Tuesday, April 29, 2014

Neoliberalism's War On Democracy (By Both Parties) Revealed As Attack On Future USA Way of Life (Not To Mention the World's Response)

"How about a Zombie kit?"

"We're way beyond that, kid. Don't know what good a Zombie kit will do now."

- Fargo

. . . the Republican Party’s social Darwinist budget plans that reward the rich and cut aid for those who need it the most. For instance, the 2012 Romney/Ryan budget plan “proposed to cut the taxes of households earning over $1 million by an average of $295,874 a year,”8 at a cruel cost to those most disadvantaged populations who rely on social programs. In order to pay for tax reductions to benefit the rich, the Romney/Ryan budget would have cut funds for food stamps, Pell grants, health care benefits, unemployment insurance, veterans’ benefits, and other crucial social programs.9 As Paul Krugman has argued, the Ryan budget
isn’t just looking for ways to save money [it's] also trying to make life harder for the poor — for their own good. In March [2012], explaining his cuts in aid for the unfortunate, [Ryan] declared, “We don’t want to turn the safety net into a hammock that lulls able-bodied people into lives of dependency and complacency, that drains them of their will and their incentive to make the most of their lives.”10
Krugman rightly replies, “I doubt that Americans forced to rely on unemployment benefits and food stamps in a depressed economy feel that they’re living in a comfortable hammock.”11 An extremist version of neoliberalism, Ryanomics is especially vicious toward US children, 16.1 million of whom currently live in poverty.12

This is by far the longest essay to be reprised on this blog, but its importance to our future way of life cannot be minimized.

Get a cool drink first and then settle in to the best thing you've read and considered in depth in decades. (It's not just the Republicans (as many say) by the way. Keep your eyes on the Blue Dog NeoLib Dims "operating on your behalf" - the Obamatrons. They are just as poisonous to our democracy. Perhaps even more so.)

This book by Henry Giroux is available here.


Read the essay from Cyrano's Journal below or click here.

Neoliberalism’s War on Democracy

April 27, 2014

Rowan Wolf

Henry A. Giroux

The following is the introduction to Henry Geroux’s new book Neoliberalism’s War on Higher Education. Read it now by ordering it from Truthout.

It is certain, in any case, that ignorance, allied with power, is the most ferocious enemy justice can have.
- James Baldwin
Four decades of neoliberal policies have resulted in an economic Darwinism that promotes privatization, commodification, free trade, and deregulation. It privileges personal responsibility over larger social forces, reinforces the gap between the rich and poor by redistributing wealth to the most powerful and wealthy individuals and groups, and it fosters a mode of public pedagogy that privileges the entrepreneurial subject while encouraging a value system that promotes self-interest, if not an unchecked selfishness.1 Since the 1970s, neoliberalism or free-market fundamentalism has become not only a much-vaunted ideology that now shapes all aspects of life in the United States but also a predatory global phenomenon “that drives the practices and principles of the International Monetary Fund, the World Bank, and World Trade Organization, trans-national institutions which largely determine the economic policies of developing countries and the rules of international trade.”2

With its theater of cruelty and mode of public pedagogy, neoliberalism as a form of economic Darwinism attempts to undermine all forms of solidarity capable of challenging market-driven values and social relations, promoting the virtues of an unbridled individualism almost pathological in its disdain for community, social responsibility, public values, and the public good. As the welfare state is dismantled and spending is cut to the point where government becomes unrecognizable — except to promote policies that benefit the rich, corporations, and the defense industry — the already weakened federal and state governments are increasingly replaced by what João Biehl has called proliferating “zones of social abandonment” and “terminal exclusion.”3

One consequence is that social problems are increasingly criminalized while social protections are either eliminated or fatally weakened. Not only are public servants described as the new “welfare queens” and degenerate freeloaders but young people are also increasingly subjected to harsh disciplinary measures both in and out of schools, often as a result of a violation of the most trivial rules.4 Another characteristic of this crushing form of economic Darwinism is that it thrives on a kind of social amnesia that erases critical thought, historical analysis, and any understanding of broader systemic relations. In this regard, it does the opposite of critical memory work by eliminating those public spheres where people learn to translate private troubles into public issues. That is, it breaks “the link between public agendas and private worries, the very hub of the democratic process.”5

Once set in motion, economic Darwinism unleashes a mode of thinking in which social problems are reduced to individual flaws and political considerations collapse into the injurious and self-indicting discourse of character. Many Americans are preoccupied less with political and moral outrage over a country whose economic and political system is in the hands of a tiny, exorbitantly rich elite than they are with the challenges of being isolated and surviving at the bottom of a savage neoliberal order. This makes it all the simpler for neoliberalism to convince people to remain attached to a set of ideologies, values, modes of governance, and policies that generate massive suffering and hardships. Neoliberalism’s “best trick” is to persuade individuals, as a matter of common sense, that they should “imagine [themselves] as . . . solitary agent[s] who can and must live the good life promised by capitalist culture.”6

As George Lakoff and Glenn Smith argue, the anti-public philosophy of economic Darwinism makes a parody of democracy by defining freedom as “the liberty to seek one’s own interests and well-being, without being responsible for the interests or well-being of anyone else. It’s a morality of personal, but not social, responsibility. The only freedom you should have is what you can provide for yourself, not what the Public provides for you to start out.”7 Put simply, we alone become responsible for the problems we confront when we can no longer conceive how larger forces control or constrain our choices and the lives we are destined to lead.

Yet the harsh values and practices of this new social order are visible — in the increasing incarceration of young people, the modeling of public schools after prisons, state violence waged against peaceful student protesters, and state policies that bail out investment bankers but leave the middle and working classes in a state of poverty, despair, and insecurity. Such values are also evident in the Republican Party’s social Darwinist budget plans that reward the rich and cut aid for those who need it the most. For instance, the 2012 Romney/Ryan budget plan “proposed to cut the taxes of households earning over $1 million by an average of $295,874 a year,”8 at a cruel cost to those most disadvantaged populations who rely on social programs. In order to pay for tax reductions to benefit the rich, the Romney/Ryan budget would have cut funds for food stamps, Pell grants, health care benefits, unemployment insurance, veterans’ benefits, and other crucial social programs.9 As Paul Krugman has argued, the Ryan budget

isn’t just looking for ways to save money [it's] also trying to make life harder for the poor — for their own good. In March [2012], explaining his cuts in aid for the unfortunate, [Ryan] declared, “We don’t want to turn the safety net into a hammock that lulls able-bodied people into lives of dependency and complacency, that drains them of their will and their incentive to make the most of their lives.”10
Krugman rightly replies, “I doubt that Americans forced to rely on unemployment benefits and food stamps in a depressed economy feel that they’re living in a comfortable hammock.”11 An extremist version of neoliberalism, Ryanomics is especially vicious toward US children, 16.1 million of whom currently live in poverty.12 Marian Wright Edelman captures the harshness and savagery of the Ryan budget passed by the House of Representatives before being voted down in the Senate. She writes:

Ryanomics is an all out assault on our poorest children while asking not a dime of sacrifice from the richest 2 percent of Americans or from wealthy corporations. Ryanomics slashes hundreds of billions of dollars from child and family nutrition, health, child care, education, and child protection services, in order to extend and add to the massive Bush tax cuts for millionaires and billionaires at a taxpayer cost of $5 trillion over 10 years. On top of making the Bush tax cuts permanent, the top income bracket would get an additional 10 percent tax cut. Millionaires and billionaires would on average keep at least an additional quarter of a million dollars each year and possibly as much as $400,000 a year according to the Citizens for Tax Justice.13
As profits soar for corporations and the upper 1 percent, both political parties are imposing austerity measures that punish the poor and cut vital services for those who need them the most.14 Rather than raising taxes and closing tax loopholes for the wealthy and corporations, the Republican Party would rather impose painful spending cuts that will impact the poor and vital social services. For example, the 2013 budget cuts produced by sequestration slash $20 million from the Maternal, Infant, and Early Child Home Visiting Program, $199 million from public housing, $6 million from emergency food and shelter, $19 million from housing for the elderly, $116 million from higher education, and $96 million from homeless assistance grants — and these are only a small portion of the devastating cuts enacted.15

Seventy thousand children will be kicked off of Head Start, ten thousand teachers will be fired, and “the long-term unemployed will see their benefits cut by about 10 percent.”16 Under the right-wing insistence on a politics of austerity, Americans are witnessing not only widespread cuts in vital infrastructures, education, and social protections but also the emergence of policies produced in the spirit of revenge aimed at the poor, the elderly, and others marginalized by race and class. As Robert Reich, Charles Ferguson, and a host of recent commentators have noted, this extreme concentration of power in every commanding institution of society promotes predatory practices and rewards sociopathic behavior. Such a system creates an authoritarian class of corporate and hedge-fund swindlers that reaps its own profits by

placing big bets with other people’s money. The winners in this system are top Wall Street executives and traders, private-equity managers and hedge-fund moguls, and the losers are most of the rest of us. The system is largely responsible for the greatest concentration of the nation’s income and wealth at the very top since the Gilded Age of the nineteenth century, with the richest 400 Americans owning as much as the bottom 150 million put together. And these multimillionaires and billionaires are now actively buying . . . election[s] — and with [them], American democracy.17
Unfortunately, the US public has largely remained silent, if not also complicit in the rise of a neoliberal version of authoritarianism. While workers in Wisconsin, striking teachers in Chicago, and young people across the globe have challenged this politics and machinery of corruption, war, brutality, and social and civil death,49 they represent a small and marginalized part of the larger movement that will be necessary to initiate massive collective resistance to the aggressive violence being waged against all those public spheres that further the promise of democracy in the United States, the United Kingdom, France, and a host of other countries.

The actions of teachers, workers, student protesters, and others have been crucial in drawing public attention to the constellation of forces that are pushing the United States and other neoliberal-driven countries into what Hannah Arendt called “dark times”or what might be described as an increasingly authoritarian public realm that constitutes a clear and present danger to democracy. The questions now being asked must be seen as the first step toward exposing the dire social and political costs of concentrating wealth, income, and power into the hands of the upper 1 percent. What role higher education will play in both educating and mobilizing students is a crucial issue that will determine whether a new revolutionary ideal can take hold in order to address the ideals of democracy and its future.

Neoliberal Ideology and the Rhetoric of Freedom

In addition to amassing ever-expanding amounts of material wealth, the rich now control the means of schooling and other cultural apparatuses in the United States. They have disinvested in critical education while reproducing notions of “common sense” that incessantly replicate the basic values, ideas, and relations necessary to sustain the institutions of economic Darwinism. Both major political parties, along with plutocrat “reformers,” support educational reforms that increase conceptual and cultural illiteracy.

Critical learning has been replaced with mastering test-taking, memorizing facts, and learning how not to question knowledge or authority. Pedagogies that unsettle common sense, make power accountable, and connect classroom knowledge to larger civic issues have become dangerous at all levels of schooling. This method of rote pedagogy, heavily enforced by mainstream educational reformists, is, as Zygmunt Bauman notes, “the most effective prescription for grinding communication to a halt and for [robbing] it of the presumption and expectation of meaningfulness and sense.”18 These radical reformers are also attempting to restructure how higher education is organized. In doing so, they are putting in place modes of governance that mimic corporate structures by increasing the power of administrators at the expense of faculty, reducing faculty to a mostly temporary and low-wage workforce, and reducing students to customers — ripe for being trained for low-skilled jobs and at-risk for incurring large student loans.

This pedagogy of market-driven illiteracy has eviscerated the notion of freedom, turning it largely into the desire to consume and invest exclusively in relationships that serve only one’s individual interests. Losing one’s individuality is now tantamount to losing one’s ability to consume. Citizens are treated by the political and economic elite as restless children and are “invited daily to convert the practice of citizenship into the art of shopping.”19

Shallow consumerism coupled with an indifference to the needs and suffering of others has produced a politics of disengagement and a culture of moral irresponsibility. At the same time, the economically Darwinian ethos that places individual interest at the center of everyday life undercuts, if not removes, moral considerations about what we know and how we act from larger social costs and moral considerations. In media discourse, language has been stripped of the terms, phrases, and ideas that embrace a concern for the other. With meaning utterly privatized, words are reduced to signifiers that mimic spectacles of violence, designed to provide entertainment rather than thoughtful analysis. Sentiments circulating in the dominant culture parade either idiocy or a survival-of-the-fittest ethic, while anti-public rhetoric strips society of the knowledge and values necessary for the development of a democratically engaged and socially responsible public.

In such circumstances, freedom has truly morphed into its opposite. Neoliberal ideology has construed as pathological any notion that in a healthy society people depend on one another in multiple, complex, direct, and indirect ways. As Lewis Lapham observes, “Citizens are no longer held in thoughtful regard . . . just as thinking and acting are removed from acts of public conscience.”20 Economic Darwinism has produced a legitimating ideology in which the conditions for critical inquiry, moral responsibility, and social and economic justice disappear. The result is that neoliberal ideology increasingly resembles a call to war that turns the principles of democracy against democracy itself. Americans now live in an atomized and pulverized society, “spattered with the debris of broken interhuman bonds,”21 in which “democracy becomes a perish-able commodity”22 and all things public are viewed with disdain.

Neoliberal Governance

At the level of governance, neoliberalism has increasingly turned main-stream politics into a tawdry form of money-laundering in which the spaces and registers that circulate power are controlled by those who have amassed large amounts of capital. Elections, like mainstream politicians, are now bought and sold to the highest bidder. In the Senate and House of Representatives, 47 percent are millionaires — the “estimated median net worth of a current US senator stood at an average of $2.56 million while the median net worth of members of Congress is $913,000.”23 

Elected representatives no longer even purport to do the bidding of the people who elect them. Rather, they are now largely influenced by the demands of lobbyists, who have enormous clout in promoting the interests of the elite, financial services sector, and megacorporations. In 2012, there were just over fourteen thousand registered lobbyists in Washington, DC, which amounts to approximately twenty-three lobbyists for every member of Congress. Although the number of lobbyists has steadily increased by about 20 percent since 1998, the Center for Responsive Politics found that “total spending on lobbying the federal government has almost tripled since 1998, to $3.3 billion.”24

As Bill Moyers and Bernard Weisberger succinctly put it, “A radical minority of the superrich has gained ascendency over politics, buying the policies, laws, tax breaks, subsidies, and rules that consolidate a permanent state of vast inequality by which they can further help themselves to America’s wealth and resources.”25 How else to explain that the 2013 bill designed to regulate the banking and financial sectors was drafted for legislators by Citigroup lobbyists?26

There is more at stake here than legalized corruption, there is the arrogant dismantling of democracy and the production of policies that extend rather than mitigate human suffering, violence, misery, and everyday hardships. Democratic governance has been replaced by the sovereignty of the market, paving the way for modes of governance intent on transforming democratic citizens into entrepreneurial agents. The language of the market and business culture have now almost entirely supplanted any celebration of the public good or the calls to enhance civil society characteristic of past generations.

Moreover, authoritarian governance now creeps into every institution and aspect of public life. Instead of celebrating Martin Luther King for his stands against poverty, militarization, and racism, US society holds him up as an icon denuded of any message of solidarity and social struggle. This erasure and depoliticization of history and politics is matched by the celebration of a business culture in which the US public transforms Bill Gates into a national hero. At the same time, civil rights heroine Rosa Parks cedes her position to the Kardashian sisters, as the prominence of civic culture is canceled out by herd-like public enthusiasm for celebrity culture, reality TV, and the hyper-violence of extreme sports. The older heroes sacrificed in order to alleviate the suffering of others, while the new heroes drawn from corporate and celebrity culture live off the suffering of others.

Clearly, US society is awash in a neoliberal culture of idiocy and illiteracy. It produces many subjects who are indifferent to others and are thus incapable of seeing that when the logic of extreme individualism is extended into the far reaches of the national security state, it serves to legitimate the breakdown of the social bonds necessary for a democratic society and reinforces a culture of cruelty that upholds solitary confinement as a mode of punishment for thousands of incarcerated young people and adults.27

Is it any wonder that with the breakdown of critical education and the cultural apparatuses that support it, the American public now overwhelmingly supports state torture and capital punishment while decrying the necessity of a national health care system? Fortunately, there are signs of rebellion among workers, young people, students, and teachers, indicating that the US public has not been entirely colonized by the bankers, hedge fund managers, and other apostles of neoliberalism. For example, in Connecticut, opponents of public-school privatization replaced three right-wing, pro-charter school board members. In Chicago, reform efforts prevented the city from outsourcing the lease of Midway Airport and breast cancer screening for uninsured women. And, in Iowa, as a result of pressure from progressives, the governor rejected corporate bids to purchase Iowa’s statewide fiber-optics network.

Neoliberal governance has produced an economy and a political system almost entirely controlled by the rich and powerful — what a Citigroup report called a “plutonomy,” an economy powered by the wealthy.28  I have referred to these plutocrats as “the new zombies”:  they are parasites that suck the resources out of the planet and the rest of us in order to strengthen their grasp on political and economic power and fuel their exorbitant lifestyles.29 

Power is now global, gated, and driven by a savage disregard for human welfare, while politics resides largely in older institutions of modernity such as nation states. The new plutocrats have no allegiance to national communities, justice, or human rights, just potential markets and profits.

The work of citizenship has been set back decades by this new group of winner-take-all global predators.30 Policies are now enacted that provide massive tax cuts to the rich and generous subsidies to banks and corporations — alongside massive disinvestments in job creation programs, the building of critical infrastructures, and the development of crucial social programs ranging from health care to school meal programs for disadvantaged children.

Neoliberalism’s massive disinvestment in schools, social programs, and an aging infrastructure is not about a lack of money. The real problem stems from government priorities that inform both how the money is collected and how it is spent.31 More than 60 percent of the federal budget goes to military spending, while only 6 percent is allocated toward education.

The United States spends more than $92 billion on corporate subsidies and only $59 billion on social welfare programs.32 John Cavanagh has estimated that if there were a tiny tax imposed on Wall Street stock and derivatives transactions, the government could raise $150 billion annually.33 In addition, if the tax code were adjusted in a fair manner to tax the wealthy, another $79 billion could be raised. Finally, Cavanagh notes that $100 billion in tax income is lost annually through tax haven abuse; proper regulation would make it costly for corporations to declare “their profits in overseas tax havens like the Cayman Islands.”34

At the same time, the financialization of the economy and culture has resulted in the poisonous growth of monopoly power, predatory lending, abusive credit card practices, and misuses of CEO pay. The false but central neoliberal tenet that markets can solve all of society’s problems grants unchecked power to money and has given rise to “a politics in which policies that favor the rich … have allowed the financial sector to amass vast economic and political power.”35

As Joseph Stiglitz points out, there is more at work in this form of governance than a pandering to the wealthy and powerful:  there is also the specter of an authoritarian society “where people live in gated communities,” large segments of the population are impoverished or locked up in prison, and Americans live in a state of constant fear as they face growing “economic insecurity, healthcare insecurity, [and] a sense of physical insecurity.”36 In other words, the authoritarian nature of neoliberal political governance and economic power is also visible in the rise of a national security state in which civil liberties are being drastically abridged and violated.

As the war on terror becomes a normalized state of existence, the most basic rights available to American citizens are being shredded. The spirit of revenge, militarization, and fear now permeates the discourse of national security. For instance, under Presidents Bush and Obama, the idea of habeas corpus, with its guarantee that prisoners have minimal rights, has given way to policies of indefinite detention, abductions, targeted assassinations, drone killings, and an expanding state surveillance apparatus. The Obama administration has designated forty-six inmates for indefinite detention at Guantánamo because, according to the government, they can be neither tried nor safely released. Moreover, another “167 men now confined at Guantanamo .. . have been cleared for release yet remain at the facility.”37

With the passing of the National Defense Authorization Act in 2012, the rule of legal illegalities has been extended to threaten the lives and rights of US citizens. The law authorizes military detention of individuals who are suspected of belonging not only to terrorist groups such as al-Qaida but also to “associated forces.” As Glenn Greenwald illuminates, this “grants the president the power to indefinitely detain in military custody not only accused terrorists, but also their supporters, all without charges or trial.”38 

The vagueness of the law allows the possibility of subjecting to indefinite detention US citizens who are considered to be in violation of the law. Of course, that might include journalists, writers, intellectuals, and anyone else who might be accused because of their dealings with alleged terrorists. Fortunately, US district judge Katherine Forrest of New York agreed with Chris Hedges, Noam Chomsky, and other writers who have challenged the legality of the law.

Judge Forrest recently acknowledged the unconstitutionality of the law and ruled in favor of a preliminary barring of the enforcement of the National Defense Authorization Act.39 Unfortunately, on July 17, 2013, an appeals court in New York ruled in favor of the Obama administration, allowing the government to detain indefinitely without due process persons designated as enemy combatants.

The anti-democratic practices at work in the Obama administration also include the US government’s use of state secrecy to provide a cover for practices that range from the illegal use of torture and the abduction of innocent foreign nationals to the National Security Association’s use of a massive surveillance campaign to monitor the phone calls, e-mails, and Internet activity of all Americans.

A shadow mass surveillance state has emerged that eschews transparency and commits unlawful acts under the rubric of national security. Given the power of the government to engage in a range of illegalities and to make them disappear through an appeal to state secrecy, it should come as no surprise that warrantless wiretapping, justified in the name of national security, is on the rise at both the federal and state levels. For instance, the New York City Police Department “implemented surveillance programs that violate the civil liberties of that city’s Muslim-American citizens [by infiltrating] mosques and universities [and] collecting information on individuals suspected of no crimes.”40 The US public barely acknowledged this shocking abuse of power. Such antidemocratic policies and practices have become the new norm in US society and reveal a frightening and dangerous move toward a twenty-first-century version of authoritarianism.

Neoliberalism as the New Lingua Franca of Cruelty

The harsh realities of a society defined by the imperatives of punishment, cruelty, militarism, secrecy, and exclusion can also be seen in a growing rhetoric of insult, humiliation, and slander. Teachers are referred to as “welfare queens” by right-wing pundits; conservative radio host Rush Limbaugh claimed that Michael J. Fox was “faking” the symptoms of Parkinson’s disease when he appeared in a political ad for Democrat Claire McCaskill; and the public is routinely treated to racist comments, slurs, and insults about Barack Obama by a host of shock jocks, politicians, and even a federal judge.41

Poverty is seen not as a social problem but as a personal failing, and poor people have become the objects of abuse, fear, and loathing. The poor, as right-wing ideologues never fail to remind us, are lazy — and, for that matter, how could they truly be poor if they own TVs and cell phones? Cruel, racist insults and the discourse of humiliation are now packaged in a mindless rhetoric as unapologetic as it is ruthless — this has become the new lingua franca of public exchange.

Republican presidential candidate Mitt Romney echoed the harshness of the new lingua franca of cruelty when asked during the 2012 campaign about the government’s responsibility to the 50 million Americans who don’t have health insurance.

Incredibly, Romney replied that they already have access to health care because they can go to hospital emergency rooms.42 In response, a New York Times editorial stated that emergency room care “is the most expensive and least effective way of providing care” and such a remark “reeks of contempt for those left behind by the current insurance system, suggesting that they must suffer with illness until the point where they need an ambulance.”43 Indifferent to the health care needs of the poor and middle class, Romney also conveniently ignores the fact that, as indicated in a Harvard University study, “more than 62% of all personal bankruptcies are caused by the cost of overwhelming medical expenses.”44 The new lingua franca of cruelty and its politics of disposability are on full display here. To paraphrase Hannah Arendt, we live in a time when revenge has become the cure-all for most of our social and economic ills.

Neoliberalism and the Retreat from Ethical Considerations

Not only does neoliberal rationality believe in the ability of markets to solve all problems, it also removes economics and markets from ethical considerations. Economic growth, rather than social needs, drives politics. Long-term investments are replaced by short-term gains and profits, while compassion is viewed as a weakness and democratic public values are derided. As Stanley Aronowitz points out, public values and collective action have given way to the “absurd notion the market should rule every human activity,” including the “absurd neoliberal idea that users should pay for every public good from parks and beaches to highways [and] higher education.”45

The hard work of critical analysis, moral judgments, and social responsibility ha(s) given way to the desire for accumulating profits at almost any cost, short of unmistakably breaking the law and risking a jail term (which seems unlikely for Wall Street criminals). Gordon Gekko’s “Greed is good” speech in the film Wall Street has been revived as a rallying cry for the entire financial services industry, rather than seen as a critique of excess. With society overtaken by the morality of self-interest, profit-seeking weaves its way into every possible space, relationship, and institution. For example, the search for high-end profits has descended upon the educational sector with a vengeance, as private bankers, hedge fund elites, and an assortment of billionaires are investing in for-profit and charter schools while advocating policies that disinvest in public education.

At the same time the biotech, pharmaceutical, and defense industries and a range of other corporations are investing in universities to rake in profits while influencing everything from how such institutions are governed and define their mission to what they teach and how they treat faculty members and students. Increasingly, universities are losing their power not only to produce critical and civically-engaged students but also to offer the type of education that enables them to refute the neoliberal utopian notion that paradise amounts to a world of voracity and avarice without restrictions, governed by a financial elite who exercise authority without accountability or challenge. Literacy, public service, human rights, and morality in this neoliberal notion of education become damaged concepts, stripped of any sense of reason, responsibility, or obligation to a just society.

In this way, neo-liberalism proceeds, in zombie-like fashion, to impose its values, social relations, and forms of social death upon all aspects of civic life. This is marked by not only a sustained lack of interest in the public good, a love of inequitious power relations, and a hatred of democracy.

There is also the use of brutality, state violence, and humiliation to normalize a neoliberal social order that celebrates massive inequalities in income, wealth, and access to vital services. This is a social Darwinism without apology, a ruthless form of casino capitalism whose advocates have suggested, without irony, that what they do is divinely inspired.46

Politics has become an extension of war, just as state-sponsored violence increasingly finds legitimation in popular culture and a broader culture of cruelty that promotes an expanding landscape of selfishness, insecurity, and precarity that undermines any sense of shared responsibility for the well-being of others. Too many young people today learn quickly that their fate is solely a matter of individual responsibility, legitimated through market-driven laws that embrace self-promotion, hypercompetitiveness, and surviving in a society that increasingly reduces social relations to social combat. Young people today are expected to inhabit a set of relations in which the only obligation is to live for oneself and to reduce the obligations of citizenship to the demands of a consumer culture.

Gilded Age vengeance has also returned in the form of scorn for those who are either failed consumers or do not live up to the image of the United States as a white Christian nation. Reality TV’s overarching theme, echoing Hobbes’s “war of all against all,” brings home the lesson that punishment is the norm and reward the exception. Unfortunately, it no longer mimics reality, it is the new reality. There is more at work here than a flight from social responsibility.

Also lost is the importance of those social bonds, modes of collective reasoning, and public spheres and cultural apparatuses crucial to the construction of the social state and the formation of a sustainable democratic society. Nowhere is the dismantling of the social state and the transformation of the state into a punishing machine more evident than in the recent attacks on youth, labor rights, and higher education being waged by Republican governors in a number of key states such as Michigan, Wisconsin, Florida, and Ohio.

What is often missed in discussions of these attacks is that the war on the social state and the war on education represent part of the same agenda of destruction and violence. The first war is being waged for the complete control by the rich and powerful of all modes of wealth and income, while the second war is conducted on the ideological front and represents a battle over the very capacity of young people and others to imagine a different and more critical mode of subjectivity and alternative mode of politics.

If the first war is on the diverse and myriad terrain of political economy, the second is being waged though what C. Wright Mills once called the major cultural apparatuses, including public and higher education. This is a struggle to shape identities, desires, and modes of subjectivity in accordance with market values, needs, and relations. Both of these wars register as part of a larger effort to destroy any vestige of a democratic imaginary, and to relegate the value of the ethical responsibility and the social question to the wasteland of political thought.

Paul Krugman is on target in arguing that in spite of massive suffering caused by the economic recession — a recession that produced “once-unthinkable levels of economic distress” — there is “growing evidence that our governing elite just doesn’t care.”47

Of course, Krugman is not suggesting that if the corporate and financial elite cared, the predatory nature of capitalism would be transformed. Rather, he is suggesting that economic Darwinism leaves no room for compassion or ethical considerations, which makes its use of power much worse than more liberal models of a market-based society.

Politics of Disposability and the Attack on Higher Education

The not-so-hidden order of politics underlying the second Gilded Age and its heartless version of economic Darwinism is that some populations, especially those marginalized by class, race, ethnicity, or immigration status, are viewed as excess populations to be removed from the body politic, relegated to sites of terminal containment or exclusion.

Marked as disposable, such populations become targets of state surveillance, violence, torture, abduction, and injury. Removed from all vestiges of the social contract, they have become the unmentionables of neoliberalism. For them, surviving — not getting ahead — marks the space in which politics and power converge.

The politics of disposability delineates these populations as unworthy of investment or of sharing in the rights, benefits, and protections of a substantive democracy.48 Pushed into debt, detention centers, and sometimes prison, the alleged human waste of free-market capitalism now inhabits zones of terminal exclusion — zones marked by forms of social and civil death. Particularly disturbing is the lack of opposition among the US public to this view of particular social groups as disposable — this, perhaps more than anything else, signals the presence of a rising authoritarianism in the United States.

Left unchecked, economic Darwinism will not only destroy the social fabric and undermine democracy; it will also ensure the marginalization and eventual elimination of those intellectuals willing to fight for public values, rights, spaces, and institutions not wedded to the logic of privatization, commodification, deregulation, militarization, hypermasculinity, and a ruthless “competitive struggle in which only the fittest could survive.”50

This new culture of cruelty and disposability has become the hallmark of neoliberal sovereignty, and it will wreak destruction in ways not yet imaginable — even given the horrific outcomes of the economic and financial crisis brought on by economic Darwinism. All evidence suggests a new reality is unfolding, one characterized by a deeply-rooted crisis of education, agency, and social responsibility.

The current assault threatening higher education and the humanities in particular cannot be understood outside of the crisis of economics, politics, and power. Evidence of this new historical conjuncture is clearly seen in the growing number of groups considered disposable, the collapse of public values, the war on youth, and the assault by the ultra-rich and megacorporations on democracy itself. This state of emergency must take as its starting point what Tony Judt has called “the social question,” with its emphasis on addressing acute social problems, providing social protections for the disadvantaged, developing public spheres aimed at promoting the collective good, and protecting educational spheres that enable and deepen the knowledge, skills, and modes of agency necessary for a substantive democracy to flourish.51

What is new about the current threat to higher education and the humanities in particular is the increasing pace of the corporatization and militarization of the university, the squelching of academic freedom, the rise of an ever increasing contingent of part-time faculty, the rise of a bloated manegerial class, and the view that students are basically consumers and faculty providers of a saleable commodity such as a credential or a set of workplace skills. More striking still is the slow death of the university as a center of critique, vital source of civic education, and crucial public good.

Or, to put it more specifically, the consequence of such dramatic transformations is the near-death of the university as a democratic public sphere. Many faculties are now demoralized as they increasingly lose rights and power. Moreover, a weak faculty translates into one governed by fear rather than by shared responsibilities, one that is susceptible to labor-bashing tactics such as increased workloads, the casualization of labor, and the growing suppression of dissent.

Demoralization often translates less into moral outrage than into cynicism, accommodation, and a retreat into a sterile form of professionalism. Faculty now find themselves staring into an abyss, unwilling to address the current attacks on the university or befuddled over how the language of specialization and professionalization has cut them off from not only connecting their work to larger civic issues and social problems but also developing any meaningful relationships to a larger democratic polity.

As faculties no longer feel compelled to address important political issues and social problems, they are less inclined to communicate with a larger public, uphold public values, or engage in a type of scholarship accessible to a broader audience.52 Beholden to corporate interests, career building, and the insular discourses that accompany specialized scholarship, too many academics have become overly comfortable with the corporatization of the university and the new regimes of neoliberal governance.

Chasing after grants, promotions, and conventional research outlets, many academics have retreated from larger public debates and refused to address urgent social problems. Assuming the role of the disinterested academic or the clever faculty star on the make, endlessly chasing theory for its own sake, these so-called academic entrepreneurs simply reinforce the public’s perception that they have become largely irrelevant. Incapable, if not unwilling, to defend the university as a crucial site for learning how to think critically and act with civic courage, many academics have disappeared into a disciplinary apparatus that views the university not as a place to think but as a place to prepare students to be competitive in the global marketplace.

This is particularly disturbing given the unapologetic turn that higher education has taken in its willingness to mimic corporate culture and ingratiate itself to the national security state.53 Universities face a growing set of challenges arising from budget cuts, diminishing quality of instruction, the downsizing of faculty, the militarization of research, and the revamping of the curriculum to fit the interests of the market, all of which not only contradicts the culture and democratic value of higher education but also makes a mockery of the very meaning and mission of the university as a place both to think and to provide the formative culture and agents that make a democracy possible. Universities and colleges have been largely abandoned as democratic public spheres dedicated to providing a public service, expanding upon humankind’s great intellectual and cultural achievements, and educating future generations to be able to confront the challenges of a global democracy.

Higher education increasingly stands alone, even in its attenuated state, as a public arena where ideas can be debated, critical knowledge produced, and learning linked to important social issues. Those mainstream cultural apparatuses that once offered alternative points of view, challenged authority, and subordinated public values to market interests have largely been hijacked by the consolidation of corporate power. As Ashley Lutz, Bob McChesney, and many others have noted, approximately 90 percent of the media is currently controlled by six corporations.54

This is a particularly important statistic in a society in which the free circulation of ideas is being replaced by ideologies, values, and modes of thought managed by the dominant media. One consequence is that dissent is increasingly met with state repression, as indicated by the violence inflicted on the Occupy Wall Street protesters, and critical ideas are increasingly viewed or dismissed as banal, if not reactionary.

For many ultra-conservatives, reason itself is viewed as dangerous, along with any notion of science that challenges right-wing fundamentalist world views regarding climate change, evolution, and a host of other social issues.55 As Frank Rich has observed, the war against literacy and informed judgment is made abundantly clear in the populist rage sweeping the country in the form of the Tea Party, a massive collective anger that “is aimed at the educated, not the wealthy.”56 

This mode of civic illiteracy is rooted in racism and has prompted a revival of overtly racist language, symbols, and jokes. Confederate flags are a common feature of Tea Party rallies, as are a variety of racially loaded posters, barbs, and derogatory, racist shouting aimed at President Obama.

Democracy can only be sustained through modes of civic literacy that enable individuals to connect private troubles to larger public issues as part of a broader discourse of critical inquiry, dialogue, and engagement. Civic literacy, in this context, provides a citizenry with the skills for critical understanding while enabling them to actually intervene in society. The right-wing war on education must be understood as a form of organized irresponsibility; that is, it represents a high-intensity assault on those cultures of questioning, forms of literacy, and public spheres in which reason and critique merge with social responsibility as a central feature of critical agency and democratization. As the political philosopher Cornelius Castoriadis insists, for democracy to be vital “it needs to create citizens who are critical thinkers capable of putting existing institutions into question so that democracy again becomes . . . a new type of regime in the full sense of the term.”57

The right-wing war on critical literacy is part of an ongoing attempt to destroy higher education as a democratic public sphere that enables intellectuals to stand firm, take risks, imagine the otherwise, and push against the grain. It is important to insist that as educators we ask, again and again, how higher education can survive in a society in which civic culture and modes of critical literacy collapse as it becomes more and more difficult to distinguish opinion and emotive outbursts from a sustained argument and logical reasoning. Equally important is the need for educators and young people to take on the challenge of defending the university. Toni Morrison gets it right:

If the university does not take seriously and rigorously its role as a guardian of wider civic freedoms, as interrogator of more and more complex ethical problems, as servant and preserver of deeper democratic practices, then some other regime or ménage of regimes will do it for us, in spite of us, and without us.58
Defending the humanities, as Terry Eagleton has recently argued, means more than offering an academic enclave for students to learn history, philosophy, art, and literature. It also means stressing how indispensable these fields of study are for all students if they are to be able to make any claim whatsoever to being critical and engaged individual and social agents. But the humanities do more. They also provide the knowledge, skills, social relations, and modes of pedagogy that constitute a formative culture in which the historical lessons of democratization can be learned, the demands of social responsibility can be thoughtfully engaged, the imagination can be expanded, and critical thought can be affirmed.

As an adjunct of the academic-military-industrial complex, however, higher education has nothing to say about teaching students how to think for themselves in a democracy, how to think critically and engage with others, and how to address through the prism of democratic values the relationship between themselves and the larger world. We need a permanent revolution around the meaning and purpose of higher education, one in which academics are more than willing to move beyond the language of critique and a discourse of both moral and political outrage, however necessary to a sustained individual and collective defense of the university as a vital public sphere central to democracy itself.

We must reject the idea that the university should be modeled after “a sterile Darwinian shark tank in which the only thing that matters is the bottom line.”59 We must also reconsider how the university in a post-9/11 era is being militarized and increasingly reduced to an adjunct of the growing national security state. The public has apparently given up on the idea of either funding higher education or valuing it as a public good indispensable to the life of any viable democracy. This is all the more reason for academics to be at the forefront of a coalition of activists, public servants, and others in both rejecting the growing corporate management of higher education and developing a new discourse in which the university, and particularly the humanities, can be defended as a vital social and public institution in a democratic society.

Beyond Neoliberal Miseducation

As universities turn toward corporate management models, they increasingly use and exploit cheap faculty labor. Many colleges and universities are drawing more and more upon adjunct and nontenured faculty, many of whom occupy the status of indentured servants who are overworked, lack benefits, receive little or no administrative support, and are paid salaries that qualify them for food stamps.60 Students increasingly fare no better in sharing the status of a subaltern class beholden to neoliberal policies and values.

For instance, many are buried under huge debt, celebrated by the collection industry because it is cashing in on their misfortune. Jerry Aston, a member of that industry, wrote in a column after witnessing a protest rally by students criticizing their mounting debt that he “couldn’t believe the accumulated wealth they represent — for our industry.”61 And, of course, this type of economic injustice is taking place in an economy in which rich plutocrats such as the infamous union-busting Koch brothers each saw “their investments grow by $6 billion in one year, which is three million dollars per hour based on a 40-hour ‘work’ week.”62

Workers, students, youth, and the poor are all considered expendable in this neoliberal global economy. Yet the one institution, education, that offers the opportunities for students to challenge these antidemocratic tendencies is under attack in ways that are unparalleled, at least in terms of the scope and intensity of the assault by the corporate elite and other economic fundamentalists.

Casino capitalism does more than infuse market values into every aspect of higher education; it also wages a full-fledged assault on the very notion of public goods, democratic public spheres, and the role of education in creating an informed citizenry.

When Rick Santorum argued that intellectuals were not wanted in the Republican Party, he was articulating what has become common sense in a society wedded to narrow instrumentalist values and various modes of fundamentalism. Critical thinking and a literate public have become dangerous to those who want to celebrate orthodoxy over dialogue, emotion over reason, and ideological certainty over thoughtfulness.63 Hannah Arendt’s warning that “it was not stupidity but a curious, quite authentic inability to think64 at the heart of authoritarian regimes is now embraced as a fundamental tenet of Republican Party politics.

Right-wing appeals to austerity provide the rationale for slash-and-burn policies intended to deprive governmental social and educational programs of the funds needed to enable them to work, if not survive. Along with health care, public transportation, Medicare, food stamp programs for low-income children, and a host of other social protections, higher education is being defunded as part of a larger scheme to dismantle and privatize all public services, goods, and spheres. But there is more at work here than the march toward privatization and the never-ending search for profits at any cost; there is also the issue of wasteful spending on a bloated war machine, the refusal to tax fairly the rich and corporations, and the draining of public funds in order to support the US military presence in Iraq, Afghanistan, and elsewhere.

The deficit argument and the austerity policies advocated in its name are a form of class warfare designed largely for the state to be able to redirect revenue in support of the commanding institutions of the corporate-military-industrial complex and away from funding higher education and other crucial public services. The extent of the budget reduction assault is such that in 2012 “states reduced their education budgets by $12.7 billion.”65

Of course, the burden of such reductions falls upon poor minority and other low-income students, who will not be able to afford the tuition increases that will compensate for the loss of state funding. What has become clear in light of such assaults is that many universities and colleges have become unapologetic accomplices to corporate values and power, and in doing so increasingly regard social problems as either irrelevant or invisible.66

The transformation of higher education both in the United States and abroad is evident in a number of registers. These include decreased support for programs of study that are not business oriented, reduced support for research that does not increase profits, the replacement of shared forms of governance with business management models, the ongoing exploitation of faculty labor, and the use of student purchasing power as the vital measure of a student’s identity, worth, and access to higher education.67

As I point out throughout this book, one consequence of this ongoing disinvestment in higher education is the expansion of a punishing state that increasingly criminalizes a range of social behaviors, wages war on the poor instead of poverty, militarizes local police forces, harasses poor minority youth, and spends more on prisons than on higher education.68

The punishing state produces fear and sustains itself on moral panics. Dissent gives way to widespread insecurity, uncertainty, and an obsession with personal safety. Political, moral, and social indifference is the result, in part, of a public that is increasingly constituted within an educational landscape that reduces thinking to a burden and celebrates civic illiteracy as a prerequisite for negotiating a society in which moral disengagement and political corruption go hand in hand.69 The assault on the university is symptomatic of the deep educational, economic, and political crisis facing the United States. It is but one lens through which to recognize that the future of democracy depends on the educational and ethical standards of the society we inhabit.70

This lapse of the US public into a political and moral coma is induced, in part, by an ever-expanding, mass-mediated celebrity culture that trades in hype and sensation. It is also accentuated by a governmental apparatus that sanctions modes of training that undermine any viable notion of critical schooling and public pedagogy. While there is much being written about how unfair the Left is to the Obama administration, what is often forgotten by these liberal critics is that Obama has aligned himself with educational practices and policies as instrumentalist and anti-intellectual as they are politically reactionary, and therein lies one viable reason for not supporting his initiatives and administration.71

What liberals refuse to entertain is that the Left is correct in attacking Obama for his cowardly retreat from a number of progressive issues and his dastardly undermining of civil liberties. In fact, they do not go far enough in their criticisms. Often even progressives miss that Obama’s views on education are utterly reactionary and provide no space for the nurturance of a radically democratic imagination.

Hence, while liberals point to some of Obama’s progressive policies — often in a New Age discourse that betrays their own supine moralism — they fail to acknowledge that Obama’s educational policies do nothing to contest, and are in fact aligned with, his weak-willed compromises and authoritarian policies.

In other words, Obama’s educational commitments undermine the creation of a formative culture capable of questioning authoritarian ideas, modes of governance, and reactionary policies. The question is not whether Obama’s policies are slightly less repugnant than those of his right-wing detractors. On the contrary, it is about how the Left should engage politics in a more robust and democratic way by imagining what it would mean to work collectively and with “slow impatience” for a new political order outside of the current moderate and extreme right-wing politics and the debased, uncritical educational apparatus that supports itL.72

The Role of Critical Education

One way of challenging the new authoritarianism is to reclaim the relationship between critical education and social change. The question of what kind of subjects and modes of individual and social agency are necessary for a democracy to survive appears more crucial now than ever before, and this is a question that places matters of education, pedagogy, and culture at the center of any understanding of politics. We live at a time when too few Americans appear to have an interest in democracy beyond the every-four-years ritual performance of voting, and even this act fails to attract a robust majority of citizens.

The term “democracy” has been emptied of any viable meaning, hijacked by political scoundrels, corporate elites, and the advertising industry. The promise that democracy exhibits as an ongoing struggle for rights, justice, and a future of hope has been degraded into a misplaced desire to shop and to fulfill the pleasure quotient in spectacles of violence, while the language of democracy is misappropriated and deployed as a rationale for racist actions against immigrants, Muslims, and the poor.

Of course, while more and more nails are being put into the coffin of democracy, there are flashes of resistance, such as those among workers in Wisconsin, the Occupy Wall Street movement, and the more recent strike by Chicago teachers. Public employees, fast food workers, Walmart employees, disaffected youth, and others are struggling to expose the massive injustices and death-dealing machinations of the 1 percent and the pernicious effects of casino capitalism. But this struggle is just beginning and only time will tell how far it goes.

The time has come not only to redefine the promise of democracy but also to challenge those who have poisoned its meaning. We have already witnessed such a challenge by protest movements both at home and abroad in which the struggle over education has become one of the most powerful fulcrums for redressing the detrimental effects of neoliberalism. What these struggles, particularly by young people, have in common is the attempt to merge the powers of persuasion and critical, civic literacy with the power of social movements to activate and mobilize real change. They are recovering a notion of the social and reclaiming a kind of humanity that should inspire and inform our collective willingness to imagine what a real democracy might look like. Cornelius Castoriadis rightly argues that “people need to be educated for democracy by not only expanding the capacities that enable them to assume public responsibility but also through active participation in the very process of governing.” 73

As the crucial lens through which to create the formative culture in which politics and power can be made visible and held accountable, pedagogy plays a central role. But as Archon Fung notes, criticism is not the only public responsibility of intellectuals, artists, journalists, educators, and others who engage in critical pedagogical practices. “Intellectuals can also join citizens — and sometimes governments — to construct a world that is more just and democratic. One such constructive role is aiding popular movements and organizations in their efforts to advance justice and democracy.”74

In this instance, understanding must be linked to the practice of social responsibility and the willingness to fashion a politics that addresses real problems and enacts concrete solutions. As Heather Gautney points out,

We need to start thinking seriously about what kind of political system we really want. And we need to start pressing for things that our politicians did NOT discuss at the conventions. Real solutions — like universal education, debt forgiveness, wealth redistribution, and participatory political structures — that would empower us to decide together what’s best. Not who’s best.75
Critical thinking divorced from action is often as sterile as action divorced from critical theory. Given the urgency of the historical moment, we need a politics and a public pedagogy that make knowledge meaningful in order to make it critical and transformative. Or, as Stuart Hall argues, we need to produce modes of analysis and knowledge in which “people can invest something of themselves . . . something that they recognize is of them or speaks to their condition.”76

A notion of higher education as a democratic public sphere is crucial to this project, especially at a time in which the apostles of neoliberalism and other forms of political and religious fundamentalism are ushering in a new age of conformity, cruelty, and disposability. But as public intellectuals, academics can do more.

First, they can write for multiple audiences, expanding public spheres, especially online, to address a range of social issues including, importantly, the relationship between the attack on the social state and the defunding of higher education. In any democratic society, education should be viewed as a right, not an entitlement, and this suggests a reordering of state and federal priorities to make that happen.

For instance, the military budget could be cut by two-thirds and those funds invested instead in public and higher education. There is nothing utopian about this demand, given the excess of military power in the United States, but addressing this task requires a sustained critique of the militarization of American society and a clear analysis of the damage it has caused both at home and abroad.

Brown University’s Watson Institute for International Studies, with the efforts of a number of writers such as Andrew Bacevich, has been doing this for years and offers a treasure trove of information that could be easily accessed and used by public intellectuals in and outside of the academy. A related issue, as Angela Davis, Michelle Alexander, and others have argued, is the need for public intellectuals to become part of a broader social movement aimed at dismantling the prison-industrial complex and the punishing state, which drains billions of dollars in funds to put people in jail when such funds could be used to fund public and higher education or other social supports that may help prevent criminalized behaviors in the first place.

The punishing state is a dire threat not only to public and higher education but also, more broadly, to democracy itself. It is the pillar of the authoritarian state, undermining civil liberties, criminalizing a range of social behaviors related to concrete social problems, and intensifying the legacy of Jim Crow against poor people of color. The US public does not need more prisons; it needs more schools.

Second, academics, artists, journalists, and other cultural workers need to connect the rise of subaltern, part-time labor in the university as well as the larger society with the massive inequality in wealth and income that now corrupts every aspect of American politics and society. Precarity has become a weapon both to exploit adjuncts, part-time workers, and temporary laborers and to suppress dissent by keeping them in a state of fear over losing their jobs. Insecure forms of labor increasingly produce “a feeling of passivity born of despair.”77

Multinational corporations have abandoned the social contract and any vestige of supporting the social state. They plunder labor and perpetuate the mechanizations of social death whenever they have the chance to accumulate capital. This issue is not simply about restoring a balance between labor and capital, it is about recognizing a new form of serfdom that kills the spirit as much as it depoliticizes the mind. The new authoritarians do not ride around in tanks; they have private jets, they fund right-wing think tanks, and they lobby for reactionary policies that privatize everything in sight while filling their bank accounts with massive profits. They are the embodiment of a culture of greed, cruelty, and disposability.

Third, academics can fight for the rights of students to get a free education, a formidable and critical education not dominated by corporate values, to have a say in its shaping, and to experience what it means to expand and deepen the practice of freedom and democracy. Young people have been left out of the discourse of democracy. They are the new disposable individuals, a population lacking jobs, a decent education, and any hope of a future better than the one their parents inherited.

They are a reminder of how finance capital has abandoned any viable vision of the future, including one that would support future generations. This is a mode of politics and capital that eats its own children and throws their fate to the vagaries of the market. If a society is in part judged by how it views and treats its children, US society by all accounts has truly failed in a colossal way and, in doing so, provides a glimpse of the heartlessness at the core of the new authoritarianism.

Last, public intellectuals should also address and resist the ongoing shift in power relations between faculty and the managerial class. Too many faculty are now removed from the governing structures of higher education and as a result have been abandoned to the misery of impoverished wages, excessive class loads, no health care, and few, if any, social benefits. This is shameful and is not merely an issue of the education system but a deeply political matter, one that must address how neoliberal ideology and policy have imposed on higher education an antidemocratic governing structure that mimics the broader authoritarian forces now threatening the United States.

I want to conclude by quoting from James Baldwin, a courageous writer who refused to let the hope of democracy die in his lifetime, and who offered that mix of politics, passion, and courage that deserves not just admiration but emulation. His sense of rage was grounded in a working-class sensibility, eloquence, and heart that illuminate a higher standard for what it means to be a public and an engaged intellectual. His words capture something that is missing from the US cultural and political landscape, something affirmative that needs to be seized upon, rethought, and occupied by intellectuals, academics, artists, and other concerned citizens — as part of both the fight against the new authoritarianism and its cynical, dangerous, and cruel practices, and the struggle to reclaim a belief in justice and mutuality that seems to be dying in all of us. In The Fire Next Time, Baldwin writes:

One must say Yes to life, and embrace it wherever it is found — and it is found in terrible places. .. . For nothing is fixed, forever and forever, it is not fixed; the earth is always shifting, the light is always changing, the sea does not cease to grind down rock. Generations do not cease to be born, and we are responsible to them because we are the only witnesses they have. The sea rises, the light fails, lovers cling to each other, and children cling to us. The moment we cease to hold each other, the moment we break faith with one another, the sea engulfs us and the light goes out.

Henry A. Giroux:  Neoliberalism, Democracy and the University as a Public Sphere

Book Available here, and the Kindle edition.

Monday, April 28, 2014

(Oh! Those Poor Poor Rich!!!) Bank of America Doesn't Check Its Math (To Its Decided Advantage) The Gilded Age Has Only Just Begun:  Piketty’s Wealth Gap Wake Up Call Goes Out To the Masses

. . . the disparity in wealth is much greater than the disparity of income, and that’s because of tax avoidance by the rich.


Bank Of America's Stock Plunges By 6% After $4B Capital Plan Blunder

Bank of America CEO Brian Moynihan runs a financial firm that has 263,000 employees and $2.2 trillion of assets and investors on Monday appeared to wonder once again whether anyone can manage a bank of such enormous size.

28 Apr 2014

Bank of America Will Be Sure To Check Its Math Moving Forward

By Bess Levin

Bank of America suspended a plan to buy back $4 billion of stock and boost its dividend after discovering an error in the way it calculated its capital levels…The second-largest U.S. bank by assets said it discovered the error and brought it to the attention of the Federal Reserve, which then required it to resubmit its capital plan. It has 30 days to do so.

The Fed on March 26 approved Bank of America’s proposal to increase its annual dividend to five cents a common share from a penny and expand its share buybacks. The Charlotte, N.C., lender said it now plans to request less than the previously approved plan … The misvalued structured notes were debt securities issued by Merrill Lynch. When the value of the underlying companies changed, the bank failed to readjust the value of the bonds as well.

Not only are the bankers using fuzzy math, but the guys checking their work had no clue it was screwed up ... other than that, I have no concerns.
-Confidence Quant
isn't checking their math what they're paid to do in the first place?

Captain Oblivious
How do you even take this place seriously anymore? No one will get fired over it either.

Half Full
The good news is that bonus payments are based on the price error.

Quite right. The "error" saved BAML millions of dollars in stock comp, and the equity value that vanished today technically never existed in the first place. They should make mistakes like this more often.
The Investment Firm that failed before being purchased by BoA isn't good at math. Shocking. Next you'll tell me some old rich white guy who owns a sports team played prodominately by african-americans is racist...

I thought it might be illuminating to consult Michael Hudson on Thomas Piketty's thesis (although I question his judgment about Paul Krugman's understanding of rentier behavior).

In this Age of Privatization (refer to what's happening in Chicagoland under Rahmbo, among many others), we learn that the trick is first to privatize (by hook or crook) public services, and then convince the public (their representatives, actually) that no taxes should be collected on the profits from this privatization. Even better, let them write off the expenses of the theft! (The public always pays in the end.)

It wasn't even hard to accomplish with the dummy Congress representation the GOP presented US with as our just due (thank you, Tea(sed)Party!) after we accepted the neoconning programs put into place by the Cheney/Bush Junta.

And it became Party Time!

The Gilded Age Has Only Just Begun

April 24, 2014
From Karl Fitzgerald and Michael Hudson on Thomas Piketty‘s new book:
[O]ne of the things Thomas Piketty goes into (in) great detail (and has earned him quite a few plaudits) is looking at the difference between economic growth rates and the return on investments. . . . (H)is general thesis is that when the economic growth rate falls below the long-term average of 5%, that the wealth gap accelerates because the wealthy, who own all th(e) land, mines, (and) privatised utilities, . . . can claim a greater return than what the rest of the people who actually have to rely on earning income (can) when there (are) low growth rates. . . . the thesis is that with an ageing demographic we have a period of low growth coming and from that we’re going to see an increased inequality in wealth.

So this Gilded Age has really only just begun.
Reason has been ravaged by the Tea Party shock troops and yet the Fix the Debt Wall Street assholes fund Berger and Tillis in their Libertarian lunacy. MMT establishes the founders’ concept of enlightened self-interest as a solution. The Judeo-Christian ethic of charity has too long been ignored as a proper function of government.

Piketty’s Wealth Gap Wake Up

April 24, 2014
By Michael
Renegade Economists interview April 22nd, 2014
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Karl Fitzgerald:  Michael Hudson is back on the 3CR airwaves with an explosive show moving through the incredible wealth gap as outlined by Thomas Piketty. His book is barnstorming the world at the moment. We review it, alongside a bit of Marxist theory as we slide into what America is really up to in the Ukraine. It’s always interesting with Michael Hudson. Stay tuned for another instalment of the Renegade Economists.
Sweeping the world have been glowing reviews of the new book by Thomas Piketty, Capital in the 21st Century. I’ve been pounding on the bookshop doors asking when it’s arriving, this 700-page opus. It hasn’t hit here yet but I’ve read many book reviews. Have you had a chance to grab a hold of this must-read document?
Michael Hudson: No, but I have worked on the statistics that he uses for the last 50 years, so I know the problems with the statistics and what they can do and what they can’t do. And I’ve read what he’s been publishing all along with his colleague in California, Emanuel Saez, about the concentration of wealth and income at the top of the pyramid.
Karl: And that’s the big point is that he’s renowned, along with Saez, for working on income inequality, but this book really looks at wealth inequality.
Michael: The problem with Piketty’s statistics are that it vastly understates how unequal the world really is and that’s because – you may know in Australia that our Queen of Mean, the hotel lady Leona Helmsley said “Only the little people pay taxes”. What she means is only the little people earn income.

Rich people in America don’t earn income, they make capital gains and capital gains are not in everybody’s income statistics, they’re not in the statistics basically that are reported. And the IRS, the Internal Revenue Service of the United States, only conducts a study of capital gains once every ten years or so, and countries like England and many European countries don’t even have a tax on capital gains, so they’re not going to appear in the statistics.
So one of (the) important results of Piketty’s work, if you know what you’re reading, is that the disparity in wealth is much greater than the disparity of income, and that’s because of tax avoidance by the rich. They don’t earn an income. And the same is true of corporations. The largest American corporations I think in the world are Google and Apple. Apple takes all of its income in Ireland, not in the United States, so how are you going to treat all of this? That’s the element that’s left out of this, that rich people don’t earn an income.
The other thing that is left out of the income tax statistics is, of course, how fortunes are really made, and that’s crime and fraud. The good thing about Piketty is he points out, why is it that French novelists and English novelists tell you much more about wealth than economics? And he points out that in the 19th century novels by Jane Austen and Balzac, the way to make a fortune is to marry into it. That’s true, but what Balzac also said is that behind every fortune is a great theft.
Now, let’s look at Forbes’ list of the richest people in Russia, China, the Ukraine or the post-Soviet economies. I can guarantee you that they didn’t make this wealth by saving up income, they didn’t earn a higher income; they stole the property by fraud and internal bribery, the same way that the great fortunes were made in the United States.

The History of Really Great American Fortunes by Gustavus Myers shows how the railroad land grants made fortunes by bribing congressmen and by privatising the land. The great fortunes are made by privatising natural resources, land and the public domain, and since 1980, when the concentration of wealth and income have really taken off, as Piketty shows, this is the age of privatisation, of Margaret Thatcher, of Ronald Reagan, and Boris Yeltsin in Russia.
Karl: But that’s been the interesting point is even with these limited statistics, he’s had to delve into the tax records to try and find this incredible wealth that’s come through privatisation, that’s come through this rent-seeking. That even with all those limitations you’ve pointed out, he has still come up with some incredibly strong statistics that people like Paul Krugman are just floored by. And it seems like it’s slapped the economics profession in the face to say look, we’ve got to get beyond income inequality and really focus on this wealth issue and have a look at how this wealth is created and what we can do to redirect economics, to look at the distributive side of the equation.
Michael: You’re right. He’s started the discussion by showing the fact of vast inequality. What needs to be done now is to explain how did this inequality come about and what do you do about it? And as you and I have talked on this show before, the solution of simply taxing fortunes, which is very hard to do, is a very broad hammer. And you and I have spoken about particular kinds of wealth and particular kinds of making fortunes are predatory, and that’s namely economic rent, whether it’s land rent, natural resource rent, monopoly rent or the kind of money that the financial sector makes. So Piketty’s book, large as it is, didn’t discuss this except at the end to say “Well, you need to somehow tax the wealth away”. Well, that’s true, but that’s for another book in the future.
How do you tax it away? What’s the best kind of tax to make economies grow?

One of the things that Piketty does not discuss when it comes to making fortunes is the role of debt, that most of these fortunes that have taken off since 1980 have taken off because of the increased debt leverage. As interest rates have fallen since 1980, you’ve had more and more bank credit going in to just bid up real estate prices, stock prices, bond prices, every kind of price, not to mention fine arts trophies that have gone with this. So, just as you’ve had the rising ratio of wealth to income of the 1%, you also have a rising ratio of debt to income. And so this indebtedness and the net worth again is very unequally distributed. Most peoples’ families, the major asset they have is in their home but these homes are also very heavily mortgaged and the mortgage payments they make, basically the 99% makes interest payments to the 1%.

And what to me really has been accelerating wealth at the very top is the financial sector, is the ability of the 1% to get the other 99% in debt to them by saying “Look, we’re controlling the access point to buying a home, to buying basic needs, in America to getting an education, and you can’t afford to buy a home or get an education or even a car without borrowing money.

And we’re going to charge you enough interest so that everything you earn in effect you’re going to be paying us for interest”. And that’s the same thing that is leading the corporate raiders and the activist shareholders to try to raid corporations and say “Pay up more of your money as dividends”.

So you’ve actually had a dismantling of tangible wealth and an increase in what used to be called fictitious capital or fictitious wealth, which is all basically debt leveraged wealth.

Karl: Now one of the things Thomas Piketty goes into great detail and has earned him quite a few plaudits is looking at the difference between economic growth rates and the return on investments. And his general thesis is that when the economic growth rate falls below the long term average of 5% that the wealth gap accelerates because the wealthy, who own all this land, the mines, the privatised utilities, they can claim a greater return than what the rest of the people who actually have to rely on earning income when there’s low growth rates. And the thesis is that with an ageing demographic we have a period of low growth coming and from that we’re going to see an increased inequality in wealth. So this Gilded Age has really only just begun. What did you think of that thesis?

Michael: I think his conclusion, the gilded age is just beginning, is correct but the logic is not the logic that I’m following in my exposition. He’s saying the exact opposite of Adam Smith. Adam Smith said that the rate of interest is often highest in countries going fastest to ruin. So the fact is you can go to ruin for high interest or low interest.

When he talks about the rate of return the largest sector in the United States, and other countries also, is the real estate sector. If you look at from 1945 to today, the real estate sector doesn’t make an income. As you know, real estate by the billionaires is run as a personal charity.

They don’t pay any income – if they made an income, of course, they would pay an income tax and declare it, but they don’t make any income. Almost all the rent they make is paid out either as interest or they charge depreciation as a cost. So what Piketty is referring to is not earnings before interest, taxes, depreciation and amortisation, but one portion of declared earnings excluding taxes, excluding interest, excluding depreciation and amortisation. The next highest wealth industry is oil and gas, they don’t declare any income because either they have a depletion allowance that makes them tax-exempt or they make all their income offshore in the flags of convenience countries. So the actual returns that are made, including the capital gains and total returns, simply are not available in the statistics that he looks at.

Secondly, what is growth? If you look at the American National Income & Product Accounts, for instance, 40% of all corporate profits in America a year ago when the statistics came out were made by the banks, by the financial sector. Now, these returns are basically a transfer payment. They don’t really add to growth. Financial services are not a service, unless you believe that a hold-up man that comes up to you in front of an ATM machine and says “Your money or your life” is giving you the service of giving you your life; it’s actually a transfer payment. He’s taking your money.

So there’s a question about whether all this financial activity and the real estate speculation and all this money paid to Wall Street and to bank managers and corporate managers really is growth or is it just a kind of fictitious growth to go hand-in-hand with the fictitious capital formation? You’re having the statistics take on an increasingly fictitious element, to the degree that they’re made by corporate tax accountants that pay enormous sums to the government not to tax the income they have. I think you have that in Australia in the mining sector where the richest lady in Australia pays a lot of money to make sure that she doesn’t earn a penny. Although she obtains for herself billions per year, none of this is really earned.

Karl: You’re on 3CR’s Renegade Economists and this week we’re with distinguished research professor Michael Hudson, the author of The Bubble & Beyond.

So Michael, what you’re saying there is that, shocking as Piketty’s statistics are, they’re drastically understated and part of the reason that people such as Paul Krugman – you know, he’s written a book review where he says here “Even if the surge in US inequality to date has been driven mainly by wage income, capital has nonetheless been significant too”. So why does Paul Krugman continue to ignore this incredible wealth advantage that some people have by owning the Earth and the rest of us struggle to keep up with good old wages?

Michael: The simple answer is that Krugman is a neoclassical economist. Neoclassical means anti-classical. He does not recognise that there is such a thing as economic rent. He also got in a big argument with your Australian Steve Keen two years ago saying that banks don’t create credit. “All banks do,” Krugman said, “is lend out savings.” He said it’s inconceivable that a bank can actually create credit or inflate asset prices.

So Krugman is applauded by the right-wing to be their liberal of choice not because he understands the economy, but because he doesn’t understand the economy. If he understood how the economy worked he wouldn’t have won the Nobel Price, because that’s a prize for people pretending that there’s no such thing as economic rent; there’s no such thing as unearned income. And that’s why Krugman’s focus is on, well, the real problem is that these managers of companies are paid so much more and they earn so much more income. But he’s even wrong as to his statistics and, remember, he’s a professional bank lobbyist. He’s paid by the banks. He went to Iceland to support the banks against the government trying to rein them in. So, of course the bankers love Krugman because he’s their lobbyist.

Take the Wall Street incomes that he’s pointing to. In the United States, under US Tax Law the income they make is not really an earned income; they make most of their money through stock options and trading gains, speculation. These are countered as capital gains and not taxed as normal income, but taxed much lower.

So once again we have this fictitious accountant’s view of the world of what is income and what isn’t income. And looking at the tax returns one’s obliged to use, the categories that these tax accountants who’ve paid enormous sums to governments to distort content of and to make it appear as if the wealth really doesn’t exist. That’s why they call financial wealth “invisible wealth” in comparison to real estate, which is visible wealth. The whole idea of wealthy people is to make their wealth invisible because if it’s seen it will be taxed and it’ll be resented.

Well, what Piketty has done is make this wealth seen. So at least by his wealth statistics he says “Look, we see it there and we can measure it and we can see how unequal it is. What we can’t see is really how they got this wealth. All we have to show is the income tax statements that reflect the degree to which this wealth finds its counterpart in income.” But it’s sort of like looking – if you drop your keys you look where the light is instead of where you dropped the keys. All he has to go on statistically are the income tax records and he’s done an enormous technical job there, and that’s the only job that one can do as a starting point.

But one would really have to spend even more time reworking the statistics to untangle them to find out what is the actual reality behind this. You’d have to say “What are the capital gains that have enabled these Wall Street and financial managers to make an income?” And their contracts are very clear as to what makes it. To the extent that a corporate manager’s income is tied to the stock price, they get either a bonus or they get a stock option. Well, if they get a bonus based on the stock price, what are they going to do with corporate earnings?

They’re going to take the corporate income and instead of investing in new equipment and plant, instead of developing a new market, instead of producing more, they’re going to use the money simply to buy up their own stock instead of capital investment. So by buying up the stock, the stock price goes up and they can say “Look at how my management of the company has increased the price of the stock, give me my higher compensation and my stock options and my bonuses”.

So the failure to tax these capital gains away, the sort of free lunch, is leading to the warping of the economy that produces the statistics that Piketty’s come up with.

Karl: So Piketty’s book Capital in the 21st Century is essentially a retake of Marx’s Das Kapital?

Michael: I don’t believe that one bit. That('s) his public relations at work. This has nothing whatsoever to do with Marx. Marx’s Das Kapital focused on depreciation. It was Marx who coined the term “primitive accumulation” meaning privatisation and fraud. Piketty’s analysis is completely different from Marx, despite the fact that his parents were Trotskyists.

Karl: So (when) he talks about a drift towards oligarchy, he’s pointing out this rising inequality. But in Marx’s theory, Michael, I just wanted you to try and clarify things because I like looking at these economic issues from different perspectives. And the one Marxist concept they say is the most important economic law of all is this tendency for the fall in the rate of profit.

Michael: Oh my God, there’s nothing that is more misunderstood than that. What Marx said was that as capital increases relative to labour in production, as you mechanise production and buy capital, more and more of the return to capital is going to be taken in the form of depreciation that is a return of capital, not as a profit. He was talking about cost accounting. The example he uses is – and he’s criticising the Physiocrats and Quesnay there.

When Quesnay made the Tableau Economique he talked about the circulation of income in the economy and what landlords did with the rent they got, and they spend some of it, they invest some of it. What they left out was the amount of rental income that has to be used as seed grain, to buy the new seed grain. Marx says that in a factory and under industrial capitalism if you’re going to spend $1 million building a factory with machinery and you want to make a profit on that, you’ll not only get the profit on the $1 million – let’s say at 5%, $50,000 a year – you also get your $1 million back. So of the price they charge the price includes not only the $50,000 a year profit, it includes enough money to pay back the $1 million they put into the factory in equipment as it wears out or as it becomes obsolescent.

So there’s a misinterpretation of almost all people who have not read Marx or read his theories of surplus value where he explains the falling rate of profit. I explain all of this in my book, The Bubble & Beyond, I go into what Marx meant by this. But when a non-Marxist talks about Marx and talks about the falling rate of profit you should just sort of walk away, because they don’t have a clue as to what they’re talking about.

Karl: So it’s part automation, it’s part competition pushing down the price, but also you’re saying it’s a depreciation element that is wound up to hide the profits, in a way, so that these aren’t taxed?

Michael: In the case of real estate it becomes more bizarre. In the United States you’re able to pretend that while your real estate is going way up in value, the building is actually losing value because it has a lifetime and the landlord is allowed to recapture the capital as if real estate, which in effect means the land, as if real estate somehow wears out, like a machine, or becomes obsolescent, like you buy a computer and after three years you have to upgrade it and buy a new computer. But that’s nonsense.

In New York City, where I live, the older the building, the more valuable it is because it doesn’t wear out, it’s maintained – most landlords spend about 10% of their income on maintenance and repairs. So the pretence is landlords pretend that their building is like a machine, wearing out, they charge depreciation and because of that they say “I didn’t make any profit, this is a return of capital”. And as soon as they’ve depreciated a building in full they then sell it among themselves or they buy it all over again and start the whole process all over, so you can depreciate the same building, say it’s 100 years old, you can keep depreciating it again and again and again and again as if it’s worn out all these times, and it’s the same building. But the owners and the next owners and the next owner and the next owner doesn’t have to pay any tax on this.

Karl: Right, so that’s why when this law is critiqued and people say “Look, the falling rate of profit can’t continue for hundreds of years, this is wrong” you’re saying really it is still a valid analysis for the wealth gap?

Michael: Marx was talking about the composition of EBIT, of cash flow. Cash flow is earnings before interest, taxes, depreciation and amortisation. And Marx said within cash flow, to the extent that industry becomes more capital-intensive with machinery, you will have a rising role of depreciation relative to what’s left as profit. So it’s the relationship between the return of capital and the return to employing labour and other expenses.

Karl: Okay, well, let’s switch over to the Ukraine now and since 1991 Russia has suffered this huge capital flight, some $25billion a year leaving the country annually, that’s mounted up to over half-a-trillion dollars. There’s been a huge drain on their economy because this drift to oligarchy has continued and the Ukrainians are now suffering, they can’t afford to maintain the gas payments to Russia, this has escalated tensions there, ethnic tensions. And Michael, I wonder, you’ve done a number of interviews on this topic of recent. It must be so frustrating for you to see what the West has done with the economic policy reform encouraging this sense of reliance by undermining the public finance system?

Michael: What happened in Ukraine is what happened in Russia and all the other post-Soviet economies. American advisors came in and said “Just give away all the public property to individuals. It doesn’t make any difference who you give it to; property has its own logic”. Well, Ukraine was the most inequitable, the most rapacious country of all, except maybe Moldova. They call it the “Nigeria of the North”. Its income and wealth are almost all in the hands of kleptocrats. This is not the kind of thing that Piketty’s analysis can explain. The kleptocrats have sort of taken everything in the Ukraine and, as a result, there’s no money left to run the government because the kleptocrats, both in the West and the East, have been taking all the money.

So the IMF came in and said “Look, you borrowed money, you’ve got to pay. We’re going to insist you stop subsidising the price of gas to your people, you have to remove the gas subsidy and begin charging them more”. And so they said “Well, if we do that they won’t have enough money to keep stealing at the rate we’re stealing, so we’re going to stop paying for the gas”. So Mr Obama and the Secretary of State of America said Russia must give its gas free to the Ukraine. It must give a half-a-billion dollars a month free and not charge anything so that Ukraine will have enough money to buy military arms and invite NATO in to put hydrogen bombs on our border, so we can bomb you if you don’t do what we say.

This is the most despicable misrepresenting in the public media of anything that I’ve ever seen. Material has been coming out today, the Americans trained a group of neo-Nazis, wearing Nazi symbols, wearing Nazi uniforms, in Poland to be trained for two or three weeks as snipers, brought them in to the Maidan Square and had them begin shooting at the police and their own people and then trying to blame this false flag operation on the Russians, when actually it was all done by the Americans. And all this was caught on the telephone, the Americans said “We want our thug to take over the country”, their thug being Yatsun, the bank lobbyist that they put in. So they put in a thug and they’ve been sending these neo-Nazi assassination groups out to the West to get American sympathy. The neo-Nazis published anti-Semitic pamphlets, pretended that they were given by the Russians, even though most of the Russian speakers in the Ukraine are Jewish. That’s where Trotsky came from, from Odessa. Ukraine has huge Jewish communities.

So they pretended that the Russians are threatening the Jews, when actually immediately the Jewish synagogues in the Ukraine said “No, these are the Americans that are doing this. These are false flags. The Russians are not doing this”. They forged the signature of a Russian speaker as if he was doing it and Obama and Secretary of State Kerry come right on and lie blatantly as if they can somehow convince people that these lies are true and trying to get the Americans to build up hate. And people are wondering why on Earth is Obama doing this? Is he trying to start World War III? Why are they sending warships with atomic weapons right off Crimea surrounding Russia? I mean, what is this nonsense? It’s absolutely crazy. It’s as if Obama has decided to reinvigorate class war by taking the side of the Nazis in World War II, by these neo-Nazi groups that said “We’re sorry, the wrong side won World War II. We wished Germany conquered Russia”. Well, you can imagine the effect this has on the Russians.

Karl: In the background of course is Ukraine’s prime location as a major throughfare for the Russian gas. And so, again, it seems like pipeline politics, that’s caused so much trouble in the Middle East, is here turning up in Eastern Europe. Michael, what sort of deals have been arranged and are the Ukrainians receiving a realistic payment for the incredible access rights for the Russian gas to go through, remembering that the Russian gas Putin has ensured is still owned by Russian-based companies in the large?

Michael: Well, Russia has accused the Ukraine of just siphoning off this gas for itself and not paying for it. The American-backed Right Sector has said “We want to blow up the pipelines”. Russia hasn’t come out and said it, but obviously Putin is going I think to China in a week or two to negotiate selling the gas to China instead. So obviously Russia would like to keep the European market, it doesn’t want to be in the hands of just a single customer such as China, but the effect of the American revolution in the Ukraine is to turn Russia towards China as a market for its gas. And the beneficiary, of course, will be China. The loser will be Germany, which is why the Germans have taken the lead in coming out and saying “Wait a minute, this is crazy. You’re hurting us, not Russia”.

Russia’s going to get by, one way or another, because it’s largely self-sufficient but this is going to vastly increase the German costs of industry and, in fact, how are they going to do their cooking and how are they going to run many factories if the gas is turned off?

So about a week or two ago the Russian TV station ARD sent an investigative team into Ukraine to find out what was behind all of this Maidan shooting and the sniping. And they found out that Obama and Kerry were lying through their teeth and they talked to the witnesses, they talked to the doctors, they talked to the relatives of the shooters. The shooting came from the Ukraine Hotel which is where the American-backed snipers were shooting from and it was all essentially pushed by what’s called the Right Sector. These are really the Pinochet people.

America’s trying to do in Ukraine what it did in Chile. It’s backing a terrorist organisation to come in and just shoot people who oppose American policy, meaning people who believe they should be paid for their gas and so forth.

So you’re seeing a replay of Chile under Pinochet and the military dictatorship in the Ukraine now. And the result, of course, will be to tear Ukraine apart – it’s bankrupt, no matter what, there no doubt will be civil war there. The Americans are hoping to use the civil war as an opportunity to move in NATO and to move H-bombs right onto the Russian border. This is risking a threat of war. This is crazy.

Karl: With the added side benefit of undermining Germany’s economic sovereignty with their energy prices. And I find that geopolitical play a very interesting one following on the heels of the very embarrassing NSA phone hacking of Merkel, and it sounds like this is another little side play to undermine another country’s growing importance on the world stage.

Michael: Well, I guess an American would reply that if you can’t tap their phone, how do you know who to shoot? It’s obvious they’re control freaks by now and to the Germans, especially to Angela Merkel who came out of East Germany with the Stasi tapping everybody’s phones, you can just imagine the effect there. America is losing its cache as a democratic country and people are beginning to think that it’s moving into the position that Russia used to be in, while you’re having Russia act as the reasonable party trying to avoid war in this case. They’re turning the Cold War inside out and the result is that European politics are being torn apart with it.

Karl: And so are you saying that out of this that Vladimir Putin really, he’s not the bad guy? Is that what you’re saying? Because it looked very sus(picious) as this invasion and all this hoo-ha over Ukraine happened just four days after the Winter Olympics.

Michael: I would not say that any politician is not a bad guy. The question is (is) his hand being forced? You can be a bad guy and still have your position forced and you can still be attacked. You know what President Nixon said in our country: paranoids have enemies too. So even if you don’t like Vladimir Putin, you can say Vladimir Putin can also be attacked and maligned and forced into a situation where he has to protect himself and his own position within Russia by responding and by protecting Crimea from the American attempt to pry the naval base in Sevastopol away from Russia. Of course he had to act, he had no choice. That doesn’t mean he’s a good guy or a bad guy; it means that the Americans forced these events on him.

Karl: Well, let’s hope more people start to look at this natural resource wealth that underpins such geopolitical machinations because really things seem to be speeding up faster and faster and it’s becoming more and more obvious to people like yourself, Michael, what’s going on. But to see the Paul Krugmans, to see them just so surprised that such wealth inequality is occurring is just staggering.

And I just wanted to finish off today’s interview with a bit of discussion on a new economic law that’s perhaps coming through, Michael. It’s called Hudson’s Law. What’s this all about?

Michael: I think the neo-Liberals have found out that – it’s essentially the Stockholm syndrome on a political scale. For years people thought that, well, in a democracy, if people are getting poorer and poorer and wealth is becoming more and more unequal, the poor are going to fight back and they’re going to elect different leaders who are going to change the tax laws and get out of their poverty. But what they found is exactly the opposite.

You have the most unequal impoverished neo-Liberal economy in Europe, Latvia that continues to vote for the neo-Liberals, putting almost the entire tax on labour, not on real estate, not on the oligarchs. And they found that the more labour is oppressed, the more emotionally depressed and frightened they become. That when workers are very badly paid they’re so frightened of losing the job, they’re so frightened of being one paycheque away from homelessness that they won’t strike, they won’t protest. They’ll just say “I’ll do whatever you say, Master”.

They thought if they are obedient enough and support the rich that the rich will somehow treat them nice in a kind of patron-client relationship, such as you had at the end of the Roman Empire. And, of course, that’s not really what happens. Once the rich begin to abuse the poor and they find the poor take it, the abuse gets worse and worse and worse and that corruption of democracy is one of the political counterparts to the disparity in wealth that Piketty’s been tracing.

Karl: And so what you’re saying there is that the greater the wealth gap, the more the weak identify with the strong and they hope to really be helped out by their oppressors?

Michael: Because the wealthy become celebrities. In America, the most widely admired people are people like Donald Trump or the rich Wall Street bankers that have made their money basically through what my colleague Bill Black calls “control fraud”. They admire people who are rich, no matter how they get their richness, and basically they imagine that somehow they could get rich in the same way if only they’re obedient enough and follow the system. It’s unrealistic, but that’s psychology.

Karl: Michael, just to finish off then, you must have a few stories on Donald Trump and the incredible unearned income he’s benefited from. Is there one play that defines his ride to uber-wealthdom through unearned income?

Michael: Well, as one friend of mine at the NYU real estate department said, when Trump buys a building and puts his name on it, just putting his name on it adds 10% to the building’s value. Somehow, so many people want to identify with him personally because he’s rich that just putting his name on, without earning money, will add to the value of the building. And in terms of earning money, his former wife wrote about ten years ago that they were walking down the street and they passed a homeless guy sitting begging for quarters. And Donald said “You know, that man is as rich as I am” and the wife said “You mean, he’s a billionaire?” and Donald said “No, he has at least a zero net worth. I have a negative net worth, I’m so much in hock to the banks”.

Well, what Trump did was, he simply didn’t pay the banks. And the banks are so desperate for real estate people to come in, borrow the money and manage the properties to make enough interest to pay them, that they let him scale back the money to the banks. He did the same thing with his gambling casinos in Atlantic City and managed to avoid paying. So you have Trump, who made his money by extreme debt leverage, by having negative net worth at various times in his life, somehow coming out on top thanks to the fact that the Federal Reserve under Alan Greenspan was flooding the economy with enough money to inflate the price of his property above water and to create a Rentier class rich enough to buy property in his buildings and pay him the price that he was asking for.

Karl: Well, Professor Michael Hudson, thanks very much for joining us here on the Renegade Economists.