Low-Growth/Low-Wage Horizon of Nasty, Brutish "New Imperialism of Globalized Monopoly-Finance Capital"

Binyamin Appelbaum had a story in yesterday's paper, "Leaked Fed Staff Forecast Reflects Gloomier Expectations for U.S. Economy," about a dour assessment of the U.S. economy by Federal Reserve analysts that was inadvertently posted online. This is a newsworthy item since the Fed is signalling a rate increase in the near future; yet the Fed's own economists are telling Fed leadership that growth will remain low as will inflation:

The Fed published the minutes of its June meeting on July 8, in keeping with its normal procedures, including a summary of the staff forecast. 

The minutes said the staff moved its forecast for 2015 growth “a little lower.” The detailed data showed the staff predicted the economy would expand by 1.55 percent in 2015. 

The minutes also described the staff forecast as predicting that inflation will return to a 2 percent annual pace by 2018. The staff actually forecast that inflation would average 1.92 percent in 2018, and that it would not reach the Fed’s 2 percent target in the next five years, rising to 1.97 in 2020. 

Fed officials serving on the policy-making Federal Open Market Committee have said that they plan to raise interest rates later this year, and investors are eager for information about the exact timing. Analysts cautioned that the new disclosures reflected the views of staff members, and that the forecasts of Fed officials, published in June, were more optimistic.

The super-rich are doing smashingly well in this low-growth/low-inflation economy. To get a feel for how it all works, consult John Bellamy Foster's "The New Imperialism of Globalized Monopoly-Finance Capital" in the current July-August issue of the Monthly Review.

It is a depressing picture of global labor arbitrage where cost savings are vacuumed up by corporate monopolies in the capitalist industrial core creating "dynastic" wealth for a fraction of the 1%. This imperial system is precariously enforced by five monopolies enumerated by Samir Amin (see below): technology, financialized markets, resource extraction, media, and weapons of mass destruction:

Economically, the outward movement of generalized-monopoly capitalism is propelled primarily by the competitive struggle for low cost position via global sourcing of labor and increasingly scarce raw materials, and the monopoly rents that all of this generates. The result, as we have seen, is enormous cost savings in production for individual monopolistic enterprises, generating widening profit margins, which, coupled with more traditional forms of tribute, leads to a continual inflow of imperial rent to the center of the system. The full extent of extracted surplus is disguised by the enormous complexity of global value chains, exchange ratios, hidden accounts, and above all by the nature of capitalist GDP accounting itself.46 A part of the imperialist rent remains in the peripheral country and is not transferred to the center, but constitutes rather a payment to local ruling classes for their roles in the globalization game. About $21 trillion of this global tribute, meanwhile, is currently parked abroad in tax-haven islands, “the fortified refuge of Big Finance.”47

At the center of the capitalist economy the tendency to economic stagnation has been increasingly asserting itself since the mid-1970s. This induced repeated attempts to stimulate the system through military spending, with the United States as the engine.48 This strategy proved to be limited, however, since a big enough boost to the capitalist economy by these means in today’s environment would need to assume the dimension of a world war. 

Under these circumstances, as corporations in the 1970s and ’80s sought to hold onto and expand their growing economic surplus in the face of diminishing investment opportunities, they poured their massive surpluses into the financial structure, seeking and obtaining rapid returns from the securitization of all conceivably ascertainable future income streams. Increased concentration (“mergers and acquisitions”) and its attendant new debt, securitizations representing the income stream of already-existing mortgages and consumer debt that piled new debt on old, and new issues of debt and equity that capitalized the potential future monopoly income of patent, copyright, and other intellectual property rights, all followed one another. The financial sector provided every sort of financial instrument that could arguably be serviced by a putative income stream, including from the trading in financial instruments themselves. The result, as Magdoff and Sweezy already documented in the early stages of the process from the late 1970s to the ’90s, was a vast increase in the financial superstructure of the capitalist economy. 

This financialization of the economy had three major effects. First, it served to further uncouple in space and time—though a complete uncoupling is impossible—the amassing of financial claims of wealth or “asset accumulation” from actual investment, i.e., capital accumulation. This meant that the leading capitalist economies became characterized by a long-term amassing of financial wealth that exceeded the growth of the underlying economy (a phenomenon recently emphasized in a neoclassical vein by Thomas Piketty)—creating a more destabilized capitalist order in the center, manifested in the dramatic rise of debt as a share of GDP. Second, the financialization process became the major basis (together with the revolution in communications and digitalized technology) for a deepening and broadening of commodification throughout the globe, with the center economies no longer constituting to the same extent as before the global centers of industrial production and capital accumulation, but rather relying more and more on their role as the centers of financial control and asset accumulation. This was dependent on the capture of streams of commodity income throughout the world economy, including the increased commodification of other sectors—primarily services that were only partially commodified previously, such as communications, education, and health services. Third, “the financialization of the capital accumulation process,” as Sweezy called it, led to an enormous increase in the fragility of the entire capitalist world economy, which became dependent on the growth of the financial superstructure relative to its productive base, with the result that the system was increasingly prone to asset bubbles that periodically burst, threatening the stability of global capitalism as a whole—most recently in the Great Financial Crisis of 2007–2009. Given its financial ascendancy, the United States is uniquely able to externalize its economic crises on other economies, particularly those of the global South. As Yanis Varoufakis notes in The Global Minotaur, “To this day, whenever a crisis looms, capital flees to the greenback. This is exactly why the Crash of 2008 led to a mass inflow of foreign capital to the dollar, even though the crisis had begun on Wall Street.”49 

The phase of global monopoly-finance capital, tied to the globalization of production and the systematization of imperial rent, has generated a financial oligarchy and a return to dynastic wealth, mostly in the core nations, confronting an increasingly generalized (but also highly segmented) working class worldwide. The leading section of the capitalist class in the core countries now consists of what could be called global rentiers, dependent on the growth of global monopoly-finance capital, and its increasing concentration and centralization.50 The reproduction of this new imperialist system, as Amin explains in Capitalism in the Age of Globalization, rests on the perpetuation of five monopolies: (1) technological monopoly; (2) financial control of worldwide markets; (3) monopolistic access to the planet’s natural resources; (4) media and communication monopolies; and (5) monopolies over weapons of mass destruction.51 Behind all of this lie the giant monopolistic firms themselves, with the revenue of the top 500 global private firms currently equal to about 30 percent of world revenue, funneled primarily through the centers of the capitalist system and the core financial markets.52 As Boron points out with respect to the world’s 200 largest multinational corporations, “96 percent…have their headquarters in only eight countries, are legally registered as incorporated companies of eight countries; and their boards of directors sit in eight countries of metropolitan capital. Less than 2 percent of their boards of directors’ members are non-nationals…. Their reach is global, but their property and their owners have a clear national base.”53

The internationalization of production under the regime of giant, multinational corporations thus follows a pattern first explained by Stephen Hymer, and recently underscored by Ernesto Screpatini, who writes that “the great multinational companies” are characterized by “decentralized production but centralized control…. As a consequence the process of expansion of foreign direct investments involves a constant flow of profits from the South to the North, that is, from the Periphery to the Center of the imperial power of multinational capital.”54

Today the threatened implosion of this system is everywhere apparent. U.S. hegemony in the military sphere—in which it retains the power to unleash untold destruction but has a diminishing power to control geopolitical events—is receding along with its economic hegemony. This is so well understood today within U.S. foreign policy circles that some of the sharpest establishment thinkers emphasize that U.S. global preeminence is giving way to an imperium based on the combined force (military, economic, and political) of the triad of the United States/Canada, Western Europe, and Japan. The United States, although still retaining global preeminence, is increasingly able to exercise its power as a “sheriff” only when backed up by the “posse” (represented by Western Europe and Japan)—as famously articulated by Haass in The Reluctant Sheriff and subsequent works.55 It is thus the U.S.-led triad, and not Washington itself directly, which increasingly seeks to establish itself as the new governing power, through such institutions as the G7 and NATO. The goal is to promote the interests of the old imperial powers of the capitalist core through political, economic, and military means, while containing threats to its rule by a rising China, a recovering Russia, emerging economies generally, and the global anti-neoliberal revolt based in Latin America’s movement toward socialism.

Haass describes the current world situation as “The Unraveling.” As evidence he points to the U.S. role in destabilizing the Middle East and North Africa, the rise of the Islamic State of Iraq and al-Sham (ISIS), the growing conflicts of the United States with China over the South China Sea and Africa, the return of Russia as a world power (manifested in the dispute over the Crimea and the Ukraine), the misdirection (in his terms) of states such as “Brazil, Chile, Cuba, and Venezuela,” as well as a whole failed set of regime changes initiated by Washington. He concludes: “The question is not whether the world will continue to unravel but how fast and how far.”56

All of this highlights, as István Mészáros tells us, “the potentially deadliest phase of imperialism.”57 It is perhaps a reminder of the seriousness of the world situation today that Soviet and U.S. climatologists alerted the world in the 1980s to the fact that a full-scale nuclear war would generate a nuclear winter, reducing the temperatures of whole continents by several degrees and possibly several tens of degrees, destroying much of the biosphere itself and with it humanity. It was this type of scenario that E.P. Thompson had in mind in his “Notes on Exterminism, the Last Stage of Civilization.”58 A war between the great powers does not appear to be an imminent danger at present. However, the instability generated by the hyper-exploitative and expansionist imperialist world system of today, led by the United States, which is now engaged in simultaneous military interventions and drone warfare in a half dozen countries (and which is planning to spend $200 billion dollars in the next decade modernizing its massive nuclear arsenal), suggests any number of ways in which a deadly confrontation could emerge. Climate change itself, with the continuation of business as usual, is expected to destabilize civilization, heightening the threat of a world war, which would quickly lead to a planetary level of destruction.59

The responsibility of the left under these circumstances is to confront, in Lenin’s terms, the “contradictions, conflicts, and convulsions—not only economical, but also political, national, etc.”—that increasingly characterize our era. This means fostering a more “audacious” global movement from below in which the key challenge will be the dismantling of imperialism, understood as the entire basis of capitalism in our time—with the object of creating a more horizontal, egalitarian, peaceful, and sustainable social-metabolic order controlled by the associated producers.60 

Our future is not bright. Electoral politics -- democracy -- has not been able to right the ship. Syriza's Alexis Tsipras proved to be another Barack Obama: in the end, one more glib salesman of the status quo.

We could very well hit the Hobbesian trifecta of "nasty, brutish and short." We've already realized the first two; whether our present savagery is going to be a drawn out or brief is still up in the air.

Jobs Being Added Low Wage, Low Skill

Catherine Rampell's frontpage story from yesterday, A Sharp Drop In Job Growth Sows Concern, is worth reading:

American employers added an estimated 88,000 jobs to their payrolls last month, compared with 268,000 in February, according to a Labor Department report released Friday. It was the slowest pace of growth since last June, and less than half of what economists had expected. 

It also was the start of a third consecutive spring in which employers tapered off their hiring after a healthy start to the year. Slowdowns in the previous two years could be attributed to flare-ups in the European debt crisis, but this time the cause is less obvious. The recent payroll tax increase or other fiscal tightening in Washington could be partly to blame for the sudden retreat in hiring, but neither seems to be showing up much yet in other relevant economic data.

The employment news is pretty much all gloomy:

The unemployment rate, which comes from a different survey, ticked down to 7.6 percent in March, from 7.7 percent, but for the wrong reason: because more people reported dropping out of the labor force (meaning they are neither working nor looking for work), not because more people were hired. 

The labor force participation rate has not been this low — 63.3 percent — since 1979, a time when women were less likely to be working. 

Baby boomer retirements may account for part of the slide, but pessimism about job prospects in a mediocre economy still seems to be playing a large role, economists say. 

“The drop in the participation rate has been centered on younger workers,” said Mr. Shapiro, “many of whom have given up hope of finding a decent job and are instead continuing in school and racking up enormous amounts of student debt, which has contributed to the recent surge in consumer credit outstanding.”

The jobs being added are low-wage, low-skill positions, often times temporary:

The latest report should quiet speculation that the Federal Reserve will take its foot off the monetary accelerator anytime soon, as some had suggested after a spike in hiring in February. Even before Friday’s numbers came out, though, Fed officials had expressed concerns about not only the pace of job growth, but the quality of hiring as well. 

“It’s important to look at the types of jobs that are being created because those jobs will directly affect the fortunes and challenges of households and neighborhoods as well as the course of the recovery,” Sarah Bloom Raskin, a member of the Federal Reserve Board, said in a recent speech. 

She noted that relatively low-wage sectors like food services and retail businesses had accounted for a large share of the job growth in the last few years; a report in August from the National Employment Law Project, a liberal advocacy group, found that a majority of jobs lost during the recent recession were in the middle range of wages, while a majority of those added during the recovery had been low-paying. 

In March, in fact, jobs in food services and drinking places accounted for the largest share of total American employment on record. Today nearly one in 13 American jobs is in this industry.

Ms. Raskin also expressed concern about temporary jobs, which account for a growing share of total employment. 

“Temporary help is rapidly approaching a new record,” said Diane Swonk, chief economist at Mesirow Financial, who noted that there was also a rapid increase in temp hiring during the boom years of the 1990s. “That of course means more flexibility for employers, and less job security for workers.” 

Perhaps more distressingly, 7.6 million workers who want full-time work can find only part-time work, and their missing work hours do not count toward the official unemployment rate. The number of such workers fell slightly from February, but is still about where it was a year ago. 

A broader measure of underemployment, which includes those reluctantly working part time as well as those who want jobs but have stopped looking, stands at 13.8 percent.

To add to this nasty list -- poor job creation; low labor force participation; and the jobs that are being created are temporary, part-time, low-wage positions -- is what should be considered, now that were four-plus years from the Lehman meltdown, structural long-term unemployment:

At the same time, long-term unemployment — joblessness lasting more than six months — has been a persistent problem ever since the recession ended in the middle of 2009. And it may be partly driven by the fact that many of the jobs available do not pay well enough to be worth taking. 

“This seems to be a long-term sleeper crisis too, as we think about long-term unemployed workers who are in midlife and older workers who are likely dipping into retirement savings in order to stay afloat,” said Christine L. Owens, executive director of the National Employment Law Project. “We’re setting ourselves up for somewhere, 10 years down the road, when a lot of retirees who didn’t expect to live in poverty are going to be in poverty.”

Then to truly disabuse yourself of any optimism regarding membership in the working class read Fred Magdoff and John Bellamy Foster's "Class War and Labor's Declining Share" in the March issue of Monthly Review. Whether measured by total compensation or wages, the share paid to workers as a percentage of GDP has been declining since the 1970's. This is illustrated by several charts Magdoff and Foster include in their article, one of which is below:

Chart 2. Wages and Salaries as a Percent of GDP

Sources: Salary and wages for all employees and private sector employees from Table 1.12, NIPA, BEA; GDP, FRED Database.

Regardless of the whether government was Republican or Democrat labor's share of wealth has declined. We did enjoy a period of full employment at the end of Cintontime which saw an uptick in earnings. Then another brief bubble-induced moment in 2006. But -- outside of the end of Clintontime -- it has been steadily downhill for working-class wages since the early 1970's.

Joe Nocera's Oil Sands Sophistry

Before it vanishes forever from public memory, which hopefully will be soon, a few words of reproach for Joe Nocera's Tuesday column, How Not to Fix Climate Change. In it Nocera dismisses James Hansen, Bill McKibben, their campaign of civil disobedience designed to pressure Obama to block the Kelystone XL pipeline, even the idea that producing oil from tar sands would have much of an impact on the environment. As Nocera says, "And the climate change effects of tar sands oil are, all in all, pretty small."

The "pretty small" hyperlink included in the column online is to a Congressional Research Services report by Richard K. Lattanzio, "Canadian Oil Sands: Life-Cycle Assessments of Greenhouse Gas Emissions." A quick read of the report's summary reveals that, contrary to Nocera's assertion, the greenhouse gas emissions related to the production of oil from tar sands are not "pretty small":

A number of key studies in recent literature have expressed findings that the GHG [greenhouse gases] emissions intensities of Canadian oil sands crudes may be higher than those of other crudes imported, refined, and consumed in the United States. The studies identify two main reasons for the increase: (1) oil sands are heavier and more viscous than lighter crude oil types on average, and thus require more energy- and resource-intensive activities to extract; and (2) oil sands are compositionally deficient in hydrogen, and have a higher carbon, sulfur, and heavy metal content than lighter crude oil types on average, and thus require more processing to yield consumable fuels by U.S. standards.

And from the "Selected Findings from the Primary Published Studies" portion of the report here are two of the bullet points Lattanzio makes:

• discounting the final consumption phase of the life-cycle assessment (which can contribute up to 70%-80% of Well-to-Wheel emissions), Well-to-Tank (i.e., “production”) GHG emissions are, on average, 72%-111% higher for Canadian oil sands crude than for the weighted average of transportation fuels sold or distributed in the United States;

• the estimated effect of the proposed Keystone XL pipeline on the U.S. GHG footprint would be an increase of 3 million to 21 million metric tons of GHG emissions annually (equal to the annual GHG emissions from the combustion of fuels in approximately 588,000 to 4,061,000 passenger vehicles).

Apparently Nocera didn't read the report; or if he did, he doesn't think that adding the greenhouse-gas equivalent of several million automobiles to the road is a big deal. Which brings us to the tendentious nature of Nocera's column. For how can his readers know if pouring extra greenhouse gas into the atmosphere is a big or a small deal if he never lets on what the climate scientists are saying? To read Nocera one would think that climate change is analogous to the federal budget deficit, a theoretical problem becoming potentially hazardous decades down the road. But then again we can't say for sure because he never tells us what he thinks climate change is and what is at stake if global temperature continues to rise.

For an excellent synopsis of what we're talking about when we talk about climate change, check out this month's Monthly Review and the "Review of the Month" by John Bellamy Foster, "James Hansen and the Climate-Change Exit Strategy." Here are the first two paragraphs:

The world at present is fast approaching a climate cliff. Science tells us that an increase in global average temperature of 2°C (3.6° F) constitutes the planetary tipping point with respect to climate change, leading to irreversible changes beyond human control. A 2°C rise is sufficient to melt a significant portion of the world’s ice due to feedbacks that will hasten the melting. It will thus set the course to an ice-free world. Sea level will rise. Numerous islands will be threatened along with coastal regions throughout the globe. Extreme weather events (droughts, storms, floods) will be far more common. The paleoclimatic record shows that an increase in global average temperature of several degrees means that 50 percent or more of all species—plants and animals—will be driven to extinction. Global food crops will be negatively affected. For example, a 2011 report of the National Resource Council indicates that the U.S. corn (maize) crop, which accounts for 40 percent of the world’s total, will experience a 25 percent decline in average yield with a 2°C rise in temperature. 

A 2°C increase in global average temperature is associated with the emission of about one trillion metric tons of cumulative carbon emissions since the Industrial Revolution. A total of 566 billion metric tons of carbon have already been added to the atmosphere due to fossil fuel combustion, cement production, and land cover change since 1750. This sets up a carbon budget—the remaining tons of carbon that can be released without reaching the trillion metric ton mark—of less than 500 billion metric tons. Based on the record of emission rates over the last two decades it is estimated by climate scientists at Oxford University (associated with the website trillionthtonne.org) that we will emit the one-trillionth metric ton in twenty-eight years (this reflects a recent recalibration of the methodology resulting in a two-year reduction in the estimated timeline). We could, it is calculated, avoid emitting the trillionth ton if we were to decrease carbon emissions from this point on by about 2.4 percent a year. A truly safe response would require a drop in carbon emissions at more than twice that rate. The longer we wait the steeper the reductions will need to be.

While McKibben and company rallied against Keystone XL in D.C. this past Sunday, the story making the rounds is that Obama was golfing in Florida with key players in the Texas oil and gas industry. Nocera probably would see nothing wrong with this. And maybe there is an explanation that isn't malign. Nonetheless I feel compelled to end this morning's post with Funkadelic's "Maggot Brain (Alternate Mix)":

The Planetary Emergency

Reading "The Planetary Emergency" by John Bellamy Foster and Brett Clark in the current Monthly Review the consensus is that irreversible climate change sets in with a rise in temperature of 2 degrees C (3.6 degrees F), which corresponds to one trillion cumulative metric tons of carbon emissions.  We're going to hit the one trillion metric ton mark in 2043.  Three decades.

The answer?  We've got to stop growing.  But capitalism is based on growth, on constantly increasing consumption, on the American ideal of every Chinese family owning a car or two and eating meat three times a day.  So get ready to rumble.  Conflict is coming our way, either in the form of dealing with the catastrophic effects of climate change (imagine being a character in Cormac McCarthy's The Road) or in the many politically necessary battles required to radically change the status quo.  It's more than likely that we'll be dealing with both at the same time.