Will COVID-19 Kill Boeing?

Richard Mellor

Afscme Local 444, retired

Things are looking very bleak for Boeing Corporation. It was in trouble before the pandemic hit with the 737 MAX jet being grounded due to safety failures and two safety related crashes that killed 346 passengers and crew. Deliveries of the MAX have resumed but now FAA specialists—rather than Boeing officials—will have to OK each MAX sale before they can be delivered. The free market gurus must be choking on their own vomit. There are further problems related to delivery quality and safety issue with regard to Boeing’s transatlantic plane, the Dreamliner as well.

 

One can imagine the media frenzy if these problems were all about a Chinese manufactured plane.

 

The Pandemic has brought further pain with the collapse of air travel. Boeing’s biggest competitor, Europe’s Airbus was the world’s number 1 manufacturer of planes in 2020. The gap between the two giants has become a chasm.

 

Boeing delivered just 84 passenger jets to customers in 2020 a 90% decline from 2018 according to media reports. This is forcing Boeing to go deeper it to debt and cut costs which will surely mean layoffs of workers at the Seattle and S. Carolina factories but also pilots, flight attendants, ground workers and other sectors related to air travel. Leasing companies are also cancelling orders as the pandemic has left the airline industry with massive overcapacity.

 

Aside from more debt, what’s keeping Boeing afloat is relying on cargo and military jet sales, perhaps a war might help and Biden will cooperate in this regard if need be, he has to prove to the world he is not what Trump has called him. Last year Boeing’s total deliveries including cargo and military jets was 157 whereas Airbus delivered 566 to its global clients. As if the present situation isn’t enough, there is a likelihood that some customers will be demanding compensation for all the holdups and orders cancelled, including 600 MAX orders last year. The Wall Street Journal reported that all production of the MAX is being shifted to the South Carolina plant in March. This is something Boeing management held over workers’ heads in Seattle in order to force a concessionary contract on them. The Pandemic economy has achieved that.

 

Boeing is very important to the US economy. It has held the world’s number one position in plane manufacturing and is the world's largest aerospace company. As of December 2019 it was the USA’s largest exporter involved in commercial airplane manufacturing, defense and aerospace industries and with its subsidiaries employed 143,000 workers in 50 states.

 

The rosy, future the new administration paints as long as we all get along and work together, has the potential to turn in to nightmare. It seems highly probable that Boeing will have to be bailed out by the US taxpayer and most likely nationalized. The US propaganda machine detests the “N” word and will call for conservatorship, a much nicer and less frightening term for the investors. This was used during the last bailout in the Great Recession.

 

The aircraft industry, or more accurately, the means of transportation in society, should be publicly owned and managed by workers as producers and consumers. This cannot be successful if isolated from the other corporate entities that dominate our lives and has to be extended to include the finance industry and allocation of capital, as well as other major industries, energy, communication etc.  that are essential to society and human life, which means in our pursuit of happiness, not profits. This will mean a major national and international struggle against capital and its adherents.

 

Baton down the hatches folks and as the old Wobbly saying goes, “Don’t Mourn, Organize”.

It’s Game Time For the AFA’s Sara Nelson

Nationalize the airlines, redesign the transportation industry

 

 

Richard Mellor

Afscme Local 444, retired

8-7-20

The American Federation of Labor-Congress of Industrial Organizations (AFL-CIO, the main national body of organized labor in the US, held it first contested election in its history in 1995 when John Sweeney defeated Tom Donahue for the president’s spot. Sweeney was president of the Service Employees International Union (SEIU) at the time and Donahue was the former Secretary Treasurer under the moribund Lane Kirkland who retired. Joining Sweeney at the top was Richard Trumka, the present president of the AFL-CIO and formerly the leader of the United Mineworkers.

 

There was much fanfare at the result. A New Voice for labor was the rallying call and Sweeney created a new position to be filled by Afscme’s Linda Chavez Thompson, a Latina who would become the first non-white in a senior AFL-CIO post. This is revolutionary stuff in the world of identity politics. The Sweeney, Trumka Chavez slate were swept to power on a program of reform claiming that Labor could not continue to fight, "...only defensive battles." and promising to make the AFL-CIO the , "....fulcrum of a vibrant movement, not simply a Federation of constituent organizations."  The reformers made it clear, "...we cannot wait for change in the political climate to provide us with the opportunities to grow.  We must first organize despite the law if we are ever to organize with the law."

 

“AFL-CIO President John J. Sweeney has encouraged new thinking about the way labor unions operate and organize, and he has placed a number of progressive leaders in positions of power.”, wrote Steve Proffitt in the LA Times (October 10, 1999), “These young Turks are redefining the role of labor unions in today's service and knowledge economy……” my added emphasis.

 

Sweeney went on to talk about blocking bridges in the Martin Luther King tradition but in a very short time ended up building them, not with the rank and file of organized labor and the working class as a whole, but with the employers through the Team Concept. So the “New Voice” for labor turned out to be the same old voice singing the same old tune.

 

When the Battle in Seattle at the WTO meeting broke out in December 1999 there was a permitted union march alongside some 40,000 others protesting globalization. The radicalized youth had some influence on the younger union rank and file and eventually the meeting was cancelled. It was a great shock at the time and the police responded with extreme violence. When the younger workers were battling cops Sweeney was busy praying at a candlelight vigil. New Labor indeed.

 

The Young Turks turned out to be anything but. I was still active in the unions at the time. I would assume the liberal writer Bill Fletcher was among them as he held a position in the SEIU hierarchy and was an advisor to Sweeney when he became president of the AFL-CIO. But there were others and one I recall in particular was Amy Dean. Dean was the head of the South Bay Labor Council based in Silicon Valley, a “…5-foot, 3-inch fireball…” wrote Steve Proffitt in the LA Times article.  The liberals loved her and she would have been popular with the Labor Notes leadership who gave her a platform as one of the experts the uneducated rank and file member could speak to about how to organize and build our unions. Dean co-authored a book called The New New Deal so she must be an expert on workers and workplace struggles right.

 

Anyway that bright star went in to a black hole. I don’t know what Ms. Dean is doing now. She formed some non-profits and as far as I know from her website, as of 2014 she was a Senior Consultant, of a Management Assistance Group describing herself as a, “…leadership development and organizational transformation consultant…”. Her husband, Randy Menna, was the founder of some software development company.

 

Another firebrand began to burn bright around this time and that was Andrew (Andy Stern. Stern became president of SEIU in 1996 after Sweeney won the AFL-CIO election. The capitalist media loved him and lauded him with praise, Business Week, Time, CNN, CBS, he had it all; they weren’t afraid of him, he was their new shining star, a visionary. "We like to say: We use the power of persuasion first. If it doesn't work, we try the persuasion of power" he told the WSJ in 2008. He’s big in the hedge fund industry these days.

Sara Nelson AFA President

 

I am reminded of this thread in the organized workers’ movement as there is a new savior now, President of the Association of Flight Attendants (AFA/CWA) Sara Nelson. If you have no history with this trend I can understand why an idealistic young DSA’er interested in unions or a student who correctly sees the 14 million members in unions as relevant, would be attracted to Sister Nelson. She has spoken out against big business and speaks out strongly in defense of all workers.

 

Admittedly, capitalism is in the midst of its worst crisis since World War Two and in some ways greater given the global reach of the pandemic. And Sister Nelson’s rhetoric is welcome. She points out correctly that workers have learned a great deal during this crisis. It has brought from our gut in to our consciousness what we already knew, whose labor is essential in society and whose is parasitic. In an interview with The Nation in March, Nelson stresses, “I have never seen the airlines work with us more closely than they have during this time to put in place mitigation factors and equipment on the planes.”. The airline industry investors are aware that they need the organized workers on their side and their industry as Nelson points out is 80% organized.

 

Nelson tells the Nation that this is not going to be like 2008. “It is a crisis that working people are simply not going to allow to be put, once again, on our backs. In fact, we are coming for blood this time. No more stock buybacks. This is about putting in place a system that actually cares for people, that actually works for people.”

 

The AFA has joined with other unions in calling for direct payments to workers to keep them at work. In a video she made on March 16^th Nelson said: "No taxpayer money for CEO bonuses, stock buybacks, or dividends; no breaking contracts through bankruptcy; and no federal funds for airlines that are fighting their workers' efforts to join a union." There is nothing intrinsically wrong with these reforms but if she is counting on the Democratic Party to guarantee rules and regulations are upheld, and that this party will put in “…place a system that actually cares for people, that actually works for people.”, she is misleading workers and her position as a leader seriously trying to make changes is in jeopardy.

"Today we will save our industry and our jobs, tomorrow, our neighbors," Nelson said. "And in the weeks and months to come, our future."

 

This is not new, it’s been said by labor leaders before Sister Nelson. As activists and labor activists serious about changing the unions and wanting to build a just world, an alternative strategy and tactics has to be laid out. We have no political party of our own and this Nelson ignores as far as I can see which can only mean she has no intention of breaking with the marriage of death the trade union hierarchy has with the Democratic Party. She has even been suggested as a running mate for Biden. One fan is Doug Parker, the CEO of American Airlines who likes it when unions and corporations “work together”. Parker said of SaraNelson, “I think Sara would be a great choice.  She’s smart, she’s tough, she’s forward thinking and she cares about people.  She’s very good at bringing together people who have diverse interests in order to get transactions done, and she makes sure she gets work done on behalf of the people she represents.”

 

One would hope Sara Nelson rejected such praise from an enemy of working people and instead engage in an open struggle within organized labor to break the present leadership’s grip, to break from the Team Concept, the passive protests that strikes have become and to link all struggles together including those outside of organized labor in the communities and so forth

Instead of working with the billionaires that own the Airline industry to get “their” industry back on track and save it from the effects of the market driven pandemic, the call for taking these essential industries, and the dominant industries in society in to public ownership has to be raised. This pandemic has strengthened the confidence of the working class, it has had a huge effect on consciousness and as an important nationally recognized labor official, Nelson, like any of us, is involved in the struggle for the consciousness of the working class. Arguing that we are all in this together is not a good start.

 

We have seen numerous work stoppages and strikes during this pandemic. There will be many more battles over the horizon as the younger, mostly unorganized workers in particular continue the struggle in the face of the bosses’ efforts to make them pay for this crisis. It is not going to be easy for them to raise taxes, cut services and so on after this; but they are forced by the system to make workers pay. Sara Nelson and any of those like her will either be dragged along with this movement or get left behind or even worse, move to suppress it in order to save capitalism from itself.

 

And this is the problem, in fact there are two problems that lead many genuine socialists and anti-capitalists in the unions along this dangerous path. It is the position of the present union hierarchy that whenever capitalism goes in to crisis they move to bail it out. Having no alternative to capitalism, seeing the market as the answer to all things, this is the only road out. To mobilize the immense potential power of their own members can only lead to chaos, so concessions have to be made.  The members have to be “realistic”. This will be a hard sell after Covid-19.

 

This refusal to fight as I always argue, is not just due to corrupt individuals or character flaws although these things exist. It is a political question, it is how they see the world. Facts For Working People explained it this way some time ago:

 

“As the last century drew to a close, the Wall Street Journal produced a centennial edition. This included a segment titled - "Events that Helped Shape the Country". It explained that in 1893 there was an economic slump that left half the membership of what was then the main union federation, the American Federation of Labor (AFL), unemployed. The AFL was composed overwhelmingly of craft unions (skilled trades).  Samuel Gompers was the leader of that federation. Under his leadership, and against the background of that economic slump, the AFL made a decision as to what its general policy should be towards U.S. capitalism.

Here is how the wall street journal reported this decision. "The AFL led by Samuel Gompers votes against adopting socialist reform programs....Gompers believes that U.S. labor should work with capitalism, not against it, and that the AFL’s  proper concerns are wages and hours and better working conditions".

 

This view remains the dominant ideology of the labor hierarchy today and any serious reformer must address and oppose it.

 

The other important flaw alongside the view that capitalism can be made human and environmentally friendly is not seeing that the working class is the force and the only force that can change society and can govern society. The vast majority of us are workers whether we are employed or not. Within this class there are many sections and marginalized forces that make up the whole. Nelson talks of solidarity, this is the solidarity we need not a solidarity with our bosses, with the US ruling elite.

 

And we cannot build that world she alludes to without international solidarity and international organizations. Our problems cannot be solved within the confines of the nation state.

 

Great social shocks and crises put all individuals and groups to the test. Sara Nelson is facing the most important one of her political life. She’s off to a bumpy start.

 

Further reading on this subject:

Book Review: Jane McAlvey's A Collective Bargain
A Fighting Union Leadership Will be Built by Rank and File Activists

 

See more under the labels on the right side of this blog.
Labor Notes, DSA, Unions

Airlines Want More Taxpayer Money to Pay Wages, Safeguard Profits.

Striking Airline Workers last year. We're all in this together now?

Richard Mellor

Afscme Local 444, retired

"Brethren we conjure you...not to believe a word of what is being said about your interests and those of your employers being the same. Your interests and theirs are in a nature of things, hostile and irreconcilable.  Then do not look to them for relief...Our salvation must, through the blessing of God, come from ourselves.  It is useless to expect it from those whom our labors enrich."  *

Back in March, US airlines received $25 billion from the US taxpayer under the $2.2 trillion stimulus deal known as the “Cares Act”. This money was intended to keep the Airlines afloat for the summer by covering their labor costs. They also received, $25 billion in loans and loan guarantees. One of the conditions for the hand out was that the Airlines were barred from laying off, or to use the media’s euphemistic terminology, furloughing employees. This ban ends October 1^st 2020.

Well, the airline bosses and their investors are coming back for more money and are disappointed in the Republican proposal for the next coronavirus aid package there’s that there’s no money in it for them. Hence the resort to a dose of economic terrorism. If they don’t get it they will be laying off thousands more workers. American Airlines says it will have to lay off 25,000 workers and United Airlines some 36,000 if the taxpayer won’t pay their wages. United Airlines told its pilots that until a vaccine is available things will not improve much and the airline’s original plan to layoff about one third of its pilot workforce in 2020 and 2021 won’t do the job without taxpayer money.  Alaska has threatened to layoff 35% of its workforce.

American allocated around $11.9 billion toward buying back its stock over the past five years and paid out more than $1 billion in dividends during this same time period. Meanwhile, American’s chairman made over $11 million in salary in 2019 and other executives another $20 million. Investors in the airline industry, what amounts to a form of mass transportation on a continent, claim that it will be 2024 before the global air traffic returns to anything like they were before the coronavirus hit.

It’s always interesting to look at the language the unknown figures behind the scenes in this particular field use when making public statements.  All the talk from the airline investors through those that manage the business, never mentions profits. They need help to “prevent” thousands of job losses. They are desperate to “avoid cuts” “We hate taking this step, as we know the impact it has on our hardworking team members.”, says one executive. Some team the workers are on where they never control the ball.

The airlines are hoping that workers will leave through early retirements or as they put it “on their own”. Thousands of workers have left “on their own” at Southwest Airlines for example but one has to laugh at the language again as it implies there was no external pressure, nothing happening in the outside world or the economy that would cause thousands of workers to just leave their jobs “on their own.”

One can only imagine the uncertainty and fear that many workers must be experiencing in this crisis. Beyond this, the huge stimulus will have to be repaid and the future is one of further concessions and attacks on US workers. All the talk of essential workers and heroes is pretty nauseating as these very same workers have been abused and denigrated for ever. Nurses and other professionals in the health field aside, these heroes are in positions we are all encouraged to avoid. They are reserved for the poor, the immigrants and so on.

Airline bosses are hoping that the union leadership will agree to concessions to try to save jobs and there is no indication that they will not. When capitalism goes in to crisis, the labor hierarchy’s immediate response is to bail it out.

Aviation unions representing pilots, flight attendants and mechanics are all supporting an extension of the aid for another six months. In a letter from the unions to Congress in June they called for another $32 million for “passenger airlines cargo carriers and aviation contractors.” “This is the simplest and fastest way to maintain Congress’ historic commitment to keep aviation workers on payroll.”, the letter said.

Sara Nelson, President of the Association of Flight Attendants (AFA) made an appeal on social media in March:   "We have told Congress that any stimulus funds for the aviation industry must come with strict rules that includes requiring employers across aviation to maintain pay and benefits for every worker," Nelson said in the video. "No taxpayer money for CEO bonuses, stock buybacks, or dividends; no breaking contracts through bankruptcy; and no federal funds for airlines that are fighting their workers' efforts to join a union."

Nelson is regarded as a left winger in organized labor but, like all of them is wedded to the Team Concept stressing workers and bosses have the same interests. “We’re all in this together, there is no difference” she says in the video as she appeals to national pride and how important this industry is to all of us carrying our troops and so on. Congress must protect our paychecks she says.

Airline-catering providers, security companies, ground handlers and cleaning services got $3 billion of the Cares Act to cover pay and benefits for workers through the end of September with the same conditions----no layoffs. But numerous contractors that laid off or furloughed some 9,000 people since the Cares Act was passed received some $728 million in funding. https://www.wsj.com/articles/stimulus-money-for-airline-contractors-comes-under-scrutiny-11596044969

Yes we’re all in this together.

And Sara Nelson is placing our salvation and economic interests in the hands of the billionaires and millionaires in the US Congress. Even if we take the name of the legislation, the “Cares Act”. It has two different meanings. Workers care about wages, jobs, security etc., and investors that own the airline industry care about profits. There have been other top labor officials that liberals and sections of the left in the unions have gone gaga over, Amy Dean was one as was SEIU’s Andy Stern.  Always looking for a savior except the organized power of the working class.

Joining with airline executives and the investors behind them under the “all in this together” canopy is a guarantee that union members and the working class and taxpayers as a whole will suffer. After workers saved US capitalism from itself in 2008 bailing out the auto industry being one example, the end result was that Ultimately, the government lost about $11.8 billion on its investment in the auto makers.

I have done a fair bit of flying and have nothing but respect and admiration for the flight attendants. They work non-stop taking care of their customers and working through various time zones that can be very stressful. I remember when the airline industry forced concessions of them and attendants, (mostly women) found themselves in some areas, having to apply for welfare. Others who had planned to retire had those dreams dashed.

Not much of an “all together” attitude there. Sarah Nelson who has gained some respect for her outspoken views and sounding quite militant, is in danger of ending up as they all do, participating in the attacks on their own members, by relying on the Democratic Party and Congress, a direct result of the Team Concept and the view that there are no differences.

It is absurd that the taxpayer, the working class which is most of us, are borrowing billions of dollars that we will hand over to a ruthless bunch of wasters so that they can keep the business and pay our wages. After the Great Recession the hatred and anger at the super rich and the government was very strong. Here we are bailing the system out again and the heads of organized labor are reminding us that there are no differences among us; bankers and hedge fund managers, are no different to waiters and welders.

This is the time for any labor leader that claims to be heading in a new direction to call for the nationalization of the airline industry. If we are paying the wages why don’t we collectively own the company?  In the UK, workers have shown that they want the re-nationalization of the major important industries, mail, rail, water and do on. In the US we never hear any alternative views only pro-market propaganda from representatives of the two big business parties and their candidates. In the debates we only hear carefully scripted questions and answers from the two big business parties, I recall Jill Stein getting arrested trying to get in to the debates some years ago.

Our postal service is a public agency and an extremely efficient one if we are talking about serving the majority of the population rather than providing profits for a minority that don’t work. Many fire departments, the TVA, are public so are social services despite being savaged by privatization to a great extent. Public services like public jobs are overwhelmingly positive.

Nationalizing a major industry within the framework of a capitalist economy is not the be all and end all of it, only a small step but an important one as it undermines the propaganda that the market and the private sector is the only means of organizing society. Relying on our own collective strength and applying it through a direct action fight to win strategy, and building our own independent political party is the path the US working class must open up ahead.

*1840's appeal from New England laborers to their fellows to abandon the idea that the employers/capitalists would solve working people's problems.  Philip Foner History of the Labor Movement Vol. 1 p192

German Workers Bail Out Lufthansa. Why Not Nationalize it?

I got the info from the Wall Street Journal but my subscription has run out and I cannot afford to renew it at this point but here is an article on the same subject. https://www.cnbc.com/2020/05/25/lufthansa-and-german-government-agree-9point8-billion-rescue-package.html

Another crisis looms as the moneylender rules.

We won't be so willing next time

by Richard Mellor

Afscme Local 444, retired

Imagine a group of people being lost in the desert and coming upon a guy at a well with ample water but refusing to give you any unless you fork over some cash or possessions.  You would not look favorably on this man to say the least, after all, water is a life-sustaining product. He would be considered selfish. He would be seen as a parasite if he demanded from the thirsty their few worldly possessions each time they needed to drink.  There would be talk of commandeering his well, most willing to share the now collective product with him but others willing to introduce him to his maker for his his greed and lack of humanity.

Yet the economic system under which we live is based on this sort of activity. It is based, as James Connolly once said on the, “strong devouring the weak; its theory of the world of men and women is that of a glorified pig-trough where the biggest swine gets the most swill." The competition for possession of the world’s wealth has driven nations in to violent conflict and two major world wars ending with the nuclear annihilation of whole civilian populations. Isn’t the so-called free market swell?

By their own account, the heroes of this system, are the men (and women but mostly men) with the well. They own the accumulated wealth, the product of generations of human labor power in use and use that wealth to accumulate even more. When wealth creation through the labor process is impossible or limited for various reasons, they resort to a more parasitical activity, gambling, at times shifting wealth from one capitalist to another as they compete for riches and all times appropriating surplus value from the working class.  This type of gambling has dire consequences for humanity and the natural world in which we live. For the capitalist it can be exciting and lead to incredible social power and domination over others. This class calls it success and this success from their point of view, is the product of hard work.

One example of a successful and hard working capitalist is Wesley Edens. Edens is the founder of a gambling and moneylending outfit called Fortress Investment Group.  Mr. Edens was on the front page of the Wall Street Journal last week. These journals detail the activity of these people announcing their successes and failures and providing insights in to how this gravy train can keep on running. He is a golden boy for the moment.

Edens lost big in the Great Recession of 2007 as he didn’t bet money, as others of his kind did, that workers, mostly low waged or retired workers, would be driven to the point where they couldn’t pay the moneylenders that are in the home lending business and their homes, or human shelter were taken from them as a result.

Things were so bad, the Wall Street Journal says, that his company’s stock price fell below $1. But Edens pulled himself up by his bootstraps as “self made” men are wont to do. He worked a lot of overtime I assume and saved up $124 million and invested it in another moneylending outfit called Springleaf Holdings.  Springleaf Holdings is not going to make the same mistake and has been investing in subprime lending. And just to clarify, Subprime are people who are a bit of a risk. For the poor moneylender it, “…means making loans to people who may have difficulty maintaining the repayment schedule, sometimes reflecting setbacks, such as unemployment, divorce, medical emergencies, etc.”, more here.

As Investopedia puts it:  A subprime mortgage is a type of loan granted to individuals with poor credit histories (often below 600), who, as a result of their deficient credit ratings, would not be able to qualify for conventional mortgages. Because subprime borrowers present a higher risk for lenders, subprime mortgages charge interest rates.

Credit rating agencies are organizations of capitalists designed to protect their interests, to ensure they get paid, and if not the guilty party is punished. They rate the ability of an entity to pay, or their credit worthiness as they say. Any working class person, or community business owner who has, through no fault of their own fallen on hard times, is well aware of the power of these institutions that can make it impossible to rent an apartment buy a home or buy a car to get to work. They can make you homeless in no time at all.

So far Mr. Edens honest hard work is paying off. In five years that $124 million has “ballooned” to $3.5 billion according to the WSJ, 27 times the original investment. A further $1 billion investment in Nationstar, has so far brought in $350 million.  Nationstar is an organized gang that collects payment on home loans, about 20% of them subprime.

Edens as the largest investor in Fortress, owner of these two other moneylending gangs, Springleaf and Nationstar, personally picks up $200 million for his efforts and no doubt other moneylenders and related personal share the rest. Eden’s puts his hard earned money to good use benefitting society as a whole; he’s a part owner of the Milwaukee Bucks. 

His successes has made Mr. Edens the new “Subprime King” but as we are well aware, it could be short lived as the only thing constant in the capitalist economy is never ending insecurity.  Mr. Edens is not keen on this new title as the term Subprime reminds them all of the Great Recession when capitalism tottered on the edge of the abyss only to be saved by massive injections of public funds. Nationalization of auto, banking and other failed industries helped although the US 1% prefer the term “conservatorship”, it’s a little less socialistic.

Eden’s motive are purely altruistic he would have us believe, “…it’s not a shameful thing helping people finance themselves. It’s not a bad thing”, he tells the WSJ as he explains that today’s subprime market is different than the one that kicked off the Great Recession.  “Today’s expanding subprime-loan market is different from the last one.”, the Wall Street Journal writes, and, “This boom is fueled largely by auto loans, credit cards and personal loans, which appeal to borrowers straining under the limp economic recovery and puny wage gains”. It’s interesting the words they use to describe the results of their economic activity that makes it all seem so harmless, we all become “collateral damage”, why, that’s no damage at all.

In reality though, A borrower that is “straining under the limp recovery and puny wage gains.” is a human being  under severe stress. It is a human being that, working for wages or not, doesn’t have the means to obtain so many basic necessities of life for themselves or their families. They have to turn to the likes of Wesley Edens and others, have to resort to debt slavery to obtain basic necessities like transportation, medical care and in some cases food as credit card purchases of food are not uncommon.  If the strain of financing Mr. Eden’s investment portfolio is too much for these borrowers, then their homes, cars and their dignity will be stripped from them and it’s all legal. Some turn to petty crime and the most damaged turn to drug and alcohol abuse.  Those that draw the best conclusions for their predicament seek political answers.

The Journal claims that moneylenders like this new subprime activity because “borrowers” people who need to find shelter,  “Did a better job handling those loans during the crisis than they did with mortgages.” This was pointed out during the Great Recession, that people were much less likely to default on their mortgage than their car loan as without a car they couldn’t get to work and with one they at least had somewhere to sleep. People reading this might recall the websites that were set up to help people walk away form the moneylender’s grasp----people were very angry.

We can see that the activity that kicked of the Great Recession is in full swing yet again. They can’t help it; they are driven by the laws of the market from crisis to never ending crisis until the entire global system collapses. Not so, says Edens, “Lending to people without great credit wasn’t the problem,” His activity is different, as each applicant’s income is verified and his companies won’t make the loan unless it is sure the borrower can pay it back.

What an absurd statement. Whether a person has a job or an income that can provide a decent living has more to do with objective events than personal choices. More than 5 million homeowners lost their homes to the moneylenders after the Great Recession hit. The spin doctors would have us believe this was all poor decision making and that the moneylenders are providing a social service, Edens says of his activity:

“A lot of people live paycheck to paycheck, and if they don’t have financing it’s not good for the country,” Edens tells the Wall Street Journal,  “This is a more humane way of people dealing with credit.”

What a swell guy! But why is it that people live paycheck to paycheck?  It couldn’t be low wages, high rents or exorbitant mortgages could it?

Reading of Mr. Eden’s altruistic activity I am reminded of the last wave of altruism that brought capitalism to the edge of the abyss back in 2007. “…something very nasty is going down.” wrote John Gapper in the Financial Times back then. *  Something very nasty indeed, and the prime recipients of the subprime mess were poor people and African Americans in particular. Martin Eakes, a credit union CEO referred to the Subprime collapse as a catastrophe that could become, “the largest loss of African-American wealth in American history.”**

Gertrude Johnson, an 89-year-old still working as a health aide was a real life victim of this parasitic activity. Her mortgage, at more than $3000 was more than she could handle.  Unlike the moneylenders, Ms. Johnson simply needed a home to live in, human shelter that should be a right in any civilized society. She wasn’t looking to boost her portfolio or increase her share in sports franchise or in “flipping” houses. What a disgusting term that is and it's used as if it is an honorable activity. Instead, Ms. Johnson told the Wall Street Journal:  "I just wanted to be able to eat and sleep in my house and have a roof over my head", says 89 year old Gertrude Robertson, "Every day at midnight when I go to sleep, I think maybe when I wake in the morning they'll tell me to get out."

I wonder where Ms Johnson is now if she's still alive.

This should be a reminder to those who are working the three jobs in the hope that things will change, partying their stress away or avoiding struggle completely, that, as Pericles reminded us, "Just because you don't take an interest in politics doesn't mean politics won't take an interest in you." The stage is being set for another crisis as bad if not worse than before.  What’s different is US capitalism’s ability to recover from it. The anger that still lies beneath the surface of US society due to the bailing out of the culprits last time will reemerge with a vengeance.  The US security machine is also quite stretched involved in numerous wars and military engagements in its struggle to slow its declining influence on the world stage.

What is so great about the system in which we live?  The term Subprime loan is designed to warn the moneylender that they need to take precautions when they lend to poor people needing shelter, food or anything like that. So they do.  Eden’s asks for 26% interest for his generosity. And like all our mortgages, these moneylenders ensure all the interest is at the front end.  Getting their blood money comes first. The poor can never extricate themselves from their predicament having the likes of Mr Edens on their backs and the rest of us will be lucky if we own our homes before we die.

I am not fond of using Biblical quotes as there is just about everything in that book for everyone, sinner and saint, and one can choose what one wants but..........

Proverbs 22:7 has some thoughts on the activities of those who govern the society in which we live: “The rich rules over the poor, and the borrower is the slave of the lender.”  

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Leviticus 25:35-37  says: “If your brother becomes poor and cannot maintain himself with you, you shall support him as though he were a stranger and a sojourner, and he shall live with you. Take no interest from him or profit, but fear your God, that your brother may live beside you. You shall not lend him your money at interest, nor give him your food for profit.”

Now Shakespeare warned, in Hamlet, “neither a lender or a borrower be” which is sound advice, particularly for the borrower but this assumes we have free will. And we all know as Marx commented, that we have free will but rarely under circumstances of our own choosing.

In the next and possibly greater crisis as capitalism finds itself on the edge of the abyss, let’s nudge it over OK.

* Financial Times 3-19-07

** ibid

Further reflections on the Greek situation.

From Pat Byrne *

With regards to the situation in Greece, It is important to avoid making the currency issue (staying in the Euro or a return to the drachma) the central question. To my mind a thousand times more important in Greece was the need for Syriza to develop a democratic socialist plan before the election on which to stand and win. I have written in previous posts how I think such a plan could have been developed and why it would have made Syriza even more popular both in Greece and abroad.

In that case a Syriza's win in January's election would have had to be immediately followed by the democratic public ownership of the banks and the rest of the Greek financial sector. This would have stopped the outflow of funds from Greece which slowly but surely crippled its cash flow and allowed the ECB to gain a much greater stranglehold on the economy and economic life of the people.

Also important would have been to begin the immediate implementation of a plan to democratize the Greek media so that the mass of the population was able to receive the whole truth and not the lies of the super-rich who dominate the Greek press and TV. Sure, it would have been sensible for a Syriza government to visit the EU institutions and present a set of demands including for a moratorium on the debt. Not with any illusions but purely to demonstrate to the Greek people the nature of these institutions and the inhuman, anti-working class policies that they were insisting on.

And to use the democratized and international media platform created to explain to the working people of Europe how the neo-liberal policies were not designed to provide good housekeeping but to cover up their past frauds and to deliver a massive increase in wealth for the rich (at the expense of the rest of us).

If we recall the huge increase in Syriza's popularity in the immediate weeks following the election and their first rounds of visits to Brussels, Paris and so on. In my view the same thing would have happened with a Syriza government pursuing a democratic socialist policy (possibly more so). This would have provided the political opportunity to announce a moratorium on repayment of all the debts and the speedy implementation of its plans to reorganise the economy on democratic socialist lines. Something that an even bigger majority of Greeks would have been able to understand and support.

It is within that overall context that the decision would have had to be taken over the currency. We don't have the technical knowledge to know what the position would have been then. How much Euro currency would have been available and so on. Certainly, from a tactical position, if it had become obvious that an exit from the Euro was necessary it would have been much better for a Syriza government to show that Greece was thrown out than for it to leave.

But as I have stated in the past, in my opinion, euro or drachma was never the key question. It was how a Syriza government in partnership with the working people of Greece was going to reorganise the economy, and the nature of the international campaign to win support for their cause. Sadly, the Syriza leadership went into this fight with no plan beyond appealing for mercy from its enemies. It was like a boxer entering the ring with both hands tied behind his back and expecting to win by appealing to the good nature of his opponent.

Ironically, the more radical Syriza would have been, the more concessions it would have been offered by the IMF and the EU, especially if its propaganda had been more effective at unmasking the corruption behind the whole debt question and the pro- rich direction of their policies.

As it was, setting up a Debt Truth Commission two months into the government (calls for this were already several years old) meant that it never had the time or the ammunition with which to expose the debt from the outset. This allowed plenty of space for the bourgeois media to sell their lies and to pose the issue as the Greeks against the rest of Europe, when of course it was the working people of all the European countries who are being hammered into the ground for the same reasons. The Debt Truth Commission had to be have been done in opposition to become effective. Sadly, just one more failure to prepare for the battle.

* Pat Byrne is affiliated with the Socialist Network

Jobs: Lies, damned lies and statistics.

Sean O'Torrain.

We who run this blog always explain that capitalism is much worse than you can ever imagine. We maintain this. Today I would like to look at this in relation to jobs in the US. There has been twelve straight months of job growth of more than 200,000 jobs per month. This is the highest since 1995. It is true that this job growth is mainly in the sector of low paid jobs but this is still a lot of new jobs.

But let us look further. How does US capitalism react to this. This job growth leaves unemployment at between 5.2% and 5.5%. This is not an accurate figure as there are up to two million people in prison who are not counted, hundreds of thousands more homeless and who have given up looking for work. But for the sake of trying to see what is going on and what goes on let us take the figure of 5.5% unemployed. Does US capitalism rejoice at this job creation?

Here is what the Wall Street Journal, reflecting the thinking of the capitalist class it represents, has to say. It reports that the Federal Reserve policy makers, that is the representatives of the private banks who run the Federal Reserve "consider 5.5% to be full employment, or the rate the economy can sustain without stoking too much inflation." Now here is a good one. As far as US capitalism is concerned full employment is not full employment. It is at least 5.5% of the population unemployed. To repeat for US capitalism "full employment" is not full employment it is 5.5% unemployed, that is many many millions unemployed.

So what is US capitalism moving to do about this situation of rising employment.  Rising employment is related to wages and the class balance of forces. If unemployment gets lower, gets down to say around 1% or less then the capitalists will be desperate for workers. In this situation, the class balance of forces will shift to the side of the working class. Workers will be able to demand and get higher wages. The bosses profits will be hit. So what do they do? They move to reduce the number of jobs being created. They do this by using the Federal Reserve to increase interest rates, that is make borrowing more difficult. This will make it harder for businesses to borrow and consumers to borrow and it will slow up the economy and slow up job creation. Incredible. Well not incredible. This is capitalism with one of its sick contradictions. It cannot afford full employment.

Think about it further. Capitalism cannot afford full employment. So it calls 5.5% unemployment plus full employment. Then when unemployment looks like it might get lower than this "full employment" it increases interest rates to push up unemployment again. The mass media and mouthpieces of capitalism continually blame the unemployed for not wanting to work. The truth is the opposite. Capitalism does not want the unemployed to work, does not want full employment in the real sense. If there were full employment the working class might get cocky and go for higher wages and this might hurt profits.

 And think about it more. No matter how hard the unemployed try to get work capitalism will never allow there to be jobs for everybody. By its manipulation of the Federal Reserve and in the interest of its profits it will make sure that there is always a reserve army of unemployed from which it can draw cheap labor and use against the employed workers. And if these workers get angry about this they will jail them and make a lot of profits from the private for profit jail system.  No matter how hard people try, no matter how hard they study, no matter how low a wage they will work for, there will never be full employment under capitalism. It is not in their interests. They can never afford it.

And what about the union leaders in this. Where are these toothless wonders.  These creatures who line up to support the war criminal in the White House and who organize to crush any movement in the unions and workplaces for better wages and conditions. There are two major features in US  capitalism at this time. One is this the falling unemployment rate. Two is the massive quantities of capital, of money in the hands of the capitalists, both in the US and in off shore accounts. As the Wall Street journal says the country is "awash with cash." Of course they mean the US capitalists are awash with cash. But back to the toothless wonders in the union leadership. Unemployment is getting lower and this means the working class are getting stronger. The bosses profits and the stock markets are in the stratosphere. The money is there for higher wages. Now is the time to strike. But what do we see instead? These union leaders with their huge salaries arm in arm in the so-called team concept with the bosses, that is working with the bosses against the workers. And in politics working with the Democrats, one of the two capitalist parties, against the workers.

This country will have to get a good shaking. And the force that will have to give it this is the working class. There has to be built fighting centers of struggle in the workplaces, the unions, the communities, the schools and colleges to take on the offensive of capitalism through mass direct action. These have to linked together to build a movement for change. Millions unemployed and this being called full employment is not acceptable. Profits in the stratosphere while wages languish is not acceptable. Millions of people from poor backgrounds in prison while the criminals in Wall Street and the war criminals strut about free and overloaded with cash. This is not acceptable. Society has to be changed.  

Bernanke, banking crashes and recessions

by Michael Roberts

Back in 2002, current Federal Reserve chairman Ben Bernanke made a speech in honour of monetarist economist, Milton Friedman on the occasion of his 90th birthday.  Bernanke praised the work of Friedman and his colleague Anna Schwartz.  Their seminal work (A Monetary History of the United States, 1867–1960) argued that the Great Depression of 1929-33 was caused by the bad decisions of the Federal Reserve.  The Fed had let a credit bubble build up by allowing money supply to outstrip GDP growth and then the Fed cut money supply and raised interest rates too soon and engendered a banking crash and thus a deep depression. 

Bernanke ended his speech with the words:  “What I take from their work is the idea that monetary forces, particularly if unleashed in a destabilizing direction, can be extremely powerful. The best thing that central bankers can do for the world is to avoid such crises by providing the economy with, in Milton Friedman’s words, a “stable monetary background”–for example as reflected in low and stable inflation.  Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna: Regarding the Great Depression. You’re right, we did it. We’re very sorry. But thanks to you, we won’t do it again.” http://www.federalreserve.gov/boarddocs/speeches/2002/20021108/default.htm

Bernanke had famously argued in 1983 that bank failures in effect caused the Great Depression and this explains why he pushed for sufficient funding of bank bailouts, quantitative easing and other ‘unconventional’ monetary measures to avoid another depression arising from the Great Recession. The question is: is it right to claim that the Fed’s management of the money supply is crucial to causing or avoiding slumps as Friedman claimed and so plentiful supplies of credit or money can avoid banking collapses that engender slumps in the economy?

In a new paper (Bank failures and output during the Great Depression, http://www.nber.org/papers/w19418), Jeffrey Miron and Natalia Rigol do not think so.  They found “little indication that bank failures exerted a substantial or sustained impact on output during this period.”   They conclude that “At the broad-brush level, an impact of bank failures on output does not leap from the graphs. Industrial production fluctuated significantly during parts of the interwar period that experienced few bank failures. In particular, industrial production declined 28.8 percent over a span of fifteen months, from the cyclical peak in July, 1929 to the first wave of bank failures in November,1930. That magnitude decline – almost half the overall drop – makes it plausible that bank failures were partly a response to adverse economic conditions, whether or not failures contributed to output losses.”  In other words, the Great Depression kicked off with a fall in industrial output which then led to bank failures that exacerbated the crisis, but not vice versa.

What this suggests is that bailing out the banks would also do nothing to end a capitalist slump but simply preserve the interests of the financial sector.  And also that pumping money into the banks through measures like QE would have little effect on restoring investment and industrial output.  After all, the strategy has proved pretty abysmal at doing anything other than expanding the narrowest measures of money supply, or for that matter propping up banks and asset markets.  That is because  bank lending is demand-driven and when the demand for investment is not there, there is no demand for bank lending.  It is not really a supply issue (see http://www.clevelandfed.org/research/commentary/2013/2013-10.cfm).  That means bank failures are more a symptom rather than a cause of crises.

That is also suggested by a comparison of the recovery from the Great Recession by the major capitalist economies.  In the graph below (produced by the Bank of England), we can see that recovery from recessions on average is achieved within four quarters (red line).  If a banking crisis is also involved, then it takes up to 12 quarters (green line).  But the Great Recession has been much worse, with only the US getting anywhere near an average recovery (purple line), while the Eurozone and the UK in particular are still way behind.

Tony Northfield, at his excellent blog (http://economicsofimperialism.blogspot.co.uk/) and in a recent paper (Tony Norfield on derivatives and the crisis), explains well why banking crises and, in particular, the global financial crash, made the Great Recession worse than others, but is not the main cause for the slump.  “The rôle of derivatives in the latest crisis was to help extend the speculative boom. In that sense, they made the crisis worse than it might otherwise have been, especially since the deals spread far beyond the US, overcoming any more local barriers. However, derivatives did not cause the crisis, they merely gave it a peculiar intensity and financial form. Low growth and low profitability were the reasons for the boom in derivatives-trading and ‘financial innovation’.  Alongside other aspects of the credit-system, derivatives can help promote capital-accumulation by saving companies transaction-costs, by giving the impression that risks are lower than in reality, by appearing to represent wealth that can be used as collateral for loans and by generating recorded profits based on speculation-driven prices.  A blip in the system, a loan that does not get repaid as expected, can then trigger a financial collapse as it calls into question the assumptions behind a myriad of other deals. This is what is really meant by a ‘lack of confidence’ in financial markets: a fear that the expected values are illusory. The financial collapse impacts upon the ‘real’ economy, as credit is withdrawn and the funds lent by banks dry up, even to previously viable companies. The end-result is a worse crisis, when it finally occurs.”

A banking crisis can make a recession worse but also make a recovery weaker.  There is a lot of evidence that the root of Japan’s lacklustre performance after its credit crunch and banking crisis in 1989 was the failure to ‘cleanse’ the banks of an overhang of debt. The bad debt problem was finally dealt with by two government-backed agencies which were established to dispose of soured loans and restructure troubled corporate borrowers, but not until the late 1990s.

In a previous post (13/02/14/japans-lost-decades-unpacked-and-repacked/), I showed how Japan’s rate of profit was raised during the 1980s by a massive credit and property boom.  But that could not last.  After the great credit bubble burst in 1989, the average rate of profit in the Japanese economy fell nearly 20% during the 1990s.  But from 1998 to 2007, it rose nearly 30%.  During the 1990s, the corporate sector deleveraged by 15%, laying the basis for profitability to recover.  Average real GDP growth eventually came back (relatively) because Japanese corporates had written off old capital enough and Japanese banks were finally in better shape to lend again – of course only after a lost decade of income and jobs for its population in the 1990s, culminating in the dire deflationary slump of 1998.

Capitalist economic recovery will only take place if capital (both tangible and fictitious) is written down and profitability is sufficiently restored.  Pumping in more money Bernanke-style merely delays that process and thus produces a weak and slow recovery at best.  But Bernanke persists in order to try and avoid a deflationary slump as in the 1930s.

AIG boss: workers' anger at their bonuses as bad as the lynching of blacks in the south

AIG boss, Robert Benmosche, the persecuted minority

by Richard Mellor

Afscme Local 444, retired

 

The CEO of AIG, the one who came after the "socialist" bailout of the company is very hurt and angry.  He told the Wall Street Journal that the anger the American people displayed over the bonuses the AIG coupon clippers were promised was as bad as the lynching of Blacks by the Klan and white supremacists in the American South:

The uproar over bonuses "was intended to stir public anger, to get everybody out there with their pitchforks and their hangman nooses, and all that — sort of like what we did in the Deep South [decades ago]. And I think it was just as bad and just as wrong.", AIG's CEO Robert Benmosche said according to Ezra Klein the Washington Post blogger.

As Klein points out, "...enduring some public criticism for receiving multimillion-dollar bonuses after helping crash the global economy is a lot like being hanged from a tree by your neck until you die."

The poor 1%.  Perhaps Bono will release his latest version of Strange Fruit  to draw attention to the horrific way the AIG folks have been treated.  

 

Klein reminds us that back then, as the taxpayers pulled capitalism from the edge of the abyss it was fashionable to compare the treatment of the coupon clippers, those responsible for the Great recession,  to the way "Nazi Germany treated the weak." He quotes supermarket boss John Catsimatidis who said; “Taxes are going to go up regardless. What I’m afraid of is, we shouldn’t punish any one group. Whether we’re punishing people who are wealthy,” he said. “New York is for everybody; it’s for the poor, it’s for the middle-class, it’s for the wealthy. We can’t punish any one group and chase them away. We – I mean, Hitler punished the Jews. We can’t have punishing the ‘2 percent group’ right now.”

The arrogance of these wasters.

Stephen Schwarzman, the head of one of the major coupon clipping outfits, Blackstone, said: “It’s a war,” . “It’s like when Hitler invaded Poland in 1939.”.  Schwarzman is worth $7.7 billion and is number 54 on Forbes' list of richest Americans.  He is of course, "self made" according to Forbes.

Imagine that!  Workers and our living standards have been savaged over the past period. People cannot get health care, lost their homes and jobs. Millions of youth that capitalism has abandoned languish in the US prison industrial complex and the billionaires being attacked for getting bonuses after they ran a company in to the ground, plundered the wealth of society and then were  bailed out by their victims and are being treated like the Jews under Nazism. These people are far greater killers than the worst murderers on death row.

The situation in the US is extremely volatile.  The anger beneath the surface of society bubbling like magma under a volcano cannot yet find an organizational expression.  The heads of organized Labor refuse to lead and the anger comes out in all sorts of obsessive and destructive ways, drugs, alcohol, domestic violence and religious escapism.

I know a number of young veterans  psychologically and physically damaged due to their horrific experiences fighting the US corporations' wars.  There are the millions displaced, maimed and/or killed by Washington's foreign policy developed to serve the interests of these same coupon clippers and their system. I am overwhelmed with anger that they can get away with saying things like this.  The absence of an organizational expression for this anger at the rich and their rotten system means the process of building a movement against the capitalist offensive is not only delayed but will, when it picks up speed, pass through much confusion and unnecessary roadblocks, from reaction to revolutionary activity, as it tries to find its feet.

But find its feet it will and the likes of AIG's CEO and Stephen Schwarzman and other coupon clippers might well find themselves in the same shape the Romanov's were in 1917.  There is a lot of anger out there and I have a feeling that those willing to throw themselves in front of the mass of angry workers to save the likes of these characters will be few and far between. I know I won't.