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The United States of Corporate America: From Democracy to Plutocracy

"The price of apathy towards public affairs is to be ruled by evil men."

Plato, ancient Greek philosopher

...“The 20th century has been characterized by three developments of great political importance: The growth of democracy, the growth of corporate power, and the growth of corporate propaganda as a means of protecting corporate power against democracy.”

Alex Carey, Australian social scientist

“The most effective way to restrict democracy is to transfer decision-making from the public arena to unaccountable institutions: kings and princes, priestly castes, military juntas, party dictatorships, or modern corporations.”

Noam Chomsky, M.I.T. emeritus Professor of Linguistics

On Tuesday, January 19 (2010), the Obama administration got a kick in the pants from the Massachusetts voters when they filled former Senator Ted Kennedy's seat by electing a conservative Republican candidate. The essence of their message was: stop dithering and start governing; stop trying to satisfy the bankers and please the anonymous editors of Rupert Murdoch's Wall Street Journal, and start caring for the ordinary people.

Two days later, President Barack Obama seemed to have understood the people's message when he announced a “Volcker rule” that will forbid large banks from owning hedge funds that make money by placing large bets against their own clients, using information that these same clients gave them. It was about time. Such a policy should have been announced months ago, if not years ago.

On the same day, however, a nonelected body, the U.S. Supreme Court, threw a different challenge to the Obama administration. Indeed, on Thursday January 21 (2010), a Republican-appointed majority on the U.S. Supreme Court took it upon itself to profoundly change the U.S. Constitution and American democracy. Indeed, in what can be labeled a most reactionary decision, the Roberts U.S. Supreme Court, ruled that legal entities, such as corporations and labor unions, have the same purely personal rights to free speech as living individuals. Indeed, the First Amendment of the U.S. Constitution says “Congress shall make no law ... abridging the freedom of speech.

The only problem with such a wide interpretation of the U.S. Bills of Rights (N.B.: The first ten amendments to the United States Constitution are known as the Bill of Rights) is that this runs contrary to its letter and its spirit, since it clearly states later on that "the enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people, and reserves all powers not granted to the federal government to the citizenry or States.” The words “people” and “citizenry” clearly refer here to living human beings, not to legal or artificial entities such as business corporations, labor unions, financial organizations or political lobbies.

Such entities, for example, cannot vote in an election. Indeed, laws governing voting rights in the United States clearly establish that only “Adult citizens of the United States who are residents of one of the 50 states have the right to participate fully in the political system of the United States”. No mention is made of corporations or other legal entities.

However, with its January 19 (2010) decision, the majority on the Roberts U.S. Supreme Court is saying in effect that even if artificial entities cannot vote in an election, they can spend as much money as they like to influence the outcome of an election. Money is speech for them, and the more a legal entity has of it, the more it has a right to become powerful politically and control the political agenda.

In fact, what Chief Justice Roberts and his conservative Supreme Court majority have done is to overcome a century-old democratic tradition in the United States in granting a constitutional right to business corporations and to banks, (because they are really the ones with a lot of money), to use their enormous resources to not only participate in debates about public issues, but also, and above all, to de facto dictate the election of candidates of their choice to public office.

That's plutocracy, not democracy!

Plutocracy is defined as a political system characterized by “the rule by the wealthy, or power provided by wealth.” Democracy, on the other hand, is defined as a political system where political power belongs to the people. This means “a political government either carried out directly by the people (direct democracy) or by means of elected representatives of the people (representative democracy). The terms "the power to the people" are derived from the words "people" and "power" in Greek.

This fundamental idea of democracy was well summarized by President Abraham Lincoln, in his 1863 Gettysburg Address, when he said that it is “a government of the people, by the people and for the people.” This is a definition that is based on the basic democratic principle of equality among human beings.

But now, the Roberts Court's decision must have made President Lincoln turn in his grave, because that decision, in effect, transfers political power from the living “people” to artificial corporate entities, with tons of money to spend. If Congress does not act quickly to reverse this decision, legal entities will be able to spend freely in the media to support or oppose political candidates for president and Congress, and this, as far as the last moment of a political campaign. This is quite something!

By a stroke of the pen, the Roberts Court has thus abolished the laws governing American electoral financing and removed limits to how much special money interests can spend to have the elected officials they want. The government they want will largely be “a government of the corporations, by the corporations, for the corporations.” Truly amazing!

To reflect the new political philosophy of the five-member majority of the Roberts Court, the Preambule of the U.S. Constitution that says “We the People of the United States, in order to form a more perfect Union...” should, maybe, more appropriately be changed for “We, the business corporations of America...”

It is that much more ironic that the word “corporation” appears nowhere in the U.S. Constitution or in the Bill of Rights. It is scarcely conceivable that the drafters of the Constitution had anything resembling corporate entities in mind when they drafted the Bill of Rights. But the Roberts Court majority does not seem to agree with Washington, Jefferson, Franklin, Madison, Mason...etc. Because of their decision, the five conservative members of the U. S. Supreme Court of today have become the new Fathers of the U. S. Constitution.

For nearly a century, it has been assumed that the U.S. Bill of Rights protected persons, not corporations. Even if sometimes the courts have extended the rights of the 14^th Amendment banning the deprivation of property without due process or equal protection of the law to the property of corporations, it was never thought that the purely personal rights of the first Amendment of the Bill of Rights applied to corporate entities as well as to human beings. This is understandable. Business corporations are created through legislation that gives them potentially perpetual life and limited liability to enhance their efficiency as economic entities. While such characteristics can be beneficial in the economic sphere, they represent special dangers in the political sphere. That is the rationale for not extending constitutional rights to purely legal entities.

But now, the five-member majority of the Roberts Court have said that such legalized artificial entities have the same constitutionally protected rights to engage in political activities as living individuals.

In conclusion, let us reiterate that in a democracy—and as it is clearly established also in the U.S. Bill of Rights and in all democratic constitutions—the citizens are the only legitimate source of law. It follows inexorably that corporations, not being citizens, cannot be legitimate political actors. Chief Justice Roberts and his conservative Supreme Court majority have thus badly erred in their anti-democratic judgment.

Their judgment is clearly revolutionary or, more precisely, counter-revolutionary.

Rodrigue Tremblay

[http://www.thenewamericanempire.com/author.htm] is professor emeritus of economics at the University of Montreal and can be reached at rodrigue.tremblay@yahoo.com. He is the author of the coming book "The Code for Global Ethics" at: http://www.TheCodeForGlobalEthics.com/

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Posted, Friday, January 22, 2010, at 5:30 am

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COMMENTS (17)

Thursday, January 7, 2010

Economy 2010: From the Scandalous Known Past to the Uncertain Future

By Rodrigue Tremblay

“Homes rose markedly in value, especially in hot markets like Florida and New York City. Borrowers believed that home purchases were no-risk ventures certain to escalade, and they went out on a limb to buy. Lenders who had once required large down payments now permitted home purchasers to combine two and three loans to buy a home. People took out what were called “buffet” loans, which were interest-only loans that buyers were told they should refinance in three years or five years. Lenders told home buyers not to worry; homes were rising so fast in value that it would always be easy to refinance into another loan. Developpers built larger houses. Why not? Borrowers wanted larger homes. They needed the space to hold all the things they were buying.”

—U. S. Housing market in 1928-29, in Kristin Downey, The Woman Behind the New Deal (Frances Perkins), 2009, p. 106, from Gail Radford, Modern Housing for America: Policy Struggles in the New Deal, 1996, pp.10-22

"I place economy (saving) among the first and most important virtues, and debt as the greatest of dangers to be feared."

Thomas Jefferson: 3rd US President (1801-09)

"America is more communist than China is right now. You can see that this is welfare of the rich, it is socialism for the rich -- it's just bailing out financial institutions. This is madness; this is insanity; they have more than doubled the American national debt in one weekend for a bunch of crooks and incompetents."

Jim Rogers, American investor

After a decade plus of unchecked greed by money-changers, of the political dismantling of financial regulation, of large “too-big-to-fail” banks made larger, of artificial easy money by the central bank, of the risky securitization of all kinds of debt instruments and of leveraged buy-outs of scores of companies with their own debts by financial operators, it was no surprise that the financial house of cards came crashing down in 2007-2008. It was like a pre-programmed financial crisis. A perfect financial storm.

What lessons can be drawn from the recent unhealthy and unpalatable past? And, what is in store for the near future, considering that hardly anything in the financial environment has changed? A crisis caused by a near total absence of financial regulation, by a too easy monetary policy and by too much debt, has been met with no additional financial regulation, by an even easier monetary policy and by even more debt. In fact, the U.S. ratio of total debt ($57 trillion) to the economy (GDP: $14.5 trillion in 2009) is even higher today at 3.9, then it was before the onset of the crisis in 2007-08, when it stood at 3.4.

That is why we will argue here that the problems of U.S. financial dysfunction have not been solved. On the contrary, they have been swept under the large rug of even easier money and of even larger debts, which is only postponing the day of reckoning. For sure, the large Wall Street banks' bad debts have been transferred to the public sector (the Treasury and the Fed) and to the quasi public sector (Fannie Mae and Freddie Mac), but the overall debt load of the U.S. economy has not been reduced; it has been increased. That is why the U.S. is condemned to continue its foreign borrowing binge for some time to come.

In general, too much foreign borrowing is bad for an economy, especially if it is done to finance an excessive level of domestic consumption. When this happens, it is a sign that total domestic expenditures (government, corporations, consumers) exceed total incomes. The country lives beyond its means and the gap has to be filled with net foreign borrowings.

The principal indicator of this situation is the current account (a broader measure than the external trade balance) of the country. When a country's current account turns negative, more money for imports and interest payments is flowing out of the country than is coming in through exports and investment income. Like any individual, of course, a country can borrow abroad if its credit rating is good. The question is how much and for how long. For countries that have fully convertible currencies or, better, for countries like the United States whose national currency also serves as an international key-currency, the situation can endure for a longer period, but there is always a day of reckoning.

In general, for a normal economy, a negative current account that exceeds six (6) percent of Gross Domestic Product (GDP), especially if this is due to a negative trade balance, usually indicates a non sustainable situation of foreign borrowing and foreign indebtedness that can lead to a financial crisis. Countries like Mexico (1994-95) and Thailand (1997-98) experienced such a financial crisis in the 1990's. Such was the case also with Argentina at the turn of the century.

Since 2000, and coinciding with the arrival of the George W. Bush Republican administration, the United States has also embarked upon a policy of excessive domestic spending, resulting in larger and larger and persistent current account deficits and huge foreign borrowings. Indeed, the adoption of an imperial foreign policy of permanent war throughout the world, financed on credit, and an ideological preference for large fiscal deficits, have translated into large American current account deficits.

In 2006, the U.S. (external) current account deficit reached 6.5 percent of GDP. This was the apex of external debt sustainability and a harbinger of economic troubles to come for the U.S. economy. As a matter of fact, this induced me to write an article on October 16, 2006 entitled “Headwinds for the US Economy”, in which I warned that it was a "matter of months, not years", before the U.S. economy and the U.S. dollar begin to experience some downward pressures. I repeated the warning a few months later when I wrote on May 5, 2007, (A Slowdown or a Recession in the U.S. in 2008?), that we could expect "the collapse of one and possibly several major financial institutions under the pressures of bad loans and record foreclosures... The rate of foreclosure is bound to spike in the coming months, possibly culminating in the next two years into a financial hurricane." This was said many months before the onset of the 2008-09 recession and the September 15, 2008 failure of the large investment bank Lehman Brothers.

In 2008, in the midst of the economic recession, the U.S. current account deficit was still estimated at –$706 billion (nearly all caused by a –$707.8 billion trade deficit) for a $14,441 U. S. GDP, that translated into a 4.9 percent current account deficit relative to the economy.

With the 2008–09 economic crisis and recession, the US current account deficit has since been somewhat reduced due to a drop in incomes and in imports, and partly due to a sharp decline in oil prices, but it is expected to remain above four percent of GDP. In the coming years, this ratio is likely to increase again as the long-term U.S. fiscal deficit is expected to remain at 10 percent of GDP for years to come.

The Fed's Role in Creating Asset Price Bubbles

The causes of a financial crisis are complex and can vary from one country to the next. In general, however, they usually stem from the central bank becoming subservient to the government when the latter decides to embark upon a policy of large fiscal deficits. If the central government opts in favor of monetizing the public deficits and keeping interest rates low, an asset bubble is bound to emerge.

Unfortunately, that's pretty much what the Greenspan Fed elected to do in maintaining an easy money policy for too long and in keeping interest rates too low, for too long, in the late 1990s and in the first part of the 2000 decade. Indeed, most economists agree that in 2003-04, the U.S. Fed should have raised short-term interest rates (pushed down to 1 percent in June 2003 from 6.5 percent in December 2000). But the then Greenspan Fed (current Fed Chairman Ben S. Bernanke has been a Fed Board member since 2002) was deeply embroiled in the Bush political agenda. Chairman Alan Greenspan publicly acknowledged this fact when he declared on September 17, 2007, in an interview with the Financial Times, that “raising interest rates sooner and faster (before the 2004 presidential election) would not have been acceptable to the political establishment given the very low (official) rate of inflation”.

In financial matters, the American central bank (the Fed or the Federal Reserve System) is a curious animal. It is an institution that is entrusted to regulate banks and other financial institutions, but it is partly owned by the large money center banks. It is in a perpetual conflict of interests. In fact, it can be said that the Fed is the banks' own private government. In good times, large Wall Street banks, bank holding companies and other large integrated financial groups, such as AIG (American International Group), are pretty much left alone and allowed to build profitable but risky and shaky financial pyramids, with scant supervision. When things go bad, however, the Fed stands ready to bail them out with automatic discounting, zero-interest loans and other goodies, the overall cost being transferred to the general public through an inflation tax and a debased currency. We know since 2008 that the U.S. Treasury also stands ready with public money to bailout the large Wall Street banks when their gambles go sour. The $700 billion Troubled Assets Relief Program (TARP) is testimony to that effect.

A central bank can always print new money. But this is hardly a magic recipe for prosperity. If it were so, many Third World countries could claim to have discovered this magic potion. The current Bernanke Fed is tragically wrong in its belief that it can reverse the current over-indebtedness situation in the economy and its mismanagement of the financial crisis by printing money. It is not true that the real economy always respond positively to heavy doses of monetary stimulus. In fact, the contrary is usually the case. If it were true, Zimbabwe, which is an African economic basket case with an uncontrolled bout of hyperinflation, would be prosperous. The U.S. economy is not exempt from fundamental economic laws. A few years down the road, people will see why.

It is my feeling that the U.S. economy is presently in the eye of a powerful financial hurricane of debt liquidation. Such systemic crisis happens no more than twice in a century and it takes at least a decade to work itself out. In this environment, one should be wary of the stock market as a barometer of the real economy. There could be artificially created short-term “liquidity” rallies, when all the while the real economy remains in the doldrums. The 2009 liquidity-driven stock market rally has all the appearances of such a bear market rally destined to fail and trap many unwary investors. In fact, this rally looks like a mirror repeat of the 1930 stock market rally that saw stocks retrace some fifty percent of their initial 1929 losses. We know now that this was only a mirage, and that the worst was still to come.

In my last July 10 blog, I stated that there is likely to be a prolonged 2007-2017 economic stagnation period in the U.S. —I reconfirm this assessment, which is reinforced by my conviction that the Bernanke Fed is making matters worse by its unlimited printing press so-called “solution” of discounting everything but the kitchen sink. It is my contention that this imprudent Fed is paving the way for the mother load of bubble and subsequent crash. This is because, as alluded to above, they seem to have forgotten that the credit cycle and the process of debt build-up, and the subsequent debt liquidation that follows, are the primary driving forces in the underlying economic cycle.

This time the crash will be initiated in the huge bond market, will spread to the commercial loan market and ultimately to the stock market, and then will further crush the real economy in a way that few understand today but will learn the hard way in the coming years.

Let us keep in mind that in the recent past, the Fed and the U.S. Treasury did not see the subprime and housing crises coming. They were completely taken off-guard. In 2005, according to then Fed member Ben Bernanke, “there was no housing bubble”, even though everybody and his uncle could see that the real estate bubble was about to burst.

And now, let us look at the figures. At the end of 2009, reflecting a binge of printing new money by the Fed, the U.S. monetary base, i.e. money circulating through the public and banking reserves on deposit with the Federal Reserve, stood at more than $2,016,136,000,000, after having increased 146 percent in three years. This is unprecedented. —Even if one subtracts the inactive excess bank reserves at the Fed, worth more than $1 trillion (and earning interest!), the U.S.'s monetary base has grown 22 percent in three years, from a starting point of $818 billion in early 2006.

Nevertheless, Fed Chairman Ben Bernanke said in 2009, that he does not fear inflation and that, in fact, inflation could even go down from then on. He could be right for the next few months, but how about the next few years?

Those who listened to Chairman B. B. in 2005, and kept buying leveraged real estate, lost their shirt. I am of the feeling that those who believed Chairman B.B in 2009, and kept buying long-term U.S. Treasury bonds, are also going to lose their shirt. Because of the huge federal deficits and Fed policy to monetize a big chunk of them, U.S. long-term rates are bound to increase in the coming years, whether the real economy grows or not. That would be the next Fed-created bubble bursting, the bubble of artificially low interest rates, excessive money creation and artificially high asset prices for long-term Treasury bonds.

In the past, the big losers of this policy were the millions of people who lost their homes through mortgage foreclosures, the millions of people who lost their jobs through bankruptcies and the millions of retirees who saw their retirement incomes plummet with near zero interest rates. In the future, the principal losers will still be middle class families who will continue being the victims of a massive spoliation and will still have trouble making ends meet, plus retirees whose retirement capital will be further eroded. Where is AARP when we need it?

__________________________________

Rodrigue Tremblay is professor emeritus of economics at the University of Montreal and can be reached at rodrigue.tremblay@yahoo.com.

He is the author of the coming book "The Code for Global Ethics" at: www.TheCodeForGlobalEthics.com/

You can reserve a copy of the book on Amazon

*****The French version of the book is now available. See:

www.lecodepouruneethiqueglobale.com/

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Please visit the book site at:

www.TheCodeForGlobalEthics.com/

_____________________________________

Posted, Thursday, January 7, 2010, at 5:30 am

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COMMENTS (10)

Wednesday, December 23, 2009

The New Crusade: Imperial U.S. vs Political Islam

By Rodrigue Tremblay

"I am as intolerant of imperialistic designs on the part of other nations as I was of such designs on the part of Germany. The choice is between two ideals; on the one hand, the ideal of democracy, which represents the rights of free peoples everywhere to govern themselves, and, the ideal of imperialism which seeks to dominate by force and unjust power, an ideal which is by no means dead and which is earnestly [sought] in many quarters still."

U.S. President Woodrow Wilson, July 1919

"Fight and kill the disbelievers wherever you find them, take them captive, harass them, lie in wait and ambush them using every stratagem of war."

The Qur'an (9:5), Islam's holy book

"We are fighting them (the terrorists) over there so that we won't have to fight them here at home."

Former U.S. President George W. Bush's political slogan

“I, like any head of state, reserve the right to act unilaterally if necessary to defend my nation.”

U.S. President Barack Obama, December 10, 2009

“When the tyrant has disposed of foreign enemies by conquest...and there is nothing to fear from them, then he is always stirring up some war.”

Plato, ancient Greek philosopher (428/427-348/347 B.C.)

In the political movie “Charlie Wilson's War” about the Soviet-Afghanistan war, the hero states “America does not fight religious wars.” Is this possibly wrong, dead wrong?

In fact, is it not possible that since September 11, 2001, a new type of “holy war” may have begun? This time, the new crusade with strong religious overtones pits fundamentalist Christian America and its allies, against political Islam and the Islamist al Qaeda terrorist organization. On September 16, 2001, then President George W. Bush set the tone when he said: “This crusade, this war on terrorism, is gonna take awhile.”

On December 1, 2009 Nobel “Peace” laureate Barack Obama, president of the United States since January 20, 2009, decided to follow in the footsteps of his predecessor, President George W. Bush. He announced a policy of stepping up the U.S.-led war in Afghanistan-Pashtunistan. He announced an escalation in the military occupation of Afghanistan by sending extra American troops in that Muslim country, putting the number of American soldiers in Afghanistan at more than 100,000. Not satisfied in using the same vocabulary as George W. Bush, Barack Obama pushed the symbolism by adopting Bush's practice of announcing policies surrounded by more than 4,000 students dressed as soldiers at the West Point Academy. This was all too reminiscent of President Lyndon B. Johnson's fatal decision in 1965 to acquiesce to the request from U.S. commanders to enlarge the Vietnam war by sending scores of additional U.S. soldiers to that Asiatic country.

America seems to be in a constant need of a foreign enemy. First, it was the British. Then it was the Indians. Then it was the Mexicans. Then it was the Spanish. Then it was the Philippinos. Then it was the Japanese. Then it was the Germans. Then it was the Italians. Then it was the Koreans. Then it was the Cubans. Then it was the Vietnamese. Then it was the Soviets. Then it was the Iraqis. Then it was the Islamists. Then it was the Talibans. And, once the current conflict in Pashtunistan-Afghanistan-Pakistan is over, it will possibly be the Iranians, the Chinese, the Russians...etc.!

The reason for such a permanent-war mentality is most likely related to the U.S. military-industrial complex, an enormous beast that must be fed regularly hundreds and hundreds of billions of dollars, if not trillions of dollars, to sustain itself.

In the months following the collapse of the Soviet Union in December 1991, the high echelons at the Pentagon were busy designing a new post-cold-war strategy designed to keep the U.S. war machine humming. Paul Wolfowitz, then Undersecretary of Defense for Policy under Secretary of Defense Dick Cheney in the George H. Bush administration, wrote a memorandum titled “The Defense Policy Guidance 1992-1994”, which was dated February 18, 1992. The new so-called Wolfowitz Doctrine was a blueprint to "set the nation’s [military] direction for the next century." This new neocon military doctrine called for the replacement of the policy of "containment" with one of military "preemption" and international "unilateralism", in effect, discarding the United Nations Charter that forbids such international behavior.

The Pentagon's overall goal was to establish, through military force, a “one-Superpower World”. The more immediate objectives of the new U.S. neocon doctrine was to "...preserve U.S. and Western access to the [Middle East and Southwest Asia] region's oil", and, as stated in an April 16, 1992 addendum, to contribute “to the security of Israel and to maintaining the qualitative edge that is critical to Israel's security”.

Because of some opposition within the U.S. Government, the new policy did not become immediately effective. But the objective remained.

For instance, in September 2000, under the auspices of “The Project for the New American Century”, a new strategic document was issued and was entitled "Rebuilding America's Defenses, Strategy: Forces and Resources For a New Century". The same goals expressed in the 1992 document were reiterated.

The belief was expressed that the kind of military transformation the (neocon) planners were considering required "some catastrophic and catalyzing event — like a new Pearl Harbor”, to make it possible to sell the plan to the American public.

They were either very prescient or very lucky, because exactly one year later, they were served with the "New Pearl Harbor" they had been openly hoping for. Indeed, the Islamist terrorist attacks of Sept. 11, 2001, turned out to have been a bonanza for the American military-industrial complex. The military planners' wish for a "New Pearl Harbor", was fulfilled at the right time. It is important to remember that from 2001 to 2005, Paul Wolfowitz served as U.S. Deputy Secretary of Defense in the George W. Bush administration, reporting to U.S. Secretary of Defense Donald Rumsfeld. In this capacity, he was well positioned to implement his own Wolfowitz doctrine that later morphed into the George W. Bush Doctrine. For the time being, this is the “doctrine” that newly-elected President Barack Obama continues to implement in the Pashtunistan-Afghanistan-Pakistan corridor. As a politician, Barack Obama may be new at the job, but the policy he is being asked to implement was crafted long before he even set foot in Washington D.C.

Another possible reason why the United States is so often involved in foreign wars, besides its obvious aim of imposing a New American Empire on the world, may be due to the strong influence of religion in the United States. Just as for some aggressive Islamic countries, the U.S. is also the most religious of all first world countries. Researchers have found strong positive correlations between a nation's religious belief and high levels of domestic stress and anxiety, and other indicators of social dysfunction such as homicides, the proportion of people incarcerated, infant mortality, drug abuse, sexually transmitted diseases, teenage births and abortions, corruption, large income inequalities, economic and social insecurity...etc.

It is possible that wars serve as an emotional outlet that allows some Americans to forget about their nation's domestic problems. I suppose more research would be necessary on this issue. Indeed, is it possible that foreign wars, including wars of aggression, are a way for the American elites to deflect attention from domestic social problems and, as such, are a convenient pretext to direct tax money to defense expenditures rather than to social programs? The issue deserves at least to be raised. This could explain why U.S. foreign policy is so devoid of fundamental morality.

U. S. politicians who become president understand this American proclivity for war. They know that the best way to popularity is to be seen as a “war president”. A president who does not start a war abroad or who does not enlarge one already in progress is open to criticism and is likely to suffer politically. He must be seen less as a president than as “commander-in-chief”, in effect, as an emperor. How could this be, when the framers of the U.S. Constitution attempted precisely to avoid that?

Indeed, Article One (the War Powers Clause) of the U.S. Constitution gives Congress, and not the President, the authority to declare war.

Since World War II, however, this central article of the U.S. Constitution has been circumvented by having Congress give the President a blanket authorization to deploy troops abroad for euphemistically called "police actions", without an explicit or formal congressional declaration of war. The term was first used by President Harry S. Truman to describe the Korean War.

This artifice has done a lot to trivialize the act of war. It also contributed much in the transfer of the powers of war and peace from the legislative branch to the executive branch. In doing so, it has reinforced the role of the U.S. president as a commander-in-chief or as a de facto emperor. Only a formal constitutional amendment could restore, in practice, the framers' initial intent.

All said, it is easy to understand why when political faces change in Washington D.C., policies do not necessarily change. This push toward empire on the part of the United States can also explain why there is resentment and an anti-Americanism movement abroad.

Rodrigue Tremblay is professor emeritus of economics at the University of Montreal and can be reached at rodrigue.tremblay@yahoo.com.

He is the author of the coming book "The Code for Global Ethics" at: www.TheCodeForGlobalEthics.com/

You can reserve a copy of the book on Amazon

*****The French version of the book is now available. See:

www.lecodepouruneethiqueglobale.com/

or on Amazon.

Please visit the book site at:

www.TheCodeForGlobalEthics.com/

_____________________________________

Posted, Wednesday, December 23, 2009, at 5:30 am

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COMMENTS (20)

Wednesday, November 25, 2009

A Real Revolution in the Making in the U.S. Health Care Industry

by Rodrigue Tremblay

“The conservative goal has been the "Third Worldization" of the United States: an increasingly underemployed, lower-wage work-force; a small but growing moneyed class that pays almost no taxes; the privatization or elimination of human services; the elimination of public education for low-income people; the easing of restrictions against child labor; the exporting of industries and jobs to low-wage, free-trade countries; the breaking of labor unions; and the elimination of occupational safety and environmental controls and regulations.”

Michael Parenti, progressive author and lecturer

“As to diseases, make a habit of two things – to help, or at least, to do no harm.”

Hippocrates (460-277 BC), ancient Greek physician

“In a country well governed, povery is something to be ashamed of. In a country badly governed, wealth is something to be ashamed of.”

Confucius (551-479 BC), Chinese philosopher

The U.S. Congress is presently debating a most important piece of legislation that would profoundly reform the U.S. healthcare system. This is without a doubt the most important domestic proposal advanced by the Obama administration.

To understand what is at stake here, one should know that in the U.S., there are three industries that operate in a political and economic environment such that they can literally write their own ticket: the tentacular defense industry, the large financial and banking industry and the pivotal health industry. Together, these industries account for more than forty percent of the U.S. economy. Their common characteristic is that suppliers can more or less create their own demand and fix prices accordingly. The potential for gouging is enormous. Needless to say, these industries are among the most profitable ones... for those who can enter them.

The health industry is particularly insulated from normal market competition and from critical assessment by the consumer. The products and services that the consumer requires are “prescribed” to him or to her. If sick or requiring treatment, the consumer is in no position to argue and to contest costs and prices. He is not even considered a consumer but a “patient”! In a medical establishment, he is admitted, then “discharged”! Economists call such a situation a price-inelastic demand. The supplier of the service is the one who calls the shots. He decides the quantities to be administered and the price to be charged. This is a cost-plus situation fraught with mostly unregulated monopoly pricing practices.

This may partially explain why since 1970, American health costs have grown at an average annual rate of 9.6 percent per year. That is close to twice the pace of the increase of the overall economy. For example in 2010, health costs in the U.S. are expected to increase four times faster than the annual increase in the average hourly wage of American workers. This is clearly unsustainable, less it bankrupts the entire U.S. economy.

Since medical treatment is in many cases not a choice but a necessity, people have very little leeway in economizing on such consumption within their normal budget constraints. If one requires urgent treatment, one must willy-nilly enter the medical system and pay to the hilt. An example observed recently would illustrate the fundamentals. A friend visiting Florida recently had a case of severe indigestion during the night. He was driven to the emergency room of a local hospital, where he spent two hours. The total cost was in excess of $3,000, half of it for simply crossing the door of the ER room and the rest for two simple blood and urine tests. Maybe Walmart should take over the administration of U.S. hospitals!

To protect against unforeseen medical outlays that can seriously perturb their financial position, most people rely on one form or another of health insurance. This could be private insurance, group coverage insurance, cooperative insurance or collective or public insurance.

For example, members of Congress are covered by a public health insurance plan. Military personnel and military veterans are insured through a public plan, either through the U.S. Department of Defense Military Health System or through the Veterans Health Administration (VHA).

Americans who are over 65 years old are covered by a public single-payer health care system, called Medicare. Such a public American health program has been in existence since 1965. This is a large public health plan that presently covers more than 43 million Americans. It now provides comprehensive hospital, medical and drug coverage for those lucky enough to qualify because of age and residency.

For the population at large, individuals or families can be privately insured, underinsured or less than fully insured for medical costs they might incur, or, for some fifteen percent of Americans, not insured at all (45.7 million people in 2007). Private health insurance companies routinely deny insurance coverage for people who have pre-existing health conditions. It has been estimated that the total number of people in the United States who die because of lack of medical care is about 100,000 per year.

One can therefore understand why the issue of comprehensive health care insurance is so politically contentious in the United States. Those who are already covered by a generous public health care program—by such public programs such as Medicare, i.e. the insiders, possibly a third of the U.S. population—do not see an urgent need to change a situation that benefits them. Those who rake in tremendous profits in the private health industry are also fighting to maintain their privileged position. Being already covered, they are less persuaded that there is such a thing as a fundamental right to health care.

The victims, the outsiders whose health insurance is tied to their job or who are not covered at all, do not have the same political clout nor the same access that the insiders have to the media or to members of Congress. Generally speaking, the Republican party and its allies in the far right media side with the insiders, and vigorously oppose most attempts for health care reform and an extension of their privileged position to others. Generally speaking again, the Democratic party and its progressive allies tend to side with the outsiders and have been pushing for reform for many years.

Ethically speaking, it is generally accepted that those who benefit the most from random natural endowments or from the working of the social and economic system have a moral obligation and an inescapable responsibility to share their good fortune with the less lucky or the less fortunate among us. Naked egoism is the anti-thesis of modern humanist morality.

As to the political tug-of-war being played in the U.S. around health care reform, it is too early to know the final result, but it surely will have major consequences.

Rodrigue Tremblay is professor emeritus of economics at the University of Montreal and can be reached at rodrigue.tremblay@yahoo.com.

He is the author of the coming book "The Code for Global Ethics" at: www.TheCodeForGlobalEthics.com/

You can reserve a copy of the book on Amazon

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_____________________________________

Posted, Wednesday, November 25, 2009, at 5:30 am

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COMMENTS (3)

Friday, October 30, 2009

President Barack H. Obama, One Year Later:

'C' for Effort

By Rodrigue Tremblay

"I don't want to just end the [Iraq] war, but I want to end the mind-set that got us into war in the first place."

Presidential candidate Barack Obama, January 31, 2008

“Behind the ostensible government sits enthroned an invisible government owing no allegiance and acknowledging no responsibility to the people.”

Theodore Roosevelt (1882-1945), 26th US president

“If we are strong, our character will speak for itself. If we are weak, words will be of no help.”

John F. Kennedy (1917-1963), 35th US President

“If the Nuremberg laws were applied, then every post-war American president would have been hanged.”

Noam Chomsky, linguist and political expert

Barack H. Obama was a good presidential candidate but, so far, in crucial areas, he has been a somewhat disappointing president.

In November 2008, Democratic presidential candidate Barack H. Obama and the first black American to have that chance, got to the U.S. preseidency on the coattails of a despised Bush-Cheney administration. Indeed, it was a relief for a majority of Americans to have Senator Obama replace “facts-do-not-matter” George W. Bush as president of the United States. His Republican opponent Sen. John McCain was little more than a Bush-retread. It was therefore unaavoidable that such an election would generate big expectations that things would change for the better. As a matter of fact, candidate Obama's electoral slogans were “Yes we can” and “Change we can believe in”.

Because President Obama is America’s first black President, he is symbolically the culmination of Martin Luther King's Civil Rights movement. Because of that, many have hesitated to criticize him or his administration. But his record, so far, speaks for itself. In two central areas, defense and the economy, his performance has been, at best, lackluster. In fact, Obama's performance in these areas has betrayed a lot of highly held expectations.

He seems to have been ill prepared for such a big time job. It is true that the function of president of the United States, as the country becomes more and more a militaristic empire and less and less a democratic republic, is most demanding. Possibly, nobody can be qualified and prepared enough for such a challenge.

In Obama's case, he was promoted from being a junior senator with a limited staff (one secretary and a few assistants), and no real administrative experience, to running the huge U.S. government with its three trillion dollar budget. And, moreover, he had not had the time or the wisdom to build around him a strong enough “brain-trust” to intellectually control the agenda. Rather the agenda seems to have been imposed upon him. It can be said that he asked for it when, after moving into office, his first move was to keep at their job key Bush appointees to implement the all-too-important defense and economic policies. As it is said in French “Plus ça change, plus c'est pareil” (The more things change, the more they remain the same!)

In Obama's case, the disappointment is not only a question of poor performance due to a lack of depth, formation or experience. It is a question of promises not kept and of vision betrayed. The disappointment is palpable in polls. His job approval rating hovers around 50 percent (only 45 percent of adults), while only 43 percent of Americans say they would vote to reelect him, and 48 percent say they would vote for someone else. Obama's performance has reinforced the cynicism and disillusion felt by many voters and their uneasy feeling that most politicians are either corrupt, incompetent, deceitful or hypocrites, or all of the above. In such an environment, it appears to many that voting has become a waste of time. Voter turnout in the U.S., already one of the lowest in the world, may take a turn for the worse if confidence is not restored soon. On that score, the 2010 turnout should be watched closely, especially among young disillusioned voters.

As far as foreign wars are concerned, Obama's record is less than positive. Although there has been a timid beginning of troop withdrawals in Iraq—notwithstanding the promises—in Afghanistan, things have taken a turn for the worse. Indeed, President Obama has only made things worse in that remote part of the world, by accelerating the killing and by illegally upgrading the killing in Pakistan with the Pentagon's drones. This is dangerous politics because this open-ended military adventure is all too reminiscent of the Vietnam quagmire that destroyed President Johnson, mired the last days of President Nixon's term, and tarnished America's reputation in the world.

Similarly in financial matters. Under Obama, the causes of the 2007-2009 financial crisis have not been clearly identified, let alone corrected or eradicated. Instead, they have been swept under the rug and covered with tax money bailouts and an orgy of newly created money. In fact, just as for defense, President Obama has delegated his economic and financial policies to the troika of Bernanke-Geithner-Summers, just as President Clinton had delegated the same responsibility to the troika of Greenspan-Rubin-Summers, and just as President G. W. Bush had done with the troika of Bernanke-Paulson-Geithner. We cannot help but detecting a pattern here.

It must be recorded that the Bernanke-Geithner-Summers team was deeply involved in the financial deregulation that led to the securization banking crisis and to the subprime mortgage crisis. When one considers the trillions of dollars in public money that have been used to camouflage the large N. Y. banks' bad debts, it is obvious that the Obama administration has adopted the old political technique of pandering to the rich with the blind support of the poor. (N.B.: The top 23 Wall Street banks and financial firms are expected to hand out a record $140 billion in bonus compensation during this year of 2009—$10 billion more than the previous record year of 2007. It has since been announced that the seven largest bailed out banks may see their bonus plans scaled down, and the Obama admistration should get the benefit of the doubt for this small and possibly symbolic step toward public morality.)

Such practically unconditional bailouts of “too-big-to-fail” banks can be seen as some plush state socialism for the rich, coupled with harsh and unregulated market capitalism for the poor, saddled as they are with unlimited home foreclosures and personal bankruptcies.

The epicenter of the unprecedented banking salvage operation has been the Federal Reserve System, sort of a parallel government with the power to impose hidden taxes. Even more than the Treasury's generous Troubled Asset Relief Program (TARP) of purchasing preferred equity in troubled banks, and other similar Treasury plans, the bulk of the banking bailouts came from the Federal Reserve system. The list of the Fed's bailout programs is very long and very complicated and remains mostly off screen, because it is mostly camouflaged within a super-easy monetary policy.

The U.S. Fed is a sort of semi-private central bank that often caters to private banking interests at the expense of the public good. Many Americans realize that the Fed is as much a creator of financial crises as it is an instrument to fight them. In fact, the Fed is presently busy preparing the next big financial crisis, i.e. the collapse of the bond market two or three years from now. —That could explain why the remote and mysterious semi-private Fed is the least popular of all American federal institutions, and why grass roots efforts to submit it to a public audit are gaining momentum.

In fact, the U.S. Fed is an institution that has gone much further than the U.S. Treasury in socializing the large N.Y. banks' losses and in privatizing their huge profits in the hands of profiteers, at a time, especially after the Sept. 15 (2008) demise of Lehman Brothers, when many of them were technically insolvent.

Thus, by buying large amounts of toxic and unmarketable assets from the large N.Y. banks and from large insurers, such as the huge American International Group (AIG), at close to zero cost to them, and by creating new deposits in exchange, and by paying interest on such bank deposits, the Fed has in effect transferred all or most of the seigniorage of money creation from the public to the private sector. Everybody holding U.S. dollars has paid a huge hidden tax imposed by the Fed to salvage the large “too-big-to-fail” N.Y. banks. Sooner or later, somebody will have to calculate that hidden tax and make it public. Most likely, this could only be done if the Fed were to be thoroughly audited, which it has so far staunchly refused.

All and all, and where it counts the most, in matters of wars and peace and in economic matters, things have hardly changed under the new Obama administration. It is likely that an even more pugnacious McCain administration would have been worse, considering Sen. McCain's public declarations and pronouncements. Nevertheless, this is poor consolation to those who had high expectations and who were led to believe that President Obama's election would really bring fundamental change.

Rodrigue Tremblay is professor emeritus of economics at the University of Montreal and can be reached at

rodrigue.tremblay@ yahoo.com.

He is the author of the book 'The New American Empire'.

Visit his blog site at www.thenewamericanempire.com/blog.

Author's Website: www.thenewamericanempire.com/

Check out Dr. Tremblay's coming book

"The Code for Global Ethics" at:

www.TheCodeForGlobalEthics.com/

*****The French version of the book is now available. See:

www.lecodepouruneethiqueglobale.com/

or on Amazon:

sending the word “Code” to bigpictureworld@yahoo.com