My Education as an Economist: How I Learned to Reject the Market Dogma That Dominates the Profession, By Michael Hudson / CounterPunch Sep 28 15

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I did not set out to be an economist. In college at the University of Chicago I never took a course in economics or went anywhere near its business school. My interest lay in music and the history of culture. When I left for New York City in 1961, it was to work in publishing along these lines. I had worked served as an assistant to Jerry Kaplan at the Free Press in Chicago, and thought of setting out on my own when the Hungarian literary critic George Lukacs assigned me the English-language rights to his writings. Then, in 1962 when Leon Trotsky’s widow, Natalia Sedova died, Max Shachtman, executor of her estate, assigned me the rights to Trotsky’s writings and archive. But I was unable to interest any house in backing their publication. My future turned out not to lie in publishing other peoples’ work.

My life already had changed abruptly in a single evening. My best friend from Chicago had urged that I look up Terence McCarthy, the father of one of his schoolmates. Terence was a former economist for General Electric and also the author of the “Forgash Plan.” Named for Florida Senator Morris Forgash, it proposed a World Bank for Economic Acceleration with an alternative policy to the existing World Bank – lending in domestic currency for land reform and greater self-sufficiency in food instead of plantation export crops.

My first evening’s visit with him transfixed me with two ideas that have become my life’s work. First was his almost poetic description of the flow of funds through the economic system. He explained why most financial crises historically occurred in the autumn when the crops were moved. Shifts in the Midwestern water level or climatic disruptions in other countries caused periodic droughts, which led to crop failures and drains on the banking system, forcing banks to call in their loans. Finance, natural resources and industry were parts of an interconnected system much like astronomy – and to me, an aesthetic thing of beauty. But unlike astronomical cycles, the mathematics of compound interest leads economies inevitably into a debt crash, because the financial system expands faster than the underlying economy, overburdening it with debt so that crises grow increasingly severe. Economies are torn apart by breaks in the chain of payments.

That very evening I decided to become an economist. Soon I enrolled in graduate study and sought work on Wall Street, which was the only practical way to see how economies really functioned. For the next twenty years, Terence and I spoke about an hour a day on current economic events. He had translated A History of Economic Doctrines: From the Physiocrats to Adam Smith, the first English-language version of Marx’s Theories of Surplus Value – which itself was the first real history of economic thought. For starters, he told me to read all the books in its bibliography – the Physiocrats, John Locke, Adam Smith, David Ricardo, Thomas Malthus, John Stuart Mill and so forth.

The topics that most interested me – and the focus of this book – were not taught at New York University where I took my graduate economics degrees. In fact, they are not taught in any university departments: the dynamics of debt, and how the pattern of bank lending inflates land prices, or national income accounting and the rising share absorbed by rent extraction in the Finance, Insurance and Real Estate (FIRE) sector. There was only one way to learn how to analyze these topics: to work for banks. Back in the 1960s there was barely a hint that these trends would become a great financial bubble. But the dynamics were there, and I was fortunate enough to be hired to chart them.

My first job was as mundane as could be imagined: an economist for the Savings Banks Trust Company. No longer existing, it had been created by New York’s then-127 savings banks (now also extinct, having been grabbed, privatized and emptied out by commercial bankers). I was hired to write up how savings accrued interest and were recycled into new mortgage loans. My graphs of this savings upsweep looked like Hokusai’s “Wave,” but with a pulse spiking like a cardiogram every three months on the day quarterly dividends were credited.

The rise in savings was lent to homebuyers, helping fuel the post-World War II price rise for housing. This was viewed as a seemingly endless engine of prosperity endowing a middle class with rising net worth. The more banks lend, the higher prices rise for the real estate being bought on credit. And the more prices rise, the more banks are willing to lend – as long as more people keep joining what looks like a perpetual motion wealthcreating machine.

The process works only as long as incomes are rising. Few people notice that most of their rising income is being paid for housing. They feel that they are saving – and getting richer by paying for an investment that will grow. At least, that is what worked for sixty years after World War II ended in 1945.

But bubbles always burst, because they are financed with debt, which expands like a chain letter for the economy as a whole. Mortgage debt service absorbs more and more of the rental value of real estate, and of homeowners’ income as new buyers take on more debt to buy homes that are rising in price.

Tracking the upsweep of savings and the debt-financed rise in housing prices turned out to be the best way to understand how most “paper wealth” has been created (or at least inflated) over the past century. Yet despite the fact that the economy’s largest asset is real estate – and is both the main asset and largest debt for most families – the analysis of land rent and property valuation did not even appear in the courses that I was taught in the evenings working toward my economics PhD.

When I finished my studies in 1964, I joined Chase Manhattan’s economic research department as its balance-of-payments economist. It was proved another fortunate on-the-job training experience, because the only way to learn about the topic was to work for a bank or government statistical agency. My first task was to forecast the balance of payments of Argentina, Brazil and Chile. The starting point was their export earnings and other foreign exchange receipts, which served as were a measure of how much revenue might be paid as debt service on new borrowings from U.S. banks.

Just as mortgage lenders view rental income as a flow to be turned into payment of interest, international banks view the hard-currency earnings of foreign countries as potential revenue to be capitalized into loans and paid as interest. The implicit aim of bank marketing departments – and of creditors in general – is to attach the entire economic surplus for payment of debt service.

I soon found that the Latin American countries I analyzed were fully “loaned up.” There were no more hard-currency inflows available to extract as interest on new loans or bond issues. In fact, there was capital flight. These countries could only pay what they already owed if their banks (or the International Monetary Fund) lent them the money to pay the rising flow of interest charges. This is how loans to sovereign governments were rolled over through the 1970s.

Their foreign debts mounted up at compound interest, an exponential growth that laid the ground for the crash that occurred in 1982 when Mexico announced that it couldn’t pay. In this respect, lending to Third World governments anticipated the real estate bubble that would crash in 2008. Except that Third World debts were written down in the 1980s (via Brady bonds), unlike mortgage debts.

My most important learning experience at Chase was to develop an accounting format to analyze the balance of payments of the U.S. oil industry. Standard Oil executives walked me through the contrast between economic statistics and reality. They explained how using “flags of convenience” in Liberia and Panama enabled them to avoid paying income taxes either in the producing or consuming countries by giving the illusion that no profits were being made. The key was “transfer pricing.” Shipping affiliates in these tax-avoidance centers bought crude oil at low prices from Near Eastern or Venezuelan branches where oil was produced. These shipping and banking centers – which had no tax on profits – then sold this oil at marked-up prices to refineries in Europe or elsewhere. The transfer prices were set high enough so as not to leave any profit to be declared.

In balance-of-payments terms, every dollar spent by the oil industry abroad was returned to the U.S. economy in only 18 months. My report was placed on the desks of every U.S. senator and congressman, and got the oil industry exempted from President Lyndon Johnson’s balance-of-payments controls imposed during the Vietnam War.

My last task at Chase dovetailed into the dollar problem. I was asked to estimate the volume of criminal savings going to Switzerland and other hideouts. The State Department had asked Chase and other banks to establish Caribbean branches to attract money from drug dealers, smugglers and their kin into dollar assets to support the dollar as foreign military outflows escalated. Congress helped by not imposing the 15 percent withholding tax on Treasury bond interest. My calculations showed that the most important factors in determining exchange rates were neither trade nor direct investment, but “errors and omissions,” a euphemism for “hot money.” Nobody is more “liquid” or “hot” than drug dealers and public officials embezzling their country’s export earnings. The U.S. Treasury and State Department sought to provide a safe haven for their takings, as a desperate means of offsetting the balance-of-payments cost of U.S. military spending.

In 1968 I extended my payments-flow analysis to cover the U.S. economy as a whole, working on a year’s project for the (now defunct) accounting firm of Arthur Andersen. My charts revealed that the U.S. payments deficit was entirely military in character throughout the 1960s. The private sector – foreign trade and investment – was exactly in balance, year after year, and “foreign aid” actually produced a dollar surplus (and was required to do so under U.S. law).

My monograph prompted an invitation to speak to the graduate economics faculty of the New School in 1969, where it turned out they needed someone to teach international trade and finance. I was offered the job immediately after my lecture. Having never taken a course in this subject at NYU, I thought teaching would be the best way to learn what academic theory had to say about it.

I quickly discovered that of all the subdisciplines of economics, international trade theory was the silliest. Gunboats and military spending make no appearance in this theorizing, nor do the all-important “errors and omissions,” capital flight, smuggling, or fictitious transfer pricing for tax avoidance. These elisions are needed to steer trade theory toward the perverse and destructive conclusion that any country can pay any amount of debt, simply by lowering wages enough to pay creditors. All that seems to be needed is sufficient devaluation (what mainly is devalued is the cost of local labor), or lowering wages by labor market “reforms” and austerity programs. This theory has been proved false everywhere it has been applied, but it remains the essence of IMF orthodoxy.

Academic monetary theory is even worse. Milton Friedman’s “Chicago School” relates the money supply only to commodity prices and wages, not to asset prices for real estate, stocks and bonds. It pretends that money and credit are lent to business for investment in capital goods and new hiring, not to buy real estate, stocks and bonds. There is little attempt to take into account the debt service that must be paid on this credit, diverting spending away from consumer goods and tangible capital goods. So I found academic theory to be the reverse of how the world actually works. None of my professors had enough real-world experience in banking or Wall Street to notice.

I spent three years at the New School developing an analysis of why the global economy is polarizing rather than converging. I found that “mercantilist” economic theories already in the 18th century were ahead of today’s mainstream in many ways. I also saw how much more clearly early economists recognized the problems of governments (or others) relying on creditors for policy advice. As Adam Smith explained, a creditor of the public, considered merely as such, has no interest in the good condition of any particular portion of land, or in the good management of any particular portion of capital stock. … He has no inspection of it. He can have no care about it. Its ruin may in some cases be unknown to him, and cannot directly affect him.

The bondholders’ interest is solely to extricate as much as they can as quickly as possible with little concern for the social devastation they cause. Yet they have managed to sell the idea that sovereign nations as well as individuals have a moral obligation to pay debts, even to act on behalf of creditors instead of their domestic populations.

My warning that Third World countries would not to be able to pay their debts disturbed the department’s chairman, Robert Heilbroner. Finding the idea unthinkable, he complained that my emphasis on financial overhead was distracting students from the key form of exploitation: that of wage labor by its employers. Not even the Marxist teachers he hired paid much attention to interest, debt or rent extraction.

I found a similar left-wing aversion to dealing with debt problems when I was invited to meetings at the Institute for Policy Studies in Washington. When I expressed my interest in preparing the ground for cancellation of Third World debts, IPS co-director Marcus Raskin said that he thought this was too far off the wall for them to back. (It took another decade, until 1982, for Mexico to trigger the Latin American “debt bomb” by announcing its above-noted inability to pay.)

In 1972 I published my first major book, Super Imperialism: The Economic Strategy of American Empire, explaining how taking the U.S. dollar off gold in 1971 left only U.S. Treasury debt as the basis for global reserves. The balance-of-payments deficit stemming from foreign military spending pumped dollars abroad. These ended up in the hands of central banks that recycled them to the United States by buying Treasury securities – which in turn financed the domestic budget deficit. This gives the U.S. economy a unique free financial ride. It is able to self-finance its deficits seemingly ad infinitum. The balance-of-payments deficit actually ended up financing the domestic budget deficit for many years. The post-gold international financial system obliged foreign countries to finance U.S. military spending, whether or not they supported it.

Some of my Wall Street friends helped rescue me from academia to join the think tank world with Herman Kahn at the Hudson Institute. The Defense Department gave the Institute a large contract for me to explain just how the United States was getting this free ride. I also began writing a market newsletter for a Montreal brokerage house, as Wall Street seemed more interested in my flow-of-funds analysis than the Left. In 1979 I wrote Global Fracture: The New International Economic Order, forecasting how U.S. unilateral dominance was leading to a geopolitical split along financial lines, much as the present book’s international chapters describe the strains fracturing today’s world economy.

Later in the decade I became an advisor to the United Nations Institute for Training and Development (UNITAR). My focus here too was to warn that Third World economies could not pay their foreign debts. Most of these loans were taken on to subsidize trade dependency, not restructure economies to enable them to pay. IMF “structural adjustment” austerity programs – of the type now being imposed across the Eurozone – make the debt situation worse, by raising interest rates and taxes on labor, cutting pensions and social welfare spending, and selling off the public infrastructure (especially banking, water and mineral rights, communications and transportation) to rent-seeking monopolists. This kind of “adjustment” puts the class war back in business, on an international scale.

The capstone of the UNITAR project was a 1980 meeting in Mexico hosted by its former president Luis Echeverria. A fight broke out over my insistence that Third World debtors soon would have to default. Although Wall Street bankers usually see the handwriting on the wall, their lobbyists insist that all debts can be paid, so that they can blame countries for not “tightening their belts.” Banks have a self-interest in denying the obvious problems of paying “capital transfers” in hard currency. My experience with this kind of bank-sponsored junk economics infecting public agencies inspired me to start compiling a history of how societies through the ages have handled their debt problems. It took me about a year to sketch the history of debt crises as far back as classical Greece and Rome, as well as the Biblical background of the Jubilee Year. But then I began to unearth a prehistory of debt practices going back to Sumer in the third millennium BC. The material was widely scattered through the literature, as no history of this formative Near Eastern genesis of Western economic civilization had been written.

It took me until 1984 to reconstruct how interest-bearing debt first came into being – in the temples and palaces, not among individuals bartering. Most debts were owed to these large public institutions or their collectors, which is why rulers were able to cancel debts so frequently: They were cancelling debts owed to themselves, to prevent disruption of their economies. I showed my findings to some of my academic colleagues, and the upshot was that I was invited to become a research fellow in Babylonian economic history at Harvard’s Peabody Museum (its anthropology and archaeology department).

Meanwhile, I continued consulting for financial clients. In 1999, Scudder, Stevens & Clark hired me to help establish the world’s first sovereign bond fund. I was told that inasmuch as I was known as “Dr. Doom” when it came to Third World debts, if its managing directors could convince me that these countries would continue to pay their debts for at least five years, the firm would set up a self-terminating fund of that length. This became the first sovereign wealth fund – an offshore fund registered in the Dutch West Indies and traded on the London Stock Exchange.

New lending to Latin America had stopped, leaving debtor countries so desperate for funds that Argentine and Brazilian dollar bonds were yielding 45 percent annual interest, and Mexican medium-term tessobonos over 22 percent. Yet attempts to sell the fund’s shares to U.S. and European investors failed. The shares were sold in Buenos Aires and San Paolo, mainly to the elites who held the high-yielding dollar bonds of their countries in offshore accounts. This showed us that the financial managers would indeed keep paying their governments’ foreign debts, as long as they were paying themselves as “Yankee bondholders” offshore. The Scudder fund achieved the world’s second highest-ranking rate of return in 1990.

During these years I made proposals to mainstream publishers to write a book warning about how the bubble was going to crash. They told me that this was like telling people that good sex would stop at an early age. Couldn’t I put a good-news spin [on the dark forecast] and tell readers how they could get rich from the coming crash? I concluded that most of the public is interested in understanding a great crash only after it occurs, not during the run-up when good returns are to be made. Being Dr. Doom regarding debt was like being a premature anti-fascist.

So I decided to focus on my historical research instead, and in March 1990 presented my first paper summarizing three findings that were as radical anthropologically as anything I had written in economics. Mainstream economics was still in the thrall of an individualistic “Austrian” ideology speculating that charging interest was a universal phenomena dating from Paleolithic individuals advancing cattle, seeds or money to other individuals. But I found that the first, and by far the major creditors were the temples and palaces of Bronze Age Mesopotamia, not private individuals acting on their own. Charging a set rate of interest seems to have diffused from Mesopotamia to classical Greece and Rome around the 8th century BC. The rate of interest in each region was not based on productivity, but was set purely by simplicity for calculation in the local system of fractional arithmetic: 1/60th per month in Mesopotamia, and later 1/10th per year for Greece and 1/12th for Rome.

Today these ideas are accepted within the assyriological and archaeological disciplines. In 2012, David Graeber’s Debt: The First Five Thousand Years tied together the various strands of my reconstruction of the early evolution of debt and its frequent cancellation. In the early 1990s I had tried to write my own summary, but was unable to convince publishers that the Near Eastern tradition of Biblical debt cancellations was firmly grounded. Two decades ago economic historians and even many Biblical scholars thought that the Jubilee Year was merely a literary creation, a utopian escape from practical reality. I encountered a wall of cognitive dissonance at the thought that the practice was attested to in increasingly detailed Clean Slate proclamations.

Each region had its own word for such proclamations: Sumerian amargi, meaning a return to the “mother” (ama) condition, a world in balance; Babylonian misharum, as well as andurarum, from which Judea borrowed as deror, and Hurrian shudutu. Egypt’s Rosetta Stone refers to this tradition of amnesty for debts and for liberating exiles and prisoners. Instead of a sanctity of debt, what was sacred was the regular cancellation of agrarian debts and freeing of bondservants in order to preserve social balance. Such amnesties were not destabilizing, but were essential to preserving social and economic stability.

To gain the support of the assyriological and archaeological professions, Harvard and some donor foundations helped me establish the Institute for the Study of Long-term Economic Trends (ISLET). Our plan was to hold a series of meetings every two or three years to trace the origins of economic enterprise and its privatization, land tenure, debt and money. Our first meeting was held in New York in 1984 on privatization in the ancient Near East and classical antiquity. Today, two decades later, we have published five volumes rewriting the early economic history of Western civilization. Because of their contrast with today’s pro-creditor rules – and the success of a mixed private/public economy – I make frequent references in this book to how earlier societies resolved their debt problems in contrast with how today’s world is letting debt polarize and enervate economies.

By the mid-1990s a more realistic modern financial theory was being developed by Hyman Minsky and his associates, first at the Levy Institute at Bard College and later at the University of Missouri at Kansas City (UMKC). I became a research associate at Levy writing on real estate and finance, and soon joined Randy Wray, Stephanie Kelton and others who were invited to set up an economics curriculum in Modern Monetary Theory (MMT) at UMKC. For the past twenty years our aim has been to show the steps needed to avoid the unemployment and vast transfer of property from debtors to creditors that is tearing economies apart today.

I presented my basic financial model in Kansas City in 2004, with a chart that I repeated in my May 2006 cover story for Harper’s. The Financial Times reproduced the chart in crediting me with [as] being one of the eight economists to forecast the 2008 crash. But my aim was not merely to predict it. Everyone except economists saw it coming. My chart explained the exponential financial dynamics that make crashes inevitable. I subsequently wrote a series of op-eds for the Financial Times dealing with Latvia and Iceland as dress rehearsals for the rest of Europe and the United States.

The disabling force of debt was recognized more clearly in the 18th and 19th centuries (not to mention four thousand years ago in the Bronze Age). This has led pro-creditor economists to exclude the history of economic thought from the curriculum. Mainstream economics has become blindly pro-creditor, pro-austerity (that is, anti-labor) and anti-government (except for insisting on the need for taxpayer bailouts of the largest banks and savers). Yet it has captured Congressional policy, universities and the mass media to broadcast a false map of how economies work. So most people see reality as written by the One Percent, and it is a travesty of reality.

Spouting ostensible free market ideology, the pro-creditor mainstream rejects what the classical economic reformers actually wrote. One is left to choose between central planning by a public bureaucracy, or even more centralized planning by Wall Street’s financial bureaucracy. The middle ground of a mixed public/private economy has been all but forgotten, denounced as “socialism.” Yet every successful economy in history has been a mixed economy.

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This essay is excerpted from the introduction to Killing the Host.

Michael Hudson’s new book, Killing the Host is published in e-format by CounterPunch Books and in print by Islet. He can be reached via his website, mh@michael-hudson.com

The U.S Grand Strategy for Syria - the farce is played out, Andrew Taylor Sept 30 2015

The US United Nations delegation: fronting on behalf of incoherence

The "Curse on both your houses" western policy toward the government and ISIS of Syria has been pre-empted by the swift Russian strikes against ISIS and in defence of Syria's lawful national sovereignty and Russia's national interests.

There are only 4 or 5 US-trained Syrian Fighters remaining combating ISIS from the original 54 inserted into Syria in July 2015. The U.S strategy for Syria approved one year ago was/ is (?) to defeat/contain ISIS by training 5,400 Rebels over the following year period in a 500 million dollar program., These numbers were not reached and of 50 US trained fighters most have either defected to al Nusra (the Syrian al Qaeda front) or been killed by the larger jihadist rebel battalions.

Further information released in recent days by U.S. defense officials has confirmed that military equipment issued by the United States to Syrian rebel fighters has been funneled to al Nusra, the al Qaeda offshoot.

The US supplied lethal equipment, which included ammunition and pick-up trucks, was “surrendered” to an al Nusra Front affiliate in order to ensure that the US sponsored rebel fighters could pass freely through territories controlled by the terrorist group

CBS News interviewed Colonel Hassan Mustafa a commander in Syria's American-trained rebel fighters who refused to show his face for fear of being killed by the other guerilla forces on the ground in Syria. His fear of showing his identity indicates the precarious and slender profile of the US allied Syrian guerillas. Salafists don't like armed American agents in Syria and the government is of the same disposition.

Finally, Pentagon officials admitted on Sep 16th that only 4 or 5 individuals from the fighters already vetted by America remain in the fight against ISIS. This admission was made by the Head of US Central Command, General Lloyd Austin.
Gen Austin however insisted "We continue to make progress across the battle space"..

What of the UK's level of participation in the US-led Air campaign aspect of the Coalition against ISIS in Syria? In May of this year the UK Ministry of Defence reported the Royal Air Force destroyed 4 Isis machine-gun positions, some bulldozers and 2 “vehicles” (one of them “large” the other probably a Toyota Hilux with a gun on the back). Three “buildings” were also flattened. "As Crispin Blunt has rightly said ... the British arm of the US-led Air campaign Coalition against ISIS in Syria achieves very little and will in future achieve very little."( "Bomb Syria, and recruits will be rolling up to join Isis", by Frank Ledwidge, The Guardian)

The US Media specially the New York Times have together with the neocons been "egging Obama into a U.S. military intervention to destroy Assad’s military so the insignificant “moderates” could somehow prevail." (Robert Parry, "NYT’s New Propaganda on Syria",June 3, 2015). Any possible White House action along such lines have been checked by today's bombing raids against anti-government jihadists by the Russian Federation Air Force. 

The "Curse on both your houses" western policy toward the government and ISIS of Syria has been pre-empted by the swift Russian strikes against ISIS and in defence of Syria's lawful national sovereignty and Russia's national interests. These strikes followed yesterday's speech at The United Nations General Assembly elucidating the Russian position.

The international fight for secular Syria under the present state government is on. Russia has made the case for her sovereignty and the impermissibility of a Syria under the control of the jihadists. Iran, Iraq, Syria and Russia have just opened a joint command centre to oversee the crisis.Check. What next Washington?

sources: report by Col. Patrick Ryder, a spokesman for U.S. Central Command; Washington Post, New York Times, CBS News,Mideast Monitor, Haaretz,Consortium News etc.

George L. Jackson Speaks! Prison interview 1971

URL: https://vimeo.com/27978145

George Jackson Speaks! 1971 Prison Interview. George L. Jackson (September 23, 1941 – August 21, 1971) was a revolutionary activist, a member of the Black Panther Party, and of the Black Guerrilla Family, an internationalist and a Marxist. Jackson was also a Soledad Brothers and was shot to death during an escape attempt by guards in San Quentin Prison .

Syria 'in a state of complete war' with terrorism - Assad (FULL Interview)

Video URL:
https://www.youtube.com/watch?v=wELCDCPsw6M&feature=youtu.be
(40:11 min.)
Source: RT: 

Published on 15 Sep 2015

As the Syrian crisis enters its fifth year, tension in the country is still growing. Bashar Assad, the President of Syria, gives an interview to key Russian media, revealing his view on political progress, the Syrian crisis, its allies and its war on terrorism

READ MORE: http://on.rt.com/6rfe

The NDP's phony “credit card” analogy: a neoliberal conception of the public household, By Matt Fodor Sept 23, 2015

source: The Left Chapter
link: http://theleftchapter.blogspot.ca/2015/09/the-ndps-phony-credit-card-analogy.html

Matt Fodor reflect's on how right wing ideas have infiltrated the NDP's rhetoric:

"This phony “credit card” analogy shows the degree to which even social democratic and center-left parties have embraced the neoliberal conception of the public household. It appeals to the populist “common sense” idea of “if a family must live within its means, so should the government.” But this is a ludicrous idea as the government is not a private household!"


*****************************************************************************
In an attempt to shore up the NDP’s fiscal credibility, Tom Mulcair recruited Andrew Thomson, the fiscally conservative finance minister that served in the NDP provincial government of Lorne Calvert in Saskatchewan.

Thomson is running in the affluent Toronto riding of Eglinton-Lawrence against Finance Minister Joe Oliver.  While the NDP has virtually no chance of winning this Liberal-Conservative battleground riding (it is one of the weakest ridings for the NDP in Ontario), Thomson has become Mulcair’s point man in articulating economic policy.

In an ironic twist, while the Liberals are positioning themselves as the party of Keynesian interventionism, Mulcair and Thomson have effectively expunged any remaining Keynesian notions from the party.  Commenting on the press conference where Thomson’s candidacy was unveiled, respected TVO journalist Steve Paikin expressed surprise at the NDP’s attempt to present themselves as the biggest deficit hawks of the major parties.  As Paikin reports:


    “Mulcair reiterated his pledge to balance the budget during his first year in office. During a wide-ranging, free-wheeling scrum, I asked Mulcair why he thought it was so imperative to be even a tougher deficit hawk than the prime minister. He said it was immoral to go further into debt today, and pass on the responsibility of repaying those debts to our children and grandchildren. Thomson added that while Canada’s debt- to-GDP ratio is a manageable 30 per cent, if you add all provincial debts into the mix, it gets closer to 85 per cent which he considered dangerous.
    “Do you like Paul Krugman as an economist?” I asked Thomson.
    “I do,” he said. Krugman has repeatedly written in his New York Times column that with interest rates at historic lows, it’s a perfect time to deficit spend to catch up for decades of under investment in infrastructure.
    “But on this one, Krugman’s wrong,” Thomson said.”


Krugman has of course been one of the most articulate and high profile critics of the economic orthodoxy of austerity, warning that in economic hard times the obsession with getting the fiscal house in order in economic hard times ultimately results in a downward spiral and contraction of the economy.   Keynesian economics calls for government intervention and deficit spending in order to stimulate the economy.

It is ironic to see the NDP present themselves as the most committed deficit fighters.  During the 2008-09 fiscal crisis, Jack Layton led the charge for a greater stimulus, in opposition to the Hooverian orthodoxy of the Harper government.  And as recently as last year, Finance Critic Peggy Nash stated that the government’s focus on deficit reduction was wrong-headed in a time of high unemployment and the economy operating below potential.

Nor are the two NDP provincial governments prioritizing fighting the deficit.  The government of Greg Selinger in Manitoba has run deficits since 2009.  And while the government of Rachel Notley in Alberta inherited a deficit from the previous Conservative government, it has vowed not to cut services in order to balance the books.

In criticizing Trudeau’s short-term deficit spending plan, Mulcair and Thomson have continued to present right-wing talking points.  A particularly ludicrous example is this recent statement, which says:  “Justin Trudeau has already maxed out his deficit credit card in the first year of his “fiscal plan.””

These right-wing talking points are balanced out by ones about “deep Martin style cuts.”  Yet the NDP, if it accepts the self-imposed constraints of balancing the budget no matter what the circumstances (while keeping taxes at “competitive” levels) will almost inevitably be forced to make cuts (and the experience of the Ford regime in Toronto has shown that the idea of only pursuing “painless” cuts, going only after waste without touching essential services, is a mirage).  And they certainly render a social democratic reform program virtually impossible.

This phony “credit card” analogy shows the degree to which even social democratic and center-left parties have embraced the neoliberal conception of the public household.  It appeals to the populist “common sense” idea of “if a family must live within its means, so should the government.”  But this is a ludicrous idea as the government is not a private household!

The distinguished political economist Andrew Gamble has argued that neoliberals have too long dominated the discourse about the public household.  According to Gamble, the center-left must

    ...find new ways to talk about the economic crisis and to engage in the politics of austerity.  At present it is losing the argument.  One of the reasons for this is that politicians of the centre-right have generally been more adept at employing a discourse about an international market system that must obey the impersonal rules of ‘market forces’ alongside a discourse about the public household.  In this discourse the public household is often reduced by analogy to a private household (which must subordinate everything to balancing its income with its expenditure) or to a corporate household (which subordinates everything to the bottom line and the pursuit of efficiency.

In recent years even the center-left has often accepted the “minimalist” conception of the public household, and should again be “maximalist.”  As Gamble states: “Recapturing the confidence to affirm the importance of politics that shape the way markets are governed and companies are governed is an essential step to a new centre-left political economy.”

The NDP’s embrace of conservative talking points about deficits and use of a “credit card” analogy to talk about government spending shows that they have a long way to go!

Source:  Andrew Gamble (2013), “Coming to Terms With Capitalism: Austerity Politics and the Public Household.”  In Olaf Cramme, Patrick Diamond and Michael McTernan, Progressive Politics After the Crash: Governing from the Left.  London: I.B. Tauris.
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Matt Fodor is a Toronto based writer and academic. He is a Ph.D. candidate in political science at York University.
This piece originally appeared on Matt Fodor's new political blog, Dropping the Writ. It is reprinted here with permission.
Matt has also started a blog dedicated to Toronto's local history,  South of Bloor St.

US Neocons Babble Over Syria Crisis, By Daniel Lazare, Sept 16, 2015

Consortium news: https://consortiumnews.com/2015/09/16/neocons-babble-over-syria-crisis/

Typical of the incoherence now common among U.S. foreign policy pundits discussing the Syrian crisis is Jeffrey Lewis, who took to the pages of the prestigious journal Foreign Policy to venture his opinion. He started out reciting the usual “group think” narrative about the need to oust Syrian President Bashar al-Assad and denounced Russia’s President Vladimir Putin for stepping up support for the Syrian military in the face of gains by Sunni terror groups.

But Lewis, who is billed as an arms-control specialist at the James Martin Center for Nonproliferation Studies in Monterey, California, then admitted that he doesn’t have a clue what to do, which at least is an improvement over all the other “experts” who say the U.S. must do something – anything! – to counter Russian intervention.

Lewis begins his article with a lot of scary talk about satellite photos confirming that Russia is expanding an air base near Latakia with the goal of increasing military aid to the evil Bashar al-Assad so as to give his doddering regime another lease on life.

“The satellite image shows far more than prefabricated housing and an air traffic control station,” Lewis observed. “It shows extensive construction of what appears to be a military canton … designed to support Russian combat air operations from the base and [which] may serve as a logistical hub for Russian combat forces.”

U.S. officials, he said, “believe Russia will base combat aircraft at the site.” The photos show that “construction crews have completed a taxiway that connects the runway to the construction area,” which in turn “means aircraft shelters for Russian aircraft.” Bottom line: “Russia is substantially expanding its involvement.”

In other words, the Russians are coming! The Russians are coming! After all, alarmism and drumbeating are de rigueur nowadays for U.S. pundits, so Lewis was doing what he had to do to remain in good standing with an increasingly bellicose – and delusional – foreign-policy establishment.

Lewis then accused Moscow of preventing a U.S.-favored regime change that would somehow please “moderate” Syrians so much that they would rally and defeat Al Qaeda and the Islamic State. That notion of an easy and seamless “regime change” is one of the favorite fantasies of neoconservatives and liberal interventionists who were equally confident that they could neatly transform Iraq by installing think-tank favorite Ahmed Chalabi to replace Saddam Hussein.

But now with the Russian intervention in Syria, at least Lewis and his fellow pundits have an excuse for why their best-laid plans didn’t work out this time. It’s Putin’s fault!

“What Russia has done,” Lewis wrote, “is make it clear that it will not let Assad fall. He can’t win, but Russia won’t let him lose. That dooms Syria to what looks like endless war. … So this column does not have a neat and tidy ending. And that is because I am not sure that it is now possible to save Syria. There is no path to resurrect a state that is failing, not so long as Putin has decided to do whatever it takes to preserve Assad’s awful regime and condemn Syria to endless conflict.

“We can, of course, make it difficult for Russia to resupply its forces in Syria. …  But these measures won’t replace Bashar al-Assad with a figure who could rally moderate Syrians to restore a stable government, let alone stop the bloodshed.”

In Lewis’s view, Putin’s insertion of Russian forces to defend the Syrian government and fight Al Qaeda and the Islamic State has checkmated U.S. plans for overthrowing Assad and neutralizing his military.

Lewis wrote: “There is now little hope of establishing a no-fly zone over Syria unless Washington wants to be in the business of shooting down Russian aircraft. From a broader perspective, U.S. efforts to arm the opposition to Assad mean fighting a proxy war with Moscow either by trying to down the Russian planes or helping Syrian opposition forces kill Russian combat troops on the ground.”

World War III, Anyone?

Unless President Obama thinks that Syria is a good place to start World War III, he has no choice but to back off. But Lewis’s conclusion rests of two dubious claims that he makes no effort to prove. The first is that Assad is uninterested in fighting the Islamic State and is indeed happy to see ISIS (or ISIL or Daesh as it is also know) open up a “second front” against rebel groups with whom his troops are engaged.

The second claim is that Assad is weak and unpopular yet at the same time so Machiavellian as to foster the growth of an ultra-violent Salafist group that scares the pants off the West and encourages ordinary Syrians to seek shelter in areas under his control.

But these assertions are a variation on the right-wing conspiracy theory that the evil genius in Damascus encouraged the growth of ISIS by springing jihadi elements from prison in the belief that they would rush out to join the opposition and thus bring discredit on the rebels. If you believe this, then you might as well believe that the CIA wired the World Trade Center with explosives in order to provide George W. Bush with a pretext for the War on Terror.

The facts in Syria are otherwise. According to no less an authority than Vice President Joe Biden, Saudi Arabia and the other Arab gulf states “poured hundreds of millions of dollars and tens of thousands of tons of military weapons into … Al Nusra and Al Qaeda and the extremist elements of jihadis coming from other parts of the world,” groups that eventually morphed into ISIS.

As early as August 2012, the Defense Intelligence Agency noted that Al Qaeda, the Muslim Brotherhood, and other such groups were driving the anti-Assad movement, that they were seeking to establish a “Salafist principality” in eastern Syria as part of an international anti-Shi‘ite crusade, and that their backers in the U.S., Turkey, and the gulf states were all comfortable with such an outcome. [See Consortiumnews.com’s “On Syria, Incoherence, Squared.”]

So it wasn’t Assad and the Baathists who fostered the growth of ISIS, but their enemies in the super-rich oil sheikdoms of the Persian Gulf. Needless to say, the gulf states declared war on Assad not because he is undemocratic – the totalitarians in Riyadh couldn’t care less about anything so trivial – but because he is an Alawite, which is to say a member of the Shi‘ite branch of Islam that the Saudis, as even The New York Times recognizes, are obsessed with fighting.

Consequently, the Saudis, Qataris and other gulf state sheikdoms are sponsoring a reign of terror in Syria for the same reason they are imprisoning democratic protesters in Bahrain and conducting nightly bombing raids in Yemen – because they are engaged in a growing all-Sunni jihad against a “Shi‘ite crescent” that is supposedly enveloping their countries.

As for Assad’s weakness and lack of popular support, the case is not as proven as Lewis wants us to believe. As the French geographer Fabrice Balanche notes, anywhere from 55 to 72 percent of the Syrian population lives in areas under government control, which suggests that the majority has voted with its feet in favor of the Baathist regime in Damascus.

Moreover, Assad received 88.7 percent of the vote in June 2014 in multi-party elections that the State Department predictably denounced as a “disgrace,” but which 30 other countries certified as “free, fair, and transparent.” These include not just Cuba, Iran, and Venezuela, but also India and South Africa, whose opinion the U.S. usually takes more seriously.

This is not to say that the results would not be different under more normal circumstances. But it strongly suggests that the mass of ordinary Syrians prefer Assad to either ISIS, the Nusra Front (Al Qaeda’s affiliate in Syria), or any of the “moderate” rebels backed by the U.S. So Assad’s unpopularity is at best unproven.

How to Restore Stability

As for Lewis’s contention that “Assad must leave” for Syrian unity to be restored, it is a pure non-sequitur. The only thing that Assad’s departure would create under present circumstances is a power vacuum that only ISIS and other jihadists could fill. The result would be unity all right, but unity under a black banner of religious obscurantism that would send millions more refugees fleeing to Europe.

If that’s what President Obama wants, then he should by all means continue with the present policy of ousting Assad at all costs. If not, then he should think very carefully about heeding a U.S. foreign-policy establishment that unanimously backed the disastrous 2003 invasion of Iraq.

Still, Lewis’s conclusion is telling – in a backwards sort of way. As he puts it: “Moscow’s apparent commitment to Damascus raises fundamental questions about what U.S. strategy, if any, can succeed. …  There are those who see Syria as a quagmire for Putin, a kind of matched pair to our own folly in Iraq; just as Washington collectively saw Afghanistan as payback for Vietnam. …

“While Charlie Wilson’s war [in Afghanistan] helped popularize the idea of bleeding Moscow, I don’t think that can be the basis of U.S. policy either. The moral cost is far too high. Aylan Kurdi, the 3-year-old boy whose corpse washed up on a Turkish beach, was fleeing Syria’s civil war, as are hundreds of thousands of the refugees now in Europe. More than half of Syria’s 17 million people have been displaced. Bleeding Moscow means bleeding these people. It may sound strategic in a Pentagon war room, but not when children’s bodies wash up on shore.”

According to this thinking, Obama can’t let Moscow prevail in bolstering the Syrian government since that would mean prolonging Syria’s agony. But Obama can’t prevent it either, so the only thing that Lewis foresees is an endless vista of washed-up bodies and desperate refugees. It’s a vision of hell straight out of Hieronymus Bosch.

But if we were to turn Lewis’s argument upside-down – or, rather, right side up given his skewed viewpoint – it might go something like this:

If true, Moscow’s decision to step up support for Assad means that America and its Arab gulf partners will now have a harder time removing him after all. This raises fundamental questions about what U.S. strategy, if any, can succeed. Conceivably, America and its allies could admit defeat and go home. But “surrender” is not in the imperial lexicon.

Or the West could cooperate with Russia and Iran in organizing a power-sharing “unity government” in Damascus that would allow Assad to remain in office for the time being while adopting democratic reforms. Obama could also put the squeeze on Turkey, Saudi Arabia and the gulf states to stop the flow of money and weapons to Al Qaeda’s Nusra Front and ISIS. That multinational cooperation might reestablish at least some stability inside Syria.

But that would require Washington’s foreign policy establishment – both the neocons and the liberal interventionists – to get down off their high horses and admit their “regime change” approach was wrongheaded and destructive. Instead, they will almost certainly respond by demanding that Obama match Moscow’s move and raise it one higher, more support for the anti-Assad rebels, up to and including Al Qaeda and perhaps even secretly aiding ISIS as well. [See Consortiumnews.com’s “Neocons Urge Embrace of Al Qaeda.”]

The aim will not only be to topple Assad and the Baathists, but to bleed Russia the same way that U.S. and Saudi-backed mujahedeen bled the Soviets in Afghanistan (a strategy that destroyed a pro-Moscow secular regime in Kabul but also led to the rise of the Taliban and the formation of Al Qaeda). Likewise, in Syria, the human cost for upping the ante will be immense, but Washington’s vast corps of laptop bombardiers will tell themselves that it’s all Assad and Putin’s fault. These foreign policy pundits will feel good about themselves and more bellicose toward Russia.

No one knows where it will end, though one can bet that there will be many more dead Syrian children along the way as well as worsening instability reaching into Europe. But the U.S. attempts to counter the Russians will sound strategic both in Pentagon war rooms and Washington think tanks. As Madeleine Albright once said about the deaths of 500,000 Iraqi children due to U.S. sanctions, the price in terms of toppling Assad will be “worth it.”

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Daniel Lazare is the author of several books including The Frozen Republic: How the Constitution Is Paralyzing Democracy (Harcourt Brace).

Manifesto backed by prominent NDPers calls for overhaul of capitalist economy By Joan Bryden, The Canadian Press Sep 15 2015

    David Suzuki joins other actors, activists, and musicians in launching the Leap Manifesto outlining a climate and economic vision for Canada during a press conference in Toronto on Tuesday, September 15, 2015. THE CANADIAN PRESS/Darren Calabrese

    The Canadian Press - David Suzuki joins other actors, activists, and musicians in launching the Leap Manifesto outlining a climate and economic vision for Canada during a press conference in Toronto on Tuesday


OTTAWA Just as Tom Mulcair attempts to convince Canadians that the NDP is a safe, moderate choice in the Oct. 19 election, some of his party's highest profile supporters are issuing a manifesto calling for a radical restructuring of the country's economy.

The "leap manifesto," signed by more than 100 actors, musicians, labour unions, aboriginal leaders, environmentalists and other activists, aims to pressure the next federal government to wean Canada entirely off fossil fuels in as little as 35 years and, in the process, upend the capitalist system on which the economy is based.

The drivers of the manifesto are best-selling author Naomi Klein and her husband Avi Lewis. It echoes the theme of Klein's latest book: "This Changes Everything: Capitalism vs. the Climate," which was turned into a documentary of the same name, directed by Lewis.

Tuesday's release of the manifesto coincides with the debut of the documentary over the weekend at the Toronto International Film Festival.

The dramatic transformation envisioned in the manifesto is in stark contrast to the pragmatic platform Mulcair is offering: balanced budgets, an openness to free trade deals, sustainable development of Alberta's oil sands, no tax hikes except for a "slight and graduated" increase in the corporate tax rate.

Yet among the celebrity signatories are a number of prominent NDP supporters, including former Ontario NDP leader Stephen Lewis, father of Avi, who gave a rousing introduction for Mulcair at a campaign event in Toronto last month.

Others signatories who've declared their NDP sympathies include pop duo Tegan and Sara, singer-songwriter Leslie Feist, Canadian Labour Congress president Hassan Yussuf and Paul Moist, president of the Canadian Union of Public Employees.

Stephen Lewis doesn't see his support for Mulcair as inconsistent with the manifesto, which he notes is also signed by people from other parties, including Roy McMurtry, a former Ontario chief justice and one-time provincial Conservative cabinet minister.

"For the New Democrats, it's an extension of the kinds of things they've been talking about," Lewis said in an interview.

"When Tom Mulcair talks about climate change and the importance of dealing with global warming in Canada and internationally, this is an extension â?? admittedly a dramatic and vivid extension â?? of the kinds of things that many of us yearn for."

Starting with the premise that Canada's record on climate change is "a crime against humanity's future," the manifesto argues the country needs to make the leap to getting 100 per cent of its electricity from renewable resources within 20 years and weaning itself entirely off fossil fuels by 2050.

This means adopting a new "iron law" of energy development: "If you wouldn't want it in your backyard, then it doesn't belong in anyone's backyard," to be applied equally to pipelines, fracking, increased oil tanker traffic and Canadian-owned mining projects abroad.

In the process, the manifesto envisions a transformation of the entire capitalist system into a Utopia in which the economy is "in balance with the earth's limits," jobs "are designed to systematically eliminate racial and gender inequality," agriculture is "far more localized and ecologically based," and low-carbon sectors of the economy, like caregiving, teaching, social work, the arts and public-interest media, flourish.

The signatories declare their belief in "energy democracy," in which energy sources are collectively controlled by communities, rather than "profit-gouging" private companies.

They call for an end to "all corporate trade deals" that interfere with attempts to build local economies and regulate corporations.

In contrast to Mulcair's insistence that running deficits puts an unfair economic burden on future generations, the signatories declare that "austerity â?? which has systematically attacked low-carbon sectors like education and health care, while starving public transit and forcing reckless energy privatizations â?? is a fossilized form of thinking that has become a threat to life on earth."

The signatories assert that the money to pay for the transformation they envision is readily available. All it requires is for the federal government to end fossil fuel subsidies, cut military spending and impose financial transaction taxes, increased resource royalties and higher income taxes on corporations and wealthy individuals.

In Calgary on Tuesday night, Mulcair said the New Democrats welcome the ideas contained in the manifesto.

"I do understand the profound desire for change reflected in that document," he said.

"We've talked about a cap and trade system, that is our policy, that's what we will be doing."

"Before the election, we are going to tell Canadians what we are going to do and once we are elected, we are actually going to do it, it has never been tried," Mulcair said.

Other manifesto signatories include actors Ellen Page, Rachel McAdams, Sarah Polley, Pamela Anderson and Donald Sutherland, singers Bruce Cockburn, Neil Young, Gord Downie, Sarah Harmer and Leonard Cohen, novelists Michael Ondaatje and Joseph Boyden, environmentalist David Suzuki, anti-free trade activist Maude Barlow, artist Robert Bateman and film director Patricia Rozema.