Beware Capitalist Tools

By Robert Reich, Robert Reich's Blog

11 September 13

orbes Magazine, which calls itself the “capitalist tool,” seems to have a penchant for publishing right-wing diatribes posing as serious economic analyses. The latest is by Paul Roderick Gregory, who accuses me of “false facts and false theories" in a recent piece I wrote about why high wages are good for the economy.

If I'm correct, Gregory asks, how could it possibly be that America become world's richest and most powerful economy in late nineteenth century, when the typical worker was earning peanuts?

Gregory claims to be an economic historian but he doesn't seem to know American history. The answer is simple: Ours was a land of unbounded natural resources that were exploited without regard to consequences for the environment. We also found it relatively easy to copy the industrial advances of England and Germany, and erected a protective tariff so that our manufacturers didn't have to compete directly with them. A giant wave of immigrants came to our shores, willing and eager to work for very little. And our largest industries - oil, railroads, steel - were monopolies or oligopolies that generated huge profits for their owners while skewering their customers. The result of all this was fat corporate profits, some of which were reinvested. Hence, the economy grew.

That was a recipe for economic growth, but not a recipe any sane person would want repeated even if that were possible. The late nineteenth century is hardly a model for twenty-first century American capitalism. I seriously doubt Gregory wants us to go back to an era of urban squalor, robber barons, corrupt city machines, unsafe factories, and poisonous food and drugs.

Gregory then criticizes me for suggesting that Henry Ford benefited financially by increasing the wages of his workers, who could then afford to purchase Model T's. Gregory says Ford increased the wages of his workers because, in Gregory's words, “Ford could afford” to pay his auto workers more, given the enormous productivity increases generated by his assembly lines.

Of course Ford could afford it; he couldn't have done paid them more otherwise. But the fact Ford could afford to pay his workers more doesn't explain why he chose to do so. As any self-respecting Forbes' capitalist tool knows, just because a corporation can afford to pay its workers more, doesn't mean it will do so. Ford paid his workers more because he found it in his economic interest to do so.

Gregory goes on to say that total wages rose sharply from 1915 to the Great Depression, but he completely misses (or ignores) my point. Income inequality widened dramatically in the 1920s. It reached a peak in 1928, when the top 1 percent took home over 23 percent of total income - just as inequality rose in the years leading up to the Great Recession, culminating in 2007, when the top 1 percent again took home over 23 percent of total income. (These data come from the pioneering work of professors Immanuel Saez and Thomas Piketty.)

It is no coincidence that 1928 and 2007 marked the high-water points of income inequality, and that the bottom fell out the following years. When most of the gains of economic growth go to the top, the vast majority no longer has the purchasing power they need to buy what the economy is capable of producing.

It's also no coincidence that household debt more than doubled in the 1920s, from 15 percent of GDP in 1920 to 32 percent of GDP in 1929 - just as consumer debt mushroomed eighty year later leading up to the crash of 2008. When most of the economic gains go to the top, the only way the middle class can keep up is to borrow. But as we learned in 1929 and then again in 2008, there's a limit to how much can be borrowed. Eventually debt balloons burst, and millions of innocent people go bust.

Gregory then looks to the present day and finds nothing at all remarkable or troublesome about corporate profits soaring while the median wage drops, adjusted for inflation. He says it happens in every upturn - corporate profits always rise before worker compensation rises.

Where has this man been living for the past several business cycles? Does he not know that the median wage has barely increased for three decades, and that it is now 5 percent lower than it was in 2000, adjusted for inflation? Does he not have access to the fact that wages are now a lower percent of the total economy and corporate profits a higher percent than at any time in the last thirty-five years?

Gregory doesn't like the notion of “middle-out economics” and believes that the captains of industry are the real job creators. But businesses need consumers in order to prosper and grow. Consumers in the middle class and below are the real job creators. In the United States, 70 percent of economic activity is personal consumption. Unless the vast middle class, and everyone seeking to join it, have enough money in their pockets - and share sufficiently in the gains from growth - businesses cannot possibly do well.

Like most polemicists who don't really have arguments to support their diatribes, Gregory resorts to ad hominem attack (my arguments is, he says, a “hackneyed respires of Karl Marx;” I'm not a real economist, he says, but a lawyer who “studied a smattering of economics at Oxford,” and so on). Gregory has a history of attacking others, such as Paul Krugman (who happens to have received a Nobel Prize in economics), with the same mixture of illogic, distortion, and disdain.

Why Forbes continues to publish this sort of garbage is beyond me. Perhaps Forbes feels compelled to provide a steady diet of right-wing drivel to its readers. Why someone who holds a tenured position at a university would stoop to write this garbage is also mystifying. Maybe Forbes pays its pundits well. And as every economist knows, money can elicit the most remarkable of inventions.

The Silent Military Coup That Took Over Washington

By John Pilger, Guardian UK

11 September 13

This time it's Syria, last time it was Iraq. Obama chose to accept the entire Pentagon of the Bush era: its wars and war crimes

n my wall is the Daily Express front page of September 5 1945 and the words: "I write this as a warning to the world." So began Wilfred Burchett's report from Hiroshima. It was the scoop of the century. For his lone, perilous journey that defied the US occupation authorities, Burchett was pilloried, not least by his embedded colleagues. He warned that an act of premeditated mass murder on an epic scale had launched a new era of terror.

Almost every day now, he is vindicated. The intrinsic criminality of the atomic bombing is borne out in the US National Archives and by the subsequent decades of militarism camouflaged as democracy. The Syria psychodrama exemplifies this. Yet again we are held hostage by the prospect of a terrorism whose nature and history even the most liberal critics still deny. The great unmentionable is that humanity's most dangerous enemy resides across the Atlantic.

John Kerry's farce and Barack Obama's pirouettes are temporary. Russia's peace deal over chemical weapons will, in time, be treated with the contempt that all militarists reserve for diplomacy. With al-Qaida now among its allies, and US-armed coupmasters secure in Cairo, the US intends to crush the last independent states in the Middle East: Syria first, then Iran. "This operation [in Syria]," said the former French foreign minister Roland Dumas in June, "goes way back. It was prepared, pre-conceived and planned."

When the public is "psychologically scarred", as the Channel 4 reporter Jonathan Rugman described the British people's overwhelming hostility to an attack on Syria, suppressing the truth is made urgent. Whether or not Bashar al-Assad or the "rebels" used gas in the suburbs of Damascus, it is the US, not Syria, that is the world's most prolific user of these terrible weapons.

In 1970 the Senate reported: "The US has dumped on Vietnam a quantity of toxic chemical (dioxin) amounting to six pounds per head of population." This was Operation Hades, later renamed the friendlier Operation Ranch Hand – the source of what Vietnamese doctors call a "cycle of foetal catastrophe". I have seen generations of children with their familiar, monstrous deformities. John Kerry, with his own blood-soaked war record, will remember them. I have seen them in Iraq too, where the US used depleted uranium and white phosphorus, as did the Israelis in Gaza. No Obama "red line" for them. No showdown psychodrama for them.

The sterile repetitive debate about whether "we" should "take action" against selected dictators (ie cheer on the US and its acolytes in yet another aerial killing spree) is part of our brainwashing. Richard Falk, professor emeritus of international law and UN special rapporteur on Palestine, describes it as "a self-righteous, one-way, legal/moral screen [with] positive images of western values and innocence portrayed as threatened, validating a campaign of unrestricted political violence". This "is so widely accepted as to be virtually unchallengeable".

It is the biggest lie: the product of "liberal realists" in Anglo-American politics, scholarship and media who ordain themselves as the world's crisis managers, rather than the cause of a crisis. Stripping humanity from the study of nations and congealing it with jargon that serves western power designs, they mark "failed", "rogue" or "evil" states for "humanitarian intervention".

An attack on Syria or Iran or any other US "demon" would draw on a fashionable variant, "Responsibility to Protect", or R2P – whose lectern-trotting zealot is the former Australian foreign minister Gareth Evans, co-chair of a "global centre" based in New York. Evans and his generously funded lobbyists play a vital propaganda role in urging the "international community" to attack countries where "the security council rejects a proposal or fails to deal with it in a reasonable time".

Evans has form. He appeared in my 1994 film Death of a Nation, which revealed the scale of genocide in East Timor. Canberra's smiling man is raising his champagne glass in a toast to his Indonesian equivalent as they fly over East Timor in an Australian aircraft, having signed a treaty to pirate the oil and gas of the stricken country where the tyrant Suharto killed or starved a third of the population.

Under the "weak" Obama, militarism has risen perhaps as never before. With not a single tank on the White House lawn, a military coup has taken place in Washington. In 2008, while his liberal devotees dried their eyes, Obama accepted the entire Pentagon of his predecessor, George Bush: its wars and war crimes. As the constitution is replaced by an emerging police state, those who destroyed Iraq with shock and awe, piled up the rubble in Afghanistan and reduced Libya to a Hobbesian nightmare, are ascendant across the US administration. Behind their beribboned facade, more former US soldiers are killing themselves than are dying on battlefields. Last year 6,500 veterans took their own lives. Put out more flags.

The historian Norman Pollack calls this "liberal fascism": "For goose-steppers substitute the seemingly more innocuous militarisation of the total culture. And for the bombastic leader, we have the reformer manqué, blithely at work, planning and executing assassination, smiling all the while." Every Tuesday the "humanitarian" Obama personally oversees a worldwide terror network of drones that "bugsplat" people, their rescuers and mourners. In the west's comfort zones, the first black leader of the land of slavery still feels good, as if his very existence represents a social advance, regardless of his trail of blood. This obeisance to a symbol has all but destroyed the US anti-war movement – Obama's singular achievement.

In Britain, the distractions of the fakery of image and identity politics have not quite succeeded. A stirring has begun, though people of conscience should hurry. The judges at Nuremberg were succinct: "Individual citizens have the duty to violate domestic laws to prevent crimes against peace and humanity." The ordinary people of Syria, and countless others, and our own self-respect, deserve nothing less now.