Costs of Empire: Time-bombs, Guns, Risk and Anarchy (part 2)
Posted by John Steele on November 17, 2008
This article was written by Eddy Laing for the Kasama Project and is the second part in a series. Part 1 is here.
By Eddy Laing
“Investors said, ‘I don’t want to be in equities anymore and I’m not getting any return in my bond positions,’” said William T. Winters, co-chief executive of JPMorgan’s investment bank … “Two things happened. They took more and more leverage, and they reached for riskier asset classes [i.e. derivatives]. Give me yield, give me leverage, give me return.” — New York Times, 9 November 2008. (20)
The drive for profit characterizes capital. But the rates of return being realized within the finance sectors in recent years fall far behind other sectors and typically below 1% (whereas the manufacturing sectors have 4-7% rates of return and petroleum yields a return of almost 10%). This situation exerts pressure in every direction, like air filling an balloon. It is not surprising that one of those directions was on the need for housing, but there’s more to that particular story.
The toxicity of home ownership
Residential mortgage debt is a specific feature of capitalism and merits additional discussion. Throughout the last century in the US and at an increasing rate since 1945, ideological and economic pressures have been brought to bear on millions of middle strata and working class people to purchase a dwelling. Home ownership has been lauded as an ‘american dream’ and the relatively privileged position of large sections of American society in relation to the rest of the world has supported this pressure. All major US cities are ringed with suburbs that have displaced agricultural land with tract homes, shopping centers, six- and eight-lane highways, and millions of acres of parking lots. Even in the densest cities where apartment dwelling is the norm, rental housing has steadily been replaced with co-op corporation and condominium property formations, so that even in the City of New York about 35% of the housing stock is now owner occupied. (9) Nationally, in 1890, 37% of non-farm households owned their homes. (10) Today 68% of adults live in ‘owner-occupied’ housing and of those about 66% have mortgages. (11) For most of those adults, their house represents nearly all of their financial ‘net worth’. (12)
In this push toward petty property ownership, capitalism gains twice. In the first instance, it transforms a large population of workers and renters into home owners, who now have a landed stake in the status quo. American history, especially 20th C. history is overflowing with examples of how the minor privilege of home ownership has been marshaled for the most reactionary social movements — and outright pogroms — aimed at people of color, the poor and the disenfranchised. In the second instance, for most buyers, owning a home really means many years (and decades) of monthly payments to a bank that end up equaling twice or more of the appraised price of the dwelling. Housing represents the largest single annual expense for most adults, typically 25-30% of income. Before the current crisis, the development, sale, maintenance and insurance of single family dwellings represented as much as 10% of the US GDP, with new housing starts comprising about half of that figure. (13) The rising rate of mortgage delinquencies is framed by these social features.
The current crisis has already forced millions of those home owners into mortgage default and wiped out whatever financial stake they held in the house or apartment. For them, homelessness is a growing reality. For millions more, the great devaluation of housing means that they are now chained to their dwelling, unable to recover anything close to the amount of money they still owe the bank on their mortgage. Current estimates are that 20% of current mortgage borrowers owe more to the bank than their home is worth, and that number continues to grow. (11)
A recession in housing began in late-2006 with the drop-off in unit prices and a growing stock of new homes that had been built on speculation, especially in Arizona, Florida and California. An important factor in this was the rise of the Federal Reserve System’s reserve deposit (aka Fed Funds or inter-bank rate) interest rate** which, among its other effects, is the base rate with which banks calculate their own rates, including those for short-term credit and adjustable rate mortgages. The Fed steadily lowered its reserve funds rate (as a stimulus) during the last recession so that it was at or below 1.25% throughout 2003. From mid-2004 forward, the Fed began raising this rate again and by late 2005 the reserve rate was back up to 4.25%. Perhaps recognizing this as ‘counter-stimulating’, the Fed again gradually lowered its reserve deposit rate, to 3% on January 30 and 2% on April 30, 2008. (14) By that time, however, the chain-reaction of delinquencies and defaults was well underway.
As the credit crisis intensified through 2008, the growing number of mortgage defaults was chronicled by newspaper accounts of people simply ‘walking away’ from their defaulted mortgages, abandoning their former homes in despair, despite the wages they had already paid over to the banks. As the crisis deepens, despair may transform into something more volatile, with who knows what as its object.
“[The] solution of the housing question by means of chaining the worker to his own ‘home’ is arising spontaneously in the neighborhood of big or rapidly rising American towns … the worker must shoulder heavy mortgage debts in order to obtain even these dwellings, and now become slaves of their employers for fair. They are tied to their houses, they cannot go away, and must put up with whatever working conditions are offered them.”
(Engels, The Housing Question, “How Proudhon solves the housing question.” note by Engels to 1887 edition.)
To the ends of the world
“The first act of the agricultural revolution was to sweep away the huts situated on the field of labour. This was done on the largest scale, and as if in obedience to a command from on high. Thus many labourers were compelled to seek shelter in villages and towns. There they were thrown like refuse into garrets, holes, cellars and comers, in the worst back slums.” (Karl Marx, Capital, Vol. 1, Chapter 25, “The General Law of Capitalist Accumulation.”)
The desperate conditions being created by ballooning mortgage payments and increasing numbers of defaults and evictions in cities (and suburbs) across the USA provides a glimpse into just one of the ways capital literally herds people about the planet. It is not just that international capital produces a dramatic and harmful effect upon the lives of billions around the world but that it does this as a matter of course in its continual grasp for surplus-value.
Throughout the past century, as agricultural economies have been displaced with cash crop mono-cultures and other ‘Green Revolution’† innovations, throughout the ‘developing’ world of subaltern states and neo-colonies, hundreds of millions of people have been driven out of rural areas into urban ones. According to the UN, between 1975 and 2005, urban populations in the ‘less developed’ world regions grew from 816,725,000 to 2,264,787,000. (15)
Approximately 75% of the population in Latin America and the Caribbean live in cities as do a third of the populations of Africa and Asia. Between 1975 and 2005, the population of Mexico City grew from 10.6 to 18.7 million; Karachi (Pakistan) grew from 3.9 to 11.9 million; Manilla grew from 4.9 to 10.7 million; Krung Thep (Bangkok) grew from 3.8 to 6.5 million; Jakarta grew from 4.8 to 8.8 million; Delhi grew from 4.4 to 15 million; Mumbai (Bombay) grew from 7 to 18.2 million; Lagos grew from 1.8 to 8.7 millions. (15)
But these growing urban populations are not mainly moving into or building expanses of single-family bungalows or large apartment blocks. Quite the opposite, the urban centers in most of the the ‘developing world’ (the neo-colonies and former neo-colonies of Euro-American imperialism) are ringed with shanty towns in which millions and tens of millions of people try to subsist without sanitation, without drinkable water, in patched-together shacks built from recycled trash.
The World Bank considers ‘poverty’ in the developing world to be an intake equivalent of $1.25/day and estimates that 1.4 billion people try to survive in this condition. Further, 2.6 billion people struggle to survive on the equivalent of less than $2/day. (By this logic, if you consume more than the equivalent of $1.25/day, you are not poor.) (16) And so, a ‘lucky’ subset of the new urbanites is employed for a few dollars per day churning out electronic gadgets, athletic shoes and clothing; driving a truck or loading ships on the dock; or perhaps working in a smelter or refinery, processing raw materials for export from these ‘emerging markets.’
In these parts of the world, neo-liberalism produces grinding poverty as the necessary by-product of its accumulation of super-profits; “Give me yield, give me leverage, give me return.”
Nigeria, for example, with a population of 141 million is the most populous country in Africa. It has proven oil reserves of 36 billion barrels and natural gas reserves of 100 trillion cu ft. At one time many decades ago, it was agriculturally self-sufficient, but as a colony of the UK and then neo-colony of the UK and US, its agricultural sectors were redirected to producing cash crops such as cocoa and rubber, and raising poultry for export. Those sectors have been in decline in recent decades as international capital has sought out cheaper and alternative commodities elsewhere.
The UK and US remain Nigeria’s largest trading partners, primarily in the form of petroleum products. Natural resources – petroleum (81%) and minerals (8%) – make up most of sub-Saharan Africa’s exports to the US, and 60% of that oil comes from Nigeria. (21) Nigeria’s GDP is $99 billion; average life expectancy is 43.7 years. (17) ExxonMobil extracted 416,000 barrels/day from Nigeria is 2007, with an average net return of $17.37 per barrel, (18) meanwhile the workers who drive petroleum tanker trucks in Nigeria are paid the equivalent of 3.85 US$/day. (19)
Yields from an ‘emerging’ economy
“We had no punch-out time. Sometimes we would work through the night until dawn.” — textile worker in Guatemala City. (23)
If you live in the USA, chances are good that some of the clothes you wear were made in Guatemala, Honduras or another of the Central American economies, where scores of textile factories produce finished goods for name brands including Docker, Fossil, Hanes, Levi’s and Wrangler. The average wage among the 114,000 Honduran textile workers is the equivalent of about US$7/day (about 60¢/hour for a 12 hour shift). (22,23)
Officially, 40% of Latin America is below the 1.25/day poverty level, with economies that function largely as stores of raw material (oil, minerals, cash crops) and as sites for maquiladoras in ‘Free Trade Zones’ where foreign capitals extract super-profits from the local working class. (The ‘free’ in ‘free trade’ means free of trade restrictions, taxes or import tariffs, such as when shipped between CAFTA or NAFTA states.)††
In addition to providing opportunities to work 12 or 14 hour shifts at minimal wages, the Central American Free Trade Agreement requires signatories to ‘privatize’ national telecom, energy and banking sectors, and adroitly excludes any definition of ‘employment discrimination’ from its discussion of labor law. About 80% of the workers in the textile and apparel maquilas are young women, whose conditions of employment typically include mandatory pregnancy testing and coerced use of birth control pills to ensure they won’t take maternity leave. (23,24,25)
The global apparel and textiles industry is a $1.6 trillion/year process. Almost 35% of that value is created in the Americas. (31) Several large apparel companies, including Hanesbrands and Gildan Activewear have subsidiaries in these countries, but an important characteristic of the sector is factories that operate under contract to the big clothing monopolies. The ownership of these operations often involves still other foreign capitals. For example, about a third of the operations in Guatemala City are owned by Korean textile concerns. Chinese firms also have factories in Honduras and Guatemala and use Panama as a base to re-export to other CAFTA states.
Textile production circuits are classic examples of neo-liberal out-sourcing. The manufacture of brand-name jeans might involve an order for denim produced in Mexico from cotton grown in Peru. The fabric is then shipped to Guatemala for cutting according to computer-aided designs from Europe. Those pieces might then be sent on to the Dominican Republic for final sewing and packaging before ending up in stores in the US or Canada. (26,27,28)
Just over one-half of the T-shirts sold in the US are produced by workers in Central America. (29) Meanwhile workers and peasants in Latin America and Africa clothe themselves with used garments purchased from dealers who are supplied by brokers who buy up the surplus stocks of Goodwill Industries and Salvation Army thrift shops in the US. (30)
The condition of the textile sector in Central America is a sub-set of the methods by which capitalism impoverishes the overwhelming majority of people on the planet. Capital expands into every available corner of the globe. In the neo-colonial period, the process of enmeshing ‘emerging markets’ has enlisted the helping hands of local compradors and oligarchs and military juntas. But none of this ‘progress’ would arrive without the use or threatened use of machine guns, cruise missiles, 2000-pound bombs, and the expeditionary armies of the imperialist states themselves.
Part 3: The BRIC emergent neo-liberal dystopias, and the costs of missiles and armies in imperial risk management.
Notes:
** The Federal Reserve System requires commercial banks to maintain funds on deposit in the regional Federal Reserve banks to offset their own deposits and other assets. This was implemented as a guarantee against bank failures that typified the depression of the early 1930s. The Fed then pays interest to the banks on these reserves. That interest rate is the ‘federal funds rate’. The prime interest rate is an average of the best commercial bank lending rates in effect at any one time — typically 3 to 4 percentage points above the ‘Fed Funds’ rate.
† The Green Revolution describes the compulsory introduction of intensive cash-crop and industrial farming in the developing states by late-20th C. imperialism, through its various governmental and NGO agents: the IMF, the World Bank, the US Agency for International Development, etc. These policies were presented by USAID as a road to food self-sufficiency and as counterpoint to the anti-colonial struggles sweeping through Asia, Africa and Latin America in the 1950s and 1960s.
†† CAFTA stands for Central American Free Trade Agreement and includes the US, Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras and Nicaragua. NAFTA stands for North American Free Trade Agreement and includes the US, Mexico and Canada.
9. “State of New York City’s Housing & Neighborhoods 2007.” Furman Center for Real Estate & Policy. New York University School of Law.
10. “Housing, Housing Finance, and Monetary Policy.” speech by Chairman Ben S. Bernanke at the Federal Reserve Bank of Kansas City’s Economic Symposium, Jackson Hole, Wyoming. August 31, 2007
11. “One in five homeowners with mortgages under water.” Reuters. 31 October 2008.
12. Bucks, Brian K., Arthur B. Kennickell, and Kevin B. Moore. “Recent Changes in U.S. Family Finances: Evidence from the 2001 and 2004 Survey of Consumer Finances.” Federal Reserve Bulletin, vol. 92 (February 2006), pp. A1-A38.
13. “Fed’s Poole on Real Estate in the US Economy.” 9 October 2007. Market News International.
14. “Open Market Operations. Intended federal funds rate. Change and level, 1990 to present.” accessed at http://www.federalreserve.gov/fomc/fundsrate.htm
15. “World Urbanization Prospects: The 2007 Revision Population Database.” Accessed at http://esa.un.org/unup/
16. Chen S. and M. Ravallion. “The developing world is poorer than we thought, but no less successful in the fight against poverty.” Policy Research Working Paper 4703. World Bank. August 2008.
17. “Nigeria (01/08).” Bureau of African Affairs. United States State Department Documents and Publications. 24 January 2008.
18. “ExxonMobil 2007 Financial & Operating Report.” ExxonMobil. Irving, TX, USA.
19. “NUPENG suspends tank-truck drivers’ strike for multi-party talks to take hold.” ICEM InBrief. 14 July 2008.
20. Morgenson, G. “How the thundering herd faltered and fell.” New York Times: BU1. 9 November 2008.
21. Langton, D. “U.S. trade and investment relationship with Sub-Saharan Africa: the African Growth and Opportunity Act and Beyond; CRS Report for Congress.” Congressional Research Service. 1 May 2008.
22. “Honduran textile groups hope trade deal will sew up future.” Financial Times. 27 July 2007.
23. “Violations of labour rights in the textile factories in the tax-free zone; Guatemala: Labour rights mean little in maquila factories.” IPS Latin America. 16 August 2007.
24. Faber, E. M. “Pregnancy discrimination in Latin America: the exclusion of ‘employment discrimination’ from the definition of ‘labor laws’ in the Central American Free Trade Agreement.” Columbia Journal of Gender & Law, 16(1). January 2007.
25. “China trade hurts many.” Atlanta Journal-Constitution. 12 June 2007.
26. “Dominican Republic, Guatemalan firms to trade in textiles.” Florida Shipper. 5 March 2007.
27. “Mexico: Textile industry readying for neighborly exports.” El Economista. 9 October 2007.
28. “Central America: Costa Rica discusses free trade with China.” Interpress Service. 8 January 2008.
29. “In 2006 the EU imported $9US bn worth of T-shirts according to new report “World Trade in T-shirts’.” Business Wire. 21 February 2008.
30. “Your cast-offs, their profits; Items donated to Goodwill and Salvation Army often end up as part of a $1 billion-a-year used clothing business.” Atlanta Journal-Constitution. 24 December 2006.
patrickm said
‘† The Green Revolution describes the compulsory introduction of intensive cash-crop and industrial farming in the developing states by late-20th C. imperialism, through its various governmental and NGO agents, the IMF, the World Bank, the US Agency for International Development etc. These policies were presented by USAID as a road to food self-sufficiency and as counterpoint to the anti-colonial struggles sweeping through Asia, Africa and Latin America in the 1950s and 1960s.’
The Green revolution is the fantastic developments in agriculture pioneered by that truly great American Dr Norman Borlaug. The component parts of this revolution include; http://en.wikipedia.org/wiki/Green_Revolution
a) The development of high yield varieties of crops achieved by systematically unleashing scientists on the real problem of feeding the masses.
b) The application of industrially produced fertilizers to the newly developed crops, achieved by unleashing engineers on the problem of mass producing the products of scientific discoveries.
c) The industrialization of the back breaking agricultural work with the introduction of machines and the consequent proletarianisation of the agricultual sector.
d) The rejection of chemical phobia promoted by such as Rachael Carson and the use of insecticides and herbicides preventing the animal predation and plant competion on the expanded crops.
e) The development of modern transport capacity’ roads; rail; ports; and so forth together with such innovations as refrigeration preserving the food that now feeds the masses.
Communists are enthusiastic supporters of this green revolution, and not just because;
‘The average person in the developing world consumes roughly 25% more calories per day now than before the Green Revolution.’
But consider the way Eddy has described this great achievement!
His description is more than just wrong, it is disastrously muddle-headed.
For example, the now giant and emerging world power India was rid of the colonial masters in the 40s but it was not till 1961 that India’s government started the revolution that was then so desperately required. Yet;
‘Malthusian Paul R. Ehrlich, in his 1968 book The Population Bomb, said that India would never feed itself…’
He was wrong and Julian Simon (the progressive right-winger) was correct.
Once again Kasama is caught up promoting a position on the wrong side of the Ehrlich / Simon divide. This description of the green revolution is just as wrong as roof garden agriculture advocated elsewhere and is more evidence for the proposition that ‘red and green don’t mix’.
Opposition to the genuine green revolution is a classic stance of the pseudo-left infected as they are by environmental greeny-ism. Older communists must speak out in defence of modernity and the green revolution that is an intergral part of making this world a fit place for proletarian revolution.
RW Harvey said
Time to (re)read Vadana Shiva’s scathing critiques of the Green Revolution:
http://www.southendpress.org/authors/17
http://www.yesmagazine.org/article.asp?ID=698
Notes fromsomeone in the heart of the struggle in India
patrickm said
RW Harvey; Why not try making an argument against my communist advocacy of industrial development and the adoption of science and engineering globally to develop agriculture?
In short make an argument against the processess of modernity being applied in every country and not just resserved for lucky industrialised countries like you obviously live in.
I presume you are not making any argument for these processess to be reversed where you live and for us westerners to be all driven out of the cities and into the country-side to destroy monoculture farming and institute a permaculture revolution and thus carry on the backward rural life of our forebears. I presume this because I presume you don’t want to be laughed at by any proletarians that happen to be reading this.
Was it a), b), c), d), or e) above that you are against? Or is this advocacy of an obviously small is beautiful rectionary from India just flapping around because you actually agree with a)-e) and really don’t know what to say?
Whatever your choices above you can bet that the government in Nepal will not be following her path but rather advocating rapid industrialisation and development and I will strand with the Communists in Nepal taking this opposite path.
Eddy said
Patrickm wrote:
sorry, I didn’t get the memo…
but I was given a tour and presentation by the lab director of one of the major US agricultural imputs companies a few years back. I distinctly recall his very first powerpoint slide: “first, it must be patentable!”
RW Harvey said
Wow, Patrick, I guess standing with the Nepalese Maosists gives you carte blanche to lay indisputable claim to the TRUTH of your every utterance. Nice move; wish I could be so cocky.
Let’s see, I think it was all of the above since in each and every case you one-sidedly claim that all these technologies bear no contradictions and will be magical wonders in making this wide Earth a communist heaven.
As the “reactionary Ms. Shiva” makes clear: when you destroy the environment or when you deplete the water, there goes your much-vaunted development, brother.
Those mechanical materialists like yourself, who cannot see beyond some stereotypical pseudo-Marxist interpretation of Marx and the role of industrial development back in 1848 may actually drive us and all the world into the reality of anarcho-primitivity you so despise.
You think that raising the world to the American standard of consumption and technology is the panacea, while I am willing to consider that in the name of saving the environment standards may just have to come down… at least until we figure out the dialectical relationship between technology and the environment.
How about a little consideration for the possibility that turning the American paradigm of endless (and frankly hollow) consuming into a Red paradigm may be a serious mistake of overlaying revoltionary rhetoric over a moribund relationship to the Earth.
patrickm said
Having read your article I am not a bit surprised you didn’t get the memo. You will nevertheless be able to deal with the points made to RW Harvey above (especially on a bet as to what the Nepalese comrades will do) so I will wait with baited breath for your more substantive reply.
On your point about ‘first it must be patentable’. Just how many revolutionary divisions do you think a pile of patents will defeat when the revolution takes place? I seem to recall Lenin saying not to worry about rope because some capitalist or other will sell it.
patrickm said
RW Harvey is not making an argument that industrialised societies revert to methods of agriculture known in less industrialised countries. He is just worried that consumption levels may not be ’sustainable’ enter Paul Ehrlich and the time warp of 1968. My reply is that I see absolutely no indication that development is not continuing to refute Ehrlich and I stand with Simon.
RW Harvey is not just ‘willing to consider’ he is clearly actively promoting that standards came down and thus promoting the reactionary Ms. Shiva. I promote the openly communist analysis presented in Bright Future and proclaim its joyous message that this century will produce a world of abundance http://brightfuture21c.wordpress.com/
I believe that human creativity is limitless and am not the slightest bit troubled with the worries of people who show no ability to either think dialectically or to even understand that it is they who are upholding a mechanical materialist position while accusing me of just that sin. The reason Ehrlich was continually wrong footed was because he had not grasped the dialectical relationship between people and the way we transform matter. Humans thrive through ‘unsustainable’ development. ‘Sustainability’ is the problem not the solution.
Anyone would think that two world wars didn’t destroy the environment of Europe, and that London didn’t used to be a shit hole. Guess what Europe is much more liveable now than it was 60 years ago and that trend will continue. The point is industrial development does not destroy the environment. (climate change being no exception) You have been sold a pup by the MSM and you are mindlessly on-selling this pup.
forget about the ‘…paradigm of endless (and frankly hollow) consuming..’ just for a moment and just advocate that the rest of the world be industrialised as rapidly as possible so that the rest of humanity can consume at our western levels. (Or some more feeble level that you may want to nominate but no further back than when man first landed on the moon please)
Eddy said
Irony is not your strong suit, I see. The point is that capital compels the pursuit of private appropriation of social product. That’s what a patent is, after all.
But more importantly, you have dismissed an essential insight (of dialectical materialism) that freedom is the recognition of necessity.
‘Human creativity’ may be boundless in our capacity to hypothesize and conjecture, but it is not ‘limitless’. We are constrained by our environment and by our ability successfully recognize and theorize our interaction with that environment (not least because ‘we’ are part of it, not a part from it). It is precisely that constraint — enforced and codified in class society — that presents humanity with the obstacles we presently face.
The ability of the masses of people in the ‘developing’ world to practice an agriculture that enables them to eat well (and not mud pies laced with cane sugar) is constrained by the ‘normal’ workings of global capital.
Ideologically, the GR is summarized well by themselves:
“These and other developments in the field of agriculture contain the makings of a new revolution. It is not a violent Red Revolution like that of the Soviets, nor is it a White Revolution like that of the Shah of Iran. I call it the Green Revolution.”[USAID director William Gaud, 1968, as cited in wikipedia entry]
Like so many features of society, the ‘Green Revolution’ manifests both economic and ideological purposes. It is a precursor to the present-day neo-liberalism which is now crashing and burning, but not without taking tens of millions of people with it.
The GR has not served to feed the masses of people, it was not intended to feed the masses of people in any sustainable way. It was meant to extract surplus from peasant agriculture in the Third World by compelling it to adopt production methods completely out of step with the needs of the people. It promoted clear-cutting rainforest for cattle raising and cash crop production. It mandated the purchase and use of expensive seeds and fertilizers. It required a level of mechanization that could only be accomplished through capitalistic farming relationships and thus methods that prevent feeding most of the people who need to eat.
Instead, as I noted in the above essay, it has further impoverished hundreds of millions of people and driven them from the countryside into the vast slums that surround cities in the developing world.
Your puffery notwithstanding.