging Markets Confront QE2: Capital Controls, Reserve Accumulation, or Both?

Kevin P. Gallagher Interviewed by Paul Jay-- mrzine.monthlyreview.org

Paul Jay: You recently wrote a piece in the Guardian.  The title is "Who Pays the Bill for the Fed's QE2?  By Depressing US Interest Rates, Quantitative Easing Forces Developing Countries to Defend Their Currencies at Crippling Cost."  What do you mean by that?

Kevin P. Gallagher: One of the unintended effects of QE2 is that there are going to be massive capital flows from the United States to emerging markets or developing countries.  Why?  Because with the interest rate low, banks and investors can borrow money in the United States and then park it in places where there's going to be a higher interest rate.  This is called the carry trade. . . .  So you're pulling money out of the United States at a low interest rate, 2, 3, 4 percent, parking it somewhere like Brazil, 10.53 percent.  That's an amazing, quick markup.   Can't get that in the US economy anywhere. . . .  [S]o there have been massive inflows of capital to the developing world.  It has two effects.  One, it raises their currencies, so their exports are more expensive.  Brazil's currency's risen by 37 percent since 2008.  Their stuff's more expensive out there in the world.  So as we are trying to stimulate our economy, they can't get many markets around the world because their stuff's too expensive.  That's one thing.  The other thing . . . is the fact that this is speculative capital that's going to move in and out of their country and could cause asset bubbles in . . . their economy.  And just as quickly as it comes in, if there's a change in the interest rate in the United States or a little scare in a country, it can pull right out and destabilize their financial system. . . .  Bernanke said that the US is trying to get its own ship in order and you should try to get your own ship in order.  What they're going to do to get their own ship in order is put in place capital controls.  These are instruments to try to keep the short-term hot money out of their country.  They'll also accumulate more T-bills or accumulate more reserves to be able to make sure that their currencies are more stable. . . .

Paul Jay: Give us some specific examples how this is what you say a "crippling cost" for some of the emerging economies.  Give us an example of what that is.

Kevin P. Gallagher: Well, there are two things, right?  One of the things is reserve accumulation.  That's where the biggest cost is.  So if I need to stabilize my currency, if there's all this hot money coming into my country, dollars coming into my country, that is going to raise the level of my currency.  So what I need to do is buy those dollars, get them off the street.  And I do that by taking my own currency and purchasing those dollars so there's a lot of my currency out on the street.  The more of it there is, the cheaper it is -- it'll keep down the currency.  Well, those dollars, by purpose, have a low interest rate, and so the returns for that investment that a country's going to make are relatively low.  And emerging markets, developing countries are growing faster than the US, so they can be putting the money into their own country.  There have been a number of studies that have shown that the economic costs are significant.  A Harvard economist did a study that showed that the economic costs of purchasing reserves is about 1 percent of your GDP.  So it's a 1 percent GDP loss for many countries. . . .

Paul Jay: And you deflate your currency.

Kevin P. Gallagher: You deflate your own currency.

Paul Jay: So, in other words, it's a countermeasure.  So if one of the objectives of QE2 was to raise the value of other currencies in order to induce people to buy more American products, this counteracts that.  So you wind up in a currency war where these economies just wind up at the same net result, except the banks make a ton of money on the way.

Kevin P. Gallagher: Sure.  The Brazilian finance minister has already said we're in the middle of a currency war and that the QE2 is only going to accentuate this. . . .

Paul Jay: Now, the Chinese currency is pegged to the US dollar.  Does it actually affect the Chinese, this QE2?

Kevin P. Gallagher: No.  They're pegged, so they purchase more dollars as our currency deflates, which increases the value of their reserves, and their reserves are almost $3 trillion already.  The accumulation of all these reserves is one of the core reasons why we have this financial crisis.  These Asian countries, for the most part China, have been accumulating so many reserves.  This has accentuated what we're calling the global imbalances.  So in order to save their country or their currency, many developing countries are accentuating some of the root causes of the crisis. . . .

Paul Jay: Let me understand one of the reasons this is happening.  You've got massive amounts of capital in very few hands around the world looking for places to go, and there's not a heck of a lot of productive places to put it, if I understand it correctly, particularly in United States and Europe.  There's so little consumer demand.  It's not like you're going to open up a new shoe factory.  So you run around looking for margins on your money.  Capital's jumping from one country to another to see if they can get a spread on cheap money -- borrow cheap money over here and earn it over there.  So what's the effect of that?  And what would capital controls do to prevent that or stop that?

Kevin P. Gallagher: Yeah, you've got it exactly right, Paul, that interest rates are low and demand is low in the developed world, so global investors say, hey, I can get money cheap out of the developed countries, mainly the United States, Europe, and so forth, and I can park it in places with higher interest rates or that seem to be growing a little faster, to recover from the crisis and make a quick buck, and then maybe pull it back into the United States or put it somewhere else. . . .  It's causing a high demand for their currencies and for things in their economy, which is making their currencies appreciate, and it's causing things like asset bubbles, housing bubbles, stock bubbles in different countries as well.

Paul Jay: It's a little counterintuitive.  For so long, countries were competing to get foreign investment.  Now they're getting these inflows and they actually want to use capital controls to slow it down.  So what countries have capital controls right now?  And what's the mechanism?  What does it look like?

Kevin P. Gallagher: There are two different kinds.  There are what we call market-based capital controls and quantity-based capital controls.  Brazil's an example of a market-based kind.  They have a tax.  It just works just like a tax or a tariff.  So they say, for certain kinds of investment that come in, speculative capital, it has to have a 6 percent tax, and they get taxed 6 percent.  Other countries, like Thailand a few years ago, had something called unremunerated reserve requirements.  Sounds nerdy.  It's sort of a tax and a quantitative control as well.  They take your money but say 30 percent of the value of this investment has to go into the central bank, denominated in a local currency, for six months.  So if something bad or perceived to be bad is going on in the country, and investors want to pull their money out real quick, at least a certain amount of it is staying in the country, so it isn't as destabilizing. . . .

Paul Jay: Now, what stops a Brazil from just saying, okay, we don't want your short-term money, period?  Like, are they buying Brazilian government bonds?  I mean, the government of Brazil can simply stop issuing bonds.

Kevin P. Gallagher: Brazil, each month, they get closer and closer to that.  They started out with a 2 percent tax, and it was a little low.  A lot of investment was still coming in.  They bumped it up to 4 percent, and then they bumped it up to 6 percent. . . .

Paul Jay: For decades US policy, directly through US government and also US control of the IMF, was so against these capital controls.  So what's the legality of this now?

Kevin P. Gallagher: If you don't have a trade agreement with the United States, you're free and easy to use capital controls.  But if you've signed a trade agreement with the United States during the first Bush administration, the Clinton administration, or the last Bush administration, capital controls are actually illegal.  Not only are they illegal, but a private investor, say a bond holder or a private firm, JPMorgan, can sue another country if they put in place capital controls.

Paul Jay: But most of the countries we're talking about must have trade agreements with the United States.  Brazil must have trade agreements.  But they seem to . . . .

Kevin P. Gallagher: Interestingly, Brazil has always refused major trade deals with the United States.  They prefer to deal with us at the World Trade Organization.  We tried to do something called the Free Trade Area of the Americas, and they said no, they didn't want a trade agreement that looked like the North American Free Trade Agreement or the Chile Free Trade Agreement, two agreements that make capital controls illegal.  They didn't want those agreements, for that and a number of other reasons.

Paul Jay: So the relative independence of many of the Latin American countries, then, who refused to be part of these free trade agreements has given them more tools, you could say, to resist this currency war?

Kevin P. Gallagher: Absolutely.


Kevin P. Gallagher is Associate Professor of International Relations at Boston University and Senior Researcher at the Global Development and Environment Institute.  The videos above were released by The Real News on 11-12 November 2010.  The text above is an edited partial transcript of the interview.++++++++++++++++++++++++++++

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