Where Has Our Change Leader Gone To?

Some of our best bloggers have essays that detail exactly what is happening to our hope of health care finance reform (nothing good) and say exactly what I think (which is that it is failing bigtime). Please read the following essays for the truth that the mainstream media is denying us.

And then send them to everyone you know.

Distributor Cap NY

Here is the obvious - the Health Care Reform debate has gotten away from President Obama. It is as if he opened Pandora's box, but instead of only the ills of the world's escaping - he let the lunatics out of their padded cells and completely take over the asylum.

I don't know if it was hubris, arrogance, laziness or just plain ignorance that allowed Obama - who proved during the campaign that he understood clarity of message and control of the data flow better than any politician in a generation - to let one of the most crucial piece of his platform fall into such disarray.

The mistakes have been so numerous and so damaging (egged along by a media that enjoyed watching this twist in the wind), I don't think it can be rescusitated into anything other than a Pyrrhic victory - a victory his team can celebrate and the rest of the country will eventually end up regretting.So Mr. Obama, my ideas - I think it might be too late - but you might want to consider. Remember this is a country that buys bottled tap water.

David Michael Green at the Regressive Antidote

He should have named enemies, right from the beginning. He should have warned Americans about what these people would do in the ensuing weeks and months. And he should have called them out on it, angrily and by name, when they in fact did it. When they started lying and frightening senior citizens in order to protect their legalized scams from reform, he should have slugged them so hard they were knocked on their fat corporate asses, never to rise again. He should’ve called them greedy, selfish, treasonous traitors who are willing to lie and steal to further enrich their bloated selves, while tens of thousands of Americans die every year from lack of medical care.

Above all, what Obama should have done was shown some passion. The unflappable conciliatory professor act has got to go. Here’s a newsflash (evidently) for the Obama White House: If the president has any desire to sell his policies, he’s got to sell his policies. If he wants to lead, he has to lead. And if he wants our support, he’s got to tell us why this is important. With juice. Mr. Folksy isn’t getting it – not by a long shot.

. . . So I have to ask: Hey, Barack. How’s this working out for you? In eight months time you’ve squandered a massive and historic opportunity. You’ve resuscitated a murderously evil political party that, with a little shove in the right direction, might instead have been buried dead forever. You’ve let just about anybody say just about anything regarding you and your policies, without consequence. People are running around claiming that you’re gonna kill grannies, and millions believe them. You’re being pilloried for the bogus failures of the British healthcare system, and your mealy-mouthed-room-temperature-yesterday’s-leftover-oatmeal proposal – such that you even have one – doesn’t even bear the slightest resemblance to the NHS.

Batocchio at Vagabond Scholar

Angry conservatives are fighting against their own interests, they’re unappeasable, and dishonest politicians are fanning the flames. Yet national Democrats seem terribly shocked by this, as does the media - who then give angry conservatives the microphone. The more liberal perspectives are often lost in the shuffle, of course. We've seen this basic story before, although this time it does seem uglier and more dangerous.

I'm curious as to the exact breakdown – how many of the eager mob are birthers? How many believe in death panels? How about internment camps? Where do they draw the line? How many of them supported Bush to the bitter end? How many would score high for authoritarian traits? I would guess there's significant overlap, but the particulars might be interesting. Is there a guy out there somewhere who's saying, "Whoa, of course Iraq had WMD and Obama's a Muslim born in Kenya, but death panels? That's just crazy!"

During the Bush presidency, some conservatives eventually acknowledged he was a disaster and jumped ship. Others, when pressed, would admit he was horrible, but they remained convinced that those damn Democrats would do far worse. Some conservatives, when pushed, will even admit that Rush Limbaugh exaggerates and sometimes outright lies (Al Franken used to have his childhood friend and dittohead Mark on the radio and present him with Limbaugh's latest BS). On the other hand, some conservatives think Stephen Colbert is a conservative. And authoritarians will often defend directly opposing beliefs, or insist on a belief in the face of strong contradictory evidence, even when a simpler explanation is available (see Bob Altemeyer's The Authoritarians, especially pp.120-121). At least one study found that when conservatives were presented evidence suggesting one of their beliefs was wrong, it actually reinforced their convictions. (Perhaps it's just that social dynamics – the "oh yeah?" reaction – is stronger than empiricism, but conservatives apparently have a stronger affinity for that.)

Social conservatives often put a premium on what they view as the natural social order. Get the right kind of people with the right "values" in charge, and all shall be well (or at least better than it will be otherwise). Authoritarians tend to define right and wrong mainly based on group identity – torture is right when we do it, wrong when done to us, and so on. Re-read Ron Suskind's classic article on "Faith, Certainty and the Presidency of George W. Bush" and you'll see similar dynamics. That approach does make decisions much easier, and absolute certainty is comforting in a way the "reality-based community" may not be.

Dave Dubya at his Freedom Rants

Maybe you saw the woman holding her Bible up in the air and chanting “This is the only truth.” She was one of a group of conservatives following instructions to disrupt Democratic representatives meeting with constituents. Perhaps she was inspired by Republican lobbyist Dick Armey’s Freedom Works’ guide "Rocking the Town Halls-Best Practices."

Maybe she was following Conservatives for Patients' Rights. It's a Washington, D.C.-based lobbying organization that's run by a former hospital executive and generally slippery greedy fellow named Rick Scott. Or maybe she was taking her cue from Americans for Prosperity. They’re listed on the RecessRally.com page under the name of their own subsidiary, Patients First. The national chairman of Americans for Prosperity is the 19th richest man in the world. A man named David Koch.

These are organizing forces behind the Right Wing offensive against the free speech and democracy being attempted at these meetings. The Republican Party tells us, "What Democrats call mob rule, the average American calls democracy. These kinds of despicable characterizations of middle-class Americans smacks of elitism."

So let’s get this straight. The 19th richest man and his fellow Republicans are in no way promoting anything resembling elitist interests.

Right. And Hitler’s Brown Shirts were promoting democracy by doing the exact same thing. The Brown Shirts were charged with disrupting political opponents’ meetings.

Driftglass was way out in front of the mob and has the best graphics you've ever seen that define into infinity our current state of insanity. (I swear I'm not overspeaking.)

These guys are the best.

Read on!

Suzan ________________________

Rahm Emanuel and Jamie Dimon "Hold Sway" in D.C. (You? Not So Much)

Can we dare to "look away" (from the financial destruction wrought on the lower classes)? It's nice to have friends in the right places. Don't you agree? And to have your whining (to them) pay off so richly. (It's really unfair that outsiders think they have a stake in this country's financial sector.) Driftglass: Chicago Operatives Alert!

I've said this before (all right, not exactly this, but I'm not the writer that David Michael Green is), and DMG says it much, much more definitively here. (And you didn't think President Obama had a favorite banker!) I'm running this essay in its entirety because no one wants to read an article from the Business section of the NYT anymore. Okay, I do, but no one else will admit to it. (Emphasis marks added - Ed.)

If the Democrats are given four years to govern and they adopt half-measure after Milquetoast point-four-three-rounded-up-to-half-measure – all to little or no effect – then there will be a little surprise in November of 2012. If they fail to produce a robust economy, or if they end the recession but produce a jobless recovery, it’s not gonna go the way it looked after last November. If they fail to use the bully pulpit to sell good ideas and aggressively discredit the disastrously failed ones, there’s gonna be a different script three years from now, no matter how good a speech Obama gives.

Normally, I’d put Sarah Palin down as an easy shot for the nomination but a long shot for winning the general election. But if the Democrats do all the stupid things listed above, then the battle for the Republican nomination will wind up being be the actual contest, with the victor in that race easily beating the incumbent president who failed to produce a recovery or vanquish the bankrupt ideas of those who made the mess in the first place.

But who could be stupid enough to allow them to do that?

Can you say “Barack Obama”?

Jamie Di(a)mon(d)! The name almost sings with promise, doesn't it? It did anyway. And somehow, still does - seductively serpentine (over and over). Jamie Dimon is the name. JPMorganChaseGovernmentSex is the game. And I think it's hilarious that Tim Geithner says he's worried about how his past associations will be perceived. (Please excuse the emphasis marks, which I've added; somehow they seem necessary - Ed.)

WASHINGTON — Jamie Dimon, the head of JPMorgan Chase, will hold a meeting of his board here in the nation’s capital for the first time on Monday, with a special guest expected: the White House chief of staff, Rahm Emanuel. Mr. Emanuel’s appearance would underscore the pull of Mr. Dimon, who amid the disgrace of his industry has emerged as President Obama’s favorite banker, and in turn, the envy of his Wall Street rivals. It also reflects a good return on what Mr. Dimon has labeled his company’s “seventh line of business” — government relations.

The business of better influencing Washington, begun in late 2007, was jump-started just as the financial crisis hit and the capital displaced New York as the nation’s money center. Then Mr. Obama’s election brought to power Chicago Democrats well-known to Mr. Dimon from his recent years running a bank there. One of them is Mr. Emanuel, who has accepted the invitation to speak to the board pending a review by the White House counsel. The Treasury secretary, Timothy F. Geithner, declined out of concern that he would be seen as too cozy with a company that has numerous business issues before the department, an administration official said. “It’s a very nice thing for the board to have happen,” said the chief of a major financial company. “But you’d have to have a lot of influence to pull it off.”Mr. Dimon and his company enjoy a prominence in the city’s K Street lobbying world that parallels their recent rise on Wall Street; JPMorgan went into the crisis stronger than most rivals and reported robust quarterly gains last week that confirmed its place at the top of the heap. With the crisis, Mr. Dimon, a longtime Democratic donor, has become even more politically engaged, in the process becoming perhaps the most credible voice of a discredited industry. Other onetime giants like Citigroup and Bank of America find themselves muted as wards of the state. JPMorgan gave back its bailout money quickly, though like all the country’s big banks it still benefits from government loan guarantees and lending facilities. He is “one of the few Democratic C.E.O.’s in that line of work,” said Representative Barney Frank, the Massachusetts Democrat who heads the House banking committee. “And look, he’s been less impaired by failure than some of the others, so that’s given him a kind of lead role.”

Mr. Dimon, JPMorgan’s chairman and chief executive, comes to Washington about twice a month, compared with maybe twice a year in the past. He requires senior managers to commute as well. In recent months, he has met with officials including Mr. Geithner; the White House economic adviser, Lawrence H. Summers; and lawmakers of both parties. He phones or e-mails Mr. Emanuel at whim. Each week, his staff gives him the names of a half-dozen public officials to call.

“It’s got to be a regular thing. You’ve got to have a few relations where people know and trust you; you can be an honest broker,” Mr. Dimon said in an interview. “You can’t just fight everything.” While he has been quick to criticize the administration, JPMorgan has chosen its fights carefully, viewing his activism as a good investment, particularly as the government considers a historic rewrite of financial rules. Mr. Obama has singled out Mr. Dimon for praise more than once. Yet some Democrats say Mr. Dimon can be too outspoken, and deaf to the anti-bank sentiment of the country. When he complained in a March speech about Washington’s vilification of Wall Street, more than 40 House Democrats shot off a protest letter. “That was nonsense,” Mr. Frank said. Yet Mr. Dimon helped persuade Mr. Frank and Congress to ease the terms for banks, allowing JPMorgan to repay $25 billion in bailout money from the Troubled Asset Relief Program, known as TARP. He did so by complaining publicly and privately that JPMorgan only reluctantly took the money last year from the Bush administration to avoid stigmatizing more needy banks, and now was being hit with new limits — on hiring skilled foreigners, executive pay and more. JPMorgan and the industry lost when a pro-consumer credit card bill became law. But it beat back a proposal to allow bankruptcy judges to lower the amount homeowners owe on mortgages. That victory came with a cost: JPMorgan angered Republicans by negotiating with Democrats and then enraged some Democrats when those talks collapsed. But Mr. Dimon and JPMorgan are willing to bear such defeats if it translates into victory on the broader financial regulation fight that is just beginning. A centerpiece of that effort involves regulating the market for derivatives, which Mr. Dimon’s firm dominates. While JPMorgan favors new reporting requirements for the complex financial instruments, it opposes the administration proposal to force trades onto public exchanges; doing so would likely cut into the firm’s lucrative business of selling clients custom-made instruments. Like other banks, it also opposes a new consumer agency for financial products.

Meanwhile, the company’s reputation could be tarnished by investigations into the crisis. Among them, JPMorgan is under scrutiny from the Justice Department and the Securities and Exchange Commission for possible antitrust and securities law violations, including derivatives deals with local governments.

As he comes into these battles, Mr. Dimon, 53, must relish his and his company’s hard-won status in both Washington and New York: For years, such pre-eminence was widely accorded to Citigroup, the financial supermarket that he helped build, and to Citigroup’s former chief, Sanford I. Weill, who was Mr. Dimon’s mentor and famously fired his protégé in 1998.

Mr. Dimon’s midcareer exile took him from his native New York to Chicago. There he rebuilt his career, reviving BankOne and merging it with JPMorgan in 2004 before returning to New York full time in 2007. In Chicago, he got to know the fast-rising Mr. Obama and his friends.

Mr. Dimon and Mr. Geithner know each other well from the Federal Reserve Bank of New York, where Mr. Geithner was president and, as such, a JPMorgan regulator. Mr. Dimon sits on the New York Fed’s board. The two men spent untold hours negotiating in 2008 when the government enlisted JPMorgan to buy some of Bear Stearns’s assets and Washington Mutual to prevent their collapse. Mr. Dimon said the two had spoken by phone perhaps 10 times this year.

A recent conversation involved their impasse over the warrants the government received from JPMorgan last fall in return for the bailout money. When the bank insisted on a lower price, the two sides agreed to let the Treasury auction the warrants. Even then, Mr. Dimon called Mr. Geithner to argue that the government’s valuation was wrong, according to administration and company officials.

But Mr. Geithner reiterated that the auction would protect the Treasury from any criticism that it had cut a backroom deal.

Mr. Emanuel was a senior adviser to President Bill Clinton when he met Mr. Dimon, and briefly entertained a job overture from him at Citigroup.

When Mr. Dimon was fired, he got a supportive call from Mr. Emanuel, who recalled his own firing early in the Clinton years and how he worked his way back into the inner circle.

“The bond here is both of us lost at some place in our career and both rebuilt,” Mr. Emanuel said in an interview. Now, he added, “He’s not afraid to express his opinions and I’m not afraid to express mine.”

He recalled that Mr. Dimon once phoned to protest the anti-business populism taking hold as voters tired of bailouts, and snapped, “Washington doesn’t get it!”

“You guys don’t get the anger out there,” Mr. Emanuel replied. “Jamie, you’re asking the American people to bail out the industry. And if they’re going to bail out the industry, it’s got to change its habits.”

Another Obama associate is on JPMorgan’s payroll. Mr. Dimon hired William M. Daley, a former commerce secretary and Chicago powerbroker, in 2004 as vice chairman and head of Midwest operations. Since 2007, Mr. Daley has overseen global government relations.

It was at that time that Mr. Dimon assessed his own performance for his board and gave himself a “D” for effort in Washington. He subsequently revamped the firm’s government affairs office, mindful of Democrats’ ascendance: They had won control of Congress and were favored to seize the White House in 2008.

Rick Lazio, a Republican former congressman, was replaced as head of government relations, reporting to Mr. Daley, with a wired Democrat: Peter L. Scher, a former official in the Senate, the Commerce Department and the trade representative’s office.

Read the rest here. Hope you do. Suzan ___________________

The Great Financial Crisis

Thanks to Jill at Brilliant at Breakfast, I learned that the Obama-is-a-socialist/communist/really really Scariest/Bill Ayers-type terrorist rightwingnut protocol was backed by the same people who funded Rick Santelli's well-placed rant on CNBC: compliments of the infamous Koch family ("multi-billionaire owners of the largest private corporation in America, and funders of scores of rightwing thinktanks and advocacy groups, from the Cato Institute and Reason Magazine to FreedomWorks. The scion of the Koch family, Fred Koch, was a co-founder of the notorious extremist-rightwing John Birch Society”):

The problem with this kind of orchestrated effort ("Swiftboat Veterans for 'Truth,'" anyone?) is that it hides corporate propaganda behind a wall of faux populism and concern for "the little guy." And how many people are going to do the digging that's required to find out what's behind this kind of orchestrated effort? (ultimate h/t to Skippy.)

And a big AMEN from Jesusland to what David Michael Green has stated:

I doubt Republicans can survive what is happening to their party as anything other than some sort of rump, stump, latter-day Whig Party, with a solid electoral grip on the whole of the Old Confederacy, as they continue to insist on maintaining in the twenty-first century every ounce of the poverty, ignorance, prejudice and class apartheid that marked the eighteenth. The only change that would represent from the last several decades is that such sick regressiveness will no longer be quite so nationalized, courtesy of the likes of Newt Gingrich, George W. Bush, Trent Lott or Mitch McConnell, but rather will remain confined to their Bible Belt, just as Jesus intended.

Isn't Mike Whitney one of the most concise political/economic commentators? He dissects our plight in The Great Financial Crisis perfectly.

Interview of John Bellamy Foster By Mike Whitney February 27, 2009 Information Clearing House MW: Do you think that the American people have been misled into believing that the current financial crisis is the result of subprime loans and toxic assets? Aren't these merely the symptoms of a deeper problem; financialization? Can you explain financialization and how the economy became more and more detached from productive activity and more and more dependent on the accumulation of paper wealth? JBF: I think it is true, as you say, that the American people have been misled by analyses of the crisis into focusing on mere symptoms, or on the straws that broke the camel’s back, such as subprime loans. There is still a great deal of toxic financial waste out there in the financial superstructure of the economy, but the real problems go much deeper. One reason for this failure to account realistically for the crisis is that those at the top of the system have very little clue themselves, given the near bankruptcy of orthodox economics. A second reason is that the dominant ideology is designed to naturalize any economic disaster, pretending it has nothing to do with the fundamental nature of the system but is simply the result of external forces, mistakes of federal regulators, deregulation, corruption of a few individuals, etc. Under these circumstances, what you get from the elites and the media is mostly nonsense, though there are individuals in the financial community, in particular, that are now analyzing the problem at a deeper, more realistic level. The first thing to recognize is that this is a very serious crisis, of an order of magnitude comparable to the Great Depression. It is not a regular business cycle downturn or credit crunch. This should suggest that there are long-term forces at work. These include, over the last third of a century, stagnation, or the slowing down of the economy, and the financialization, the shift in the center of gravity of the economy from production to finance. Financialization refers not to just one or two financial bubbles (such as the New Economy bubble and the housing bubble) but to the growing reliance on financial speculation, which can be treated as a whole series of bubbles one after the other, each new one bigger than the last. This has been the dominant economic development since the 1970s, and especially since the 1980s. This financialization was occurring on top of a "real economy" or productive economy that was more and more stagnant. Given the rot below, financial speculation thus became the only game in town, serving to lift the economy. More and more economic activity was geared not to production but to the pursuit of paper claims to wealth. The last bubble-bursting episode, associated with the housing or subprime bubble, was so severe that it brought financialization to an end, generating what we call in the title of our new book The Great Financial Crisis. The idea at the top was that the financial explosion could be managed, and a financial collapse prevented. The central banks as lenders of last resort could pour liquidity into the system at critical points to avoid a financial avalanche. And in fact they succeeded in doing this for decades. Ben Bernanke, the current head of the Federal Reserve, even referred a few years ago to “The Great Moderation,” in which the business cycle had been overcome by monetary policy. Following the successful leveraging of the system out of the 2001 crisis that followed the 2000 bursting of the New Economy bubble he assumed that they now had discovered the elixir of indefinite financial-based growth. Yet, the scale of the financial superstructure of the economy kept on rising in relation to the stagnant production system underlying it and finally it overwhelmed the capacity of the Federal Reserve and other central banks to stave off the inevitable financial collapse. From a long-term perspective we can say that there is a kind of mean reversion taking place whereby the financial system and the inordinate profits it generated over decades is reverting to the long-term trend of the overall stagnant economy, which means that trillions upon trillions upon trillions of dollars in capital assets are being lost. And with financialization no longer lifting the economy as it has in decades past we are face to face with the underlying forces of long-term stagnation. For this reason the best economists and financial analysts are now saying that when the recovery from this crisis begins, perhaps in 2011, it will be an L-shaped recovery, pointing toward long-term stagnation as in the depression decade. Without financialization there is nothing on the horizon to boost the U.S. and other advanced capitalist economies. MW: Is the financial crisis the result of deregulation, lax lending standards and too much leveraging or are there more important factors involved? In your new book The Great Financial Crisis, you say that stagnation is unavoidable in mature capitalist economies because "a handful of corporations control most industries" which has ended "price warfare". How has "monopoly capital" paved the way for financialization and the creation of derivatives, structured debt instruments and other complex investments? Could you clarify what you mean by stagnation is and how it led to the present crisis? JBF: The long-term process of the growth of financial speculation or financialization (the shift in gravity of the economy from production to finance) was a process that had to keep going because once it stopped you would have a financial avalanche. As increased debt is used more and more to leverage financial speculation the quantity of debt increases while its quality decreases. This means that the level of risk keeps rising. As speculation becomes more extreme various mechanisms are introduced to manage risk. Structured debt instruments like collateralized debt obligations and credit default swaps, and a host of other exotic financial instruments, were introduced supposedly to reduce the risk of the individual investor, but ended up expanding risk system-wide. Ideologically the increased risk is rationalized in various ways--for example the presumed high tech basis of the New Economy bubble and the notion that new financial instruments had sliced and diced risk and thereby lessened risk exposure in the subprime bubble. But eventually, the decrease in quality that goes along with the increase in quantity of debt has its effect. In this respect, the giving out of subprime loans was simply part of the normal evolution (though this time on a massive scale) of financial instability basic to speculative finance. This was well explained by economist Hyman Minsky in his various works on the “financial instability hypothesis,” largely ignored by mainstream economists. Regulation of this system was impossible, since the risk had to keep rising and any attempt to place any limits on the system once financialization got to a certain point risked a financial meltdown. The capitalist state therefore had no choice but gradually to dismantle the entire financial regulatory system and to allow risk to grow. Indeed, in every major financial crisis over the last thirty years the response was financial deregulation. The risk-prone structure that emerged was presented as “optimal” in the governing ideology and the IMF and other institutions worked at imposing the same supposedly advanced, high-risk "financial architecture" on all the countries of the world. The real underlying problem, as indicated above, was stagnation. Explaining stagnation is a long and complex process. It was analyzed in depth by Paul Baran, Paul Sweezy, and Harry Magdoff. For a fuller understanding, beyond what I am able to give in this short space, I recommend our book The Great Financial Crisis and earlier works by Baran, Sweezy, and Magdoff, especially Baran and Sweezy's Monopoly Capital. There are two factors basically to consider: maturity and monopoly. Maturity stands for the fact that industrialization is an historical process. In the beginning, i.e., the initial industrial revolution phase, there is a building up of industry virtually from scratch as in the United States in the nineteenth century and China today. During this period the demand for new investment seems infinite and if there are limits to expansion they lie in the shortage of capital to invest. Eventually, however, industry is built up in the core areas and after that production is geared more and more to mere replacement, which can be financed out of depreciation funds. In a mature economy growth is increasingly dependent on finding investment outlets, and capital tends to generate more surplus (or investment-seeking capital) than can be absorbed in existing outlets. New industries arise (such as the computer, digital product industry of today), but normally the scale of such industries relative to the whole economy is too small to constitute a major boost to the entire economic system. Although the capitalist economy is not often discussed in terms of such a historical process of industrialization (which lies outside the governing ideology,) it is taken for granted in discussions of the world economy that the more mature economies of the United States, Europe, and Japan are only going to grow nowadays at, say, a 2.5 percent rate, while emerging economies may grow much faster. The maturity argument was influenced by Keynes and developed by Alvin Hansen in the late 1930s and early 1940s in such works as Full Recovery or Stagnation? and Fiscal Policy and Business Cycles. But the most powerful and clearest theoretical discussion of maturity was provided by Paul Sweezy, building on a Marxian frame of analysis, in his Four Lectures on Marxism. The second factor is monopoly (or oligopoly). Marx was the first to discuss the tendency in capitalist economies toward the concentration and centralization of capital, an emphasis that has distinguished Marxian economics. In Marxian and radical institutionalist economics this led to the emergence by the last quarter of the nineteenth century (consolidated only in the twentieth century) of a new stage of capitalism that came to be known as the monopoly stage (or monopoly capitalism) displacing the earlier freely competitive stage of capitalism of the nineteenth century. In essence, the economy in the nineteenth century was dominated by small family firms (other than railroad capital). In the twentieth century this turns into an economy of big corporations. Although monopoly capital, remained a stage of capitalism, the laws of motion of the system were modified. The biggest change is the effective banning of price competition. Monopolistic (or oligopolistic) firms, as Paul Sweezy, then a young Harvard economist, famously explained in the 1930s in his theory of the kinked-demand curve of oligopolistic pricing, tend to shift prices in only one direction--up. Price competition among the majors is seen as self-defeating, and replaced by a steady upward movement of prices, usually a form of indirect collusion, following the price leader (usually the biggest firm in an industry). With the effective banning of price competition in mature industries (there is still price competition in rising industries where a shakedown process is occurring) the main assumption of orthodox conceptions of the capitalist economy is violated. Competition continues over low cost position in an industry (i.e. over productivity), and in other areas aimed at market share, such as advertising and branding of products (referred to as “monopolistic competition”). But actual price competition under monopoly capital is usually treated as “price warfare,” which is no longer acceptable. Throughout the nineteenth century in the United States the general price level fell with the exception of the Civil War years. Throughout the twentieth century the general price level rose with the exception of the Great Depression years. The result of all of this is that, given rising productivity, monopolistic corporations end up grabbing as surplus a larger portion of the gains of productivity growth (and virtually all the gains when real wages are also stagnant), leading to a tendency of the surplus of monopoly capital to rise. There is then a vast and growing investment-seeking surplus, which, however, encounters relatively diminished investment outlets due to a number of factors: industrial maturity, growing inequality which negatively affects consumption (insofar as this is based on paychecks not debt), and persistent unused industrial capacity which discourages the further expansion of capacity. In Marxian terms, we can say that the rate of surplus value (or the rate of exploitation) within production is too high for all of the surplus value potentially generated through production to be realized in final sales. As Keynes taught savings/surplus (ex ante) that is not invested simply disappears, so this slows down the economy as a whole. But the problem of surplus capital seeking investment is not thereby alleviated, since monopoly capital tends to adopt measures that continually pump up potential surplus even in a crisis. So the contradiction continues.

Read the rest of this essay here. Suzan ___________________________