THE JOURNAL OF THE COMMITTEE ON MONETARY AND ECONOMIC REFORM

$3.95 Vol. 28, No. 2 • MARCH–APRIL 2016

CONTENTS The Government’s Proposed 7 Critics Slam Secrecy Around Bank Fine Infrastructure Bank: A 21st Century 8 The Lies of Neoliberal Economics (or How America Became a Nation Trojan Horse of Sharecroppers) By Joyce Nelson, May 2016 But according to members of the To- 10 Book Review: “Dark Money” by In mid-April, Bank of Canada (BOC) ronto-based Committee on Monetary and Jane Mayer governor Stephen Poloz surprised many Economic Reform (COMER), the Bank of 12 Why Public Debt Is a Good Thing Canadians when he stated that the Federal Canada Act is clear about just who is Poloz’s 13 The Panama Papers, Bail-Ins Finance Minister “is not my boss,” while “boss.” Article 14:2 of the Bank of Canada and the Push to Go Cashless insisting that the Bank of Canada “is a fully Act states that in any difference of opinion 14 Bob Campbell independent policymaker.” between the Governor and the Finance 15 Socialism in America Is Closer In reporting this, the Financial Post Minister regarding monetary policy, the Than You Think (April 13) also quoted a UK-based econo- Minister may “give to the Governor a writ- 18 Stakes Are Huge as Liberal mist who said, “Technically, the bank is ten directive…and the Bank shall comply Government Moves Forward on Canada Infrastructure Bank a Crown corporation and the shares are with that directive,” which would then have owned by the Minister of Finance. So as to be published in the Canada Gazette and 20 The Decline of Manufacturing and the Rise of Big Banks the main shareholder, it could force some presented to Parliament. decision…. But in real life, central banks Who’s the Boss? Publications Mail Agreement No. 41796016 have fought for their independence, which is widely recognized as sound policy and COMER Chair Ann Emmett told me means that the finance minister does not by phone that Poloz’s statement is appar- interfere in the bank’s affairs and allows the ently based in the belief or theory that bank to be independent.”1 Continued on page 2

“With the advice from Bank of America/Merrill Lynch, we’re setting up a CANADA INFRASTRUCTURE BANK (CIB) to give you a bigger bowl.” Bank from page 1 in the US to help design the CIB and advise there should be an arms-length relationship Infrastructure Minister Amarjeet Sohi on between the BOC and the federal govern- the project.”2 ment, but “that doesn’t mean the Bank of Working voluntarily out of Sohi’s office Canada is ‘fully independent.’” Moreover, until late September, this Bank of America FOUNDING EDITOR the BOC “isn’t like other central banks” be- Merrill Lynch banker “will also work with John Hotson 1930–1996 cause the Bank of Canada is “still a publicly- large pension funds in Canada as part of owned bank,” and the sole shareholder is the Liberal government’s efforts to persuade PUBLISHER–EDITOR actually the people of Canada. them to invest in Canadian infrastructure William Krehm COMER is proceeding with its 2011 such as transit projects.” ([email protected]) lawsuit to return the Bank of Canada to Fekete added that “the government has INFORMATION SECRETARY its pre-1974 mandate and practice of lend- also created a new, executive group position Herb Wiseman ing money at near-zero interest to federal, of Chief, Infrastructure at Finance Canada ([email protected]) provincial, and (potentially) municipal gov- to advise Finance Minister Bill Morneau on Economic Reform (ER) ernments for infrastructure and healthcare the development of the Infrastructure Bank, (ISSN 1187–080X) is published bi- spending. the plans and priorities of the Infrastructure monthly by COMER Publications Since 1974, when the governing Pierre minister, and the Finance Department’s re- 27 Sherbourne Street North, Suite 1 Trudeau Liberals quietly bowed to the lationship with PPP Canada, a Crown cor- Toronto, Ontario M4W 2T3 Canada wishes of the private Swiss-based Bank for poration that delivers public infrastructure Tel: 416­‑924-3964, Fax: 416‑466‑5827 International Settlements, Canadian gov- through public-private partnerships (P3s).” Email: [email protected] ernments have instead been borrowing from As far as I can determine, by the end of Website: www.comer.org private and foreign lenders at market inter- April the names of these advisors have not est rates – resulting in hugely escalating been published in the press or on govern- COMER Membership: Annual dues deficits and debts. ment websites – raising the question of why (includes ER plus 1 book of your choice): Just paying off the accumulated com- the secrecy? CDN$50 pound interest – called “servicing the debt” Merrill Lynch and the Bank of America Economic Reform subscription only: – is a significant part of every provincial and (which merged in 2008) were both involved One year (6 issues): in Canada, CDN$20; federal annual budget, amounting to some in the massive Wall Street mishandling of Foreign, CDN$40 $60 billion per year. asset-backed securities and investments that Renowned constitutional lawyer Rocco led to the 2008 Great Recession and the Send request and payment to: Galati has taken on the case for COMER bank bailouts – which shook the world’s COMER Publications and is prepared to take it all the way to the financial stability, with repercussions that 27 Sherbourne Street North, Suite 1 Toronto, ON M4W 2T3 Supreme Court. have continued ever since. In what appears to be a way to side-step It’s been reported that “backdoor bail- ER Back Issues: CDN/US$4, includes the COMER lawsuit and the Bank of Can- outs” for Merrill Lynch and Bank of Amer- postage; additional copies same ada, (and the Bank of Canada Act?), the Lib- ica reached “a combined $11.5 billion” in issue, $2; additional issue same order, eral government of Justin Trudeau is moving taxpayer monies.3 $3. Send requests for back issues to forward with its plan – vaguely mentioned So why would the Trudeau government Herb Wiseman, 69 Village Crescent, during the 2015 election campaign – for choose someone from Bank of America Peterborough ON K9J 0A9. a new Canada Infrastructure Bank (CIB) Merrill Lynch to advise them on setting up to finance $120 billion in infrastructure a CIB? Copyright © 2016 spending over the next ten years. The CIB One possible answer comes if we look COMER Publications would apparently be the middleman be- at the single biggest shareholder in Bank of All rights reserved tween private investors and local govern- America – a little-known company called Permission to reproduce is granted ments (municipal and provincial) looking BlackRock (no space between words).4 if accompanied by: “Copyright © 2016 COMER Publications. to fund infrastructure. World’s Biggest Investor Reproduced by permission of While the Trudeau government hasn’t COMER Publications” said whether the new CIB would be a According to The Economist (December Crown corporation or how exactly it would 7, 2013), this company (that nobody’s heard Postmaster, please send address function, some important details have re- of) turns out to be the world’s biggest inves- corrections to: cently emerged. tor, with more than $4 trillion in assets un- COMER Publications der management, and another $15 trillion 27 Sherbourne Street North, Suite 1 The Advisors that it manages (under something called Toronto, Ontario M4W 2T3 Just before the March release of the Fed- the Aladdin risk-management platform) for eral Budget (which didn’t directly mention investors worldwide.5 PRINTING AND DISTRIBUTION the CIB), the Ottawa Citizen’s Jason Fekete So influential is BlackRock that, accord- Watt Solutions Inc., London reported: “Ottawa has already taken steps ing to The Economist, the company advised Printed in Canada on recycled paper. to move the CIB project forward. It has governments in the US, Greece and Britain recruited a Canadian investment banker on what to do with toxic assets from crash- working at Bank of America Merrill Lynch ing banks, with co-founder, Chair and CEO

2 | Economic Reform March–April 2016 www.comer.org Larry Fink becoming a Washington insider.6 Stanley have been buying up and gain- ernment building” by selling or borrowing These governments sought Fink’s advice, ing control over what’s known as “the real against physical assets to generate money for despite the fact that (as Fortune reported economy” – the already-built airports, toll new investment. The Ontario government in 2008) BlackRock’s Larry Fink “was an roads, sea ports, electricity production and of Kathleen Wynne is engaging in “asset early and vigorous promoter” of “the same transmission systems, water and wastewater recycling” by selling off a majority stake in mortgage-backed securities” responsible for systems, etc., across much of the developed Hydro One (an electricity distribution sys- the crisis. “Now his firm is making millions world. These investments provide them tem) in order to finance public transit – sell- cleaning up these toxic assets,” Fortune with long-term, steady profits from tolls ing off transmission lines in order to pay for noted.7 and rents increasing shareholder value that transit lines – thereby “sacrificing billions of Besides being Bank of America’s biggest previously went to the public owners of the dollars in future revenues from the crown shareholder, BlackRock owns part of Mer- infrastructure. corporation for a one-time payment.”18 rill Lynch and in 2009 BlackRock snapped As Web of Debt author Ellen Brown The Royal Bank of Canada and the Bank up Barclays’ asset-management business, warned in 2013, such a trend represents “a of Nova Scotia acted as underwriters in thereby boosting the assets under its control return to a feudal landlord economy of un- Hydro One’s initial sell-off of 81.1 million well into the trillions. earned profits from rent-seeking.”13 shares in November 2015, with both banks The current Board of Directors for The Toronto Star recently explained that holding an “option to purchase an addi- BlackRock (blackrock.com) has some in- such investments are “low-risk” and “with tional 8.15 million shares.”19 teresting people and corporate connections, a predictable, long-term return” for the in- The C.D. Howe Institute is recommend- including one Canadian – Gordon Nixon, vestor, which is why the Canadian Pension ing that other local governments in Canada the former President and CEO of the Royal Plan Investment Board (CPPIB) – the in- imitate what Ontario is doing. Bank of Canada who retired in 2014 and vestment arm of the CPP – in 2015 bought In its January 2016 brief about infra- was appointed to the BlackRock Board in “a one-third stake in Associated British structure financing, the right-wing think July 2015.8 Ports, which owns 21 ports in the UK, for tank stated, “Canadian cities should first In its extensive 2013 coverage on Black- $2.4 billion,” and a 25% stake ($500 mil- look to emulate Ontario’s provincial policy Rock, The Economist focused on the com- lion) in one road in Sydney, Australia.14 of selling underutilized assets – such as elec- pany’s risk-management platform called Mark Wiseman, the CEO of the CPPIB tricity distribution companies – to generate Aladdin – a massive data centre that “single- (with $283 billion in assets), recently told funding for infrastructure that governments handedly manages almost as much money Bloomberg News that the CPPIB is looking necessarily must own.”20 as all the world’s private equity and hedge for “projects of scale” – airports, toll roads, (Not everyone considers electricity dis- funds,” while advising thousands of inves- ports, etc. “Canada Pension, like many tribution systems to be an “underutilized tors worldwide on where and how to invest.9 other large global investors, would rather asset.” In 2014, Warren Buffett snapped Calling Aladdin’s “prognostications” acquire mature infrastructure assets than up AltaLink in Alberta for a mere $3.2 somewhat “discomfiting,” The Economist finance new projects because they’re safer, billion, after taxpayers had poured $16 bil- noted: “Buyers, sellers and regulators may Wiseman said. He encouraged the [Cana- lion into building the electricity transmis- all be relying on the same assumptions, sim- dian] federal government to look to places sion infrastructure serving four-fifths of the ply because they are all consulting Aladdin. like Australia or the UK as examples of how province.)21 In a panic, this could increase the risk of Ottawa could utilize the capital of these Although the Trudeau Liberals’ March all of them wanting to jump the same way, global funds to meet its own infrastructure budget did not mention an infrastructure making things worse.”10 needs.”15 bank, it did refer to “asset recycling” in one With BlackRock advising on $15 trillion sentence: “Where it is in the public interest, worth of investments globally, it wasn’t just The Australian Model engage public pension plans and other inno- The Economist that was worried. As The Wall In 2013, the right-wing Australian gov- vative sources of funding – such as demand Street Journal reported, the US Treasury ernment established its “Asset Recycling management initiatives and asset recycling Department’s Office of Financial Research Initiative” – a program by which states – to increase the long-term affordability and issued a 2013 report which “concluded that and territorial governments decide which sustainability of infrastructure in Canada.” asset-management firms [like BlackRock] infrastructure assets to sell to the private As first reported by the Canadian Press’s and the funds they run were ‘vulnerable sector, while the federal government grants Andy Blatchford, “The federal government to shocks’ and may engage in ‘herding’ 15 percent of the sale price to the states/ has identified a potential source of cash to behaviour that could amplify a shock to the territories. The federal funds and proceeds help pay for Canada’s mounting infrastruc- financial system.”11 from the sales are then used to fund new ture costs – and it could involve leasing or But BlackRock lobbied hard against such infrastructure projects.16 selling stakes in major public assets such a view, and in April 2016 avoided greater Australian critics of “asset recycling” say as highways, rail lines, and ports. A line oversight from regulators in the US.12 it is basically “selling a hospital to build a [mentioning asset recycling] tucked into road,” with the federal government bribing last month’s federal budget reveals the Lib- “Herding” Behaviour local governments with incentive payments erals are considering making public assets Regardless of just who has been doing in order to sell off public assets.17 available to non-government investors, like the “herding,” it’s obvious that, over the Canada’s CUPE (Canadian Union of public pension funds…. Asset recycling is past two decades and increasingly since Public Employees) calls “asset recycling” ba- gaining an increasing amount of interna- 2008, big investors like Bank of America, sically “a new way to privatize all or part of a tional attention and one of the best-known, JP Morgan, Goldman Sachs, and Morgan public asset such as a hydro utility or a gov- large-scale examples is found in Australia.”22 www.comer.org March–April 2016 Economic Reform | 3 Blatchford further reported: “Australia’s “We have almost A$7 billion invested here asset recycling model has been praised by in- “The powers of financial capitalism had an- in Australia, or about A$1.5 billion more fluential Canadians such as Mark Wiseman, other far-reaching aim, nothing less than to than the last time I spoke here” in 2013.25 create a world system of financial control in president and CEO of the Canadian Pen- private hands able to dominate the political The “asset recycling” concept has first sion Plan Investment Board. ‘With growing system of each country and the economy been applied in Australia, and it looks like infrastructure deficits worldwide…we often of the world as a whole. This system was to the same team is hoping to apply it across reference this model with our own govern- be controlled in a feudalistic fashion by the Canada next. ment and others as one to follow to incent central banks of the world acting in concert, As well, a major PR firm appears to be in- and attract long-term capital,’ Wiseman by secret agreements arrived at in frequent volved in the effort. One of the Members of meetings and conferences. The apex of the said in prepared remarks of a September systems was to be the Bank for International the FCLT think-tank is Richard Edelman, speech [entitled “Building the Case for a Settlements in Basel, Switzerland, a private President and CEO of Edelman – one of Long-Term Perspective”] in Sydney to the bank owned and controlled by the world’s the world’s largest PR firms, with 67 offices Canadian Australian Chamber of Com- central banks which were themselves private worldwide. (This is the same PR firm that merce.”23 corporations. Each central bank…sought was let go by TransCanada Corporation in to dominate its government by its ability to 2014 after leaked documents revealed shady Tangled Web control Treasury loans, to manipulate foreign exchanges, to influence the level of eco- tactics for dealing with opposition to the In her series about the CPP and the nomic activity in the country, and to influ- Energy East tarsands pipeline.)26 An Edel- CPPIB published by the Huffington Post in ence co-operative politicians by subsequent man office is the media-contact for inquiries January 2013, Amy MacPherson revealed economic rewards in the business world.” about FCLT. the “dramatic changes” made to the CPP by — Carroll Quigley, Tragedy and Hope, p. 324 In addition, CPPIB director Michael the Harper government when first elected. Goldberg is also a director of B.C.-based MacPherson wrote: “In 2007, new leg- tank with both men on the Advisory Board. Resource Works, which (according to its islation altered CPP practices through mea- The mission statement (fclt.org) reads: “In website) promotes “fact-based dialogue on sures contained in Bill C-36. By April 2007, 2013, CPPIB and McKinsey & Company responsible resource development in British all CPP assets were transferred to control of co-founded Focusing Capital on the Long Columbia.” Critics say Resource Works is the investment board…and in 2012 they Term to develop practical structures, met- a collection of PR flacks working especially changed from passive management to active rics, and approaches for longer-term be- for the oil and gas industry.27 management techniques. Aggressive trad- haviours in the investment and business Resource Works is currently promoting ing requires a team of involved experts and worlds.” the export of Site C dam-generated electric- staff at the CPP ballooned from 70 to 811 In addition to the 10 Advisory Members ity (scheduled to be online as of 2024) to in the same short period. They’ve opened in FCLT, there are 12 Members – most of power tar sands development in Alberta, offices in Hong Kong and London, took on them people who oversee pension funds, enabling (as their website puts it) the “ex- riskier markets, decreased Canadian equities including Michael Sabia, President and pansion of the oil sands powered by clean in favour of foreign projects, hedged cur- CEO of the Caisse de depot et placement du energy to avoid climate change.” The BC rency and shifted public holdings to private Quebec, and Wayne Kozun of the Ontario Christy Clark government (which has ties interests.”24 Teachers’ Pension Plan. to Resource Works) is lobbying for federal Overseeing the CPPIB’s “active manage- So the Canada Pension Plan Investment “green infrastructure” cash to build this grid ment techniques” is a high-powered board Board, the Caisse de depot et placement du to Alberta, while the two provinces are dis- of directors that includes Heather Munroe- Quebec, and the Ontario Teachers’ Pen- cussing the possibility of a pipeline-for-elec- Blum (director of the C.D. Howe Insti- sion Plan are directly involved with Larry tricity swap, in which Alberta would agree tute and the Royal Bank of Canada, and Fink, co-founder and CEO of BlackRock, to buy BC electricity in exchange for BC’s a member of the Trilateral Commission); the biggest shareholder in Bank of America permission for a tar sands export pipeline Douglas W. Mahaffy (former Managing Merrill Lynch. – Kinder Morgan’s proposed Trans Moun- Director and Head of Investment Banking This may seem to be a tangled web, tain expansion and/or Enbridge’s Northern Ontario of Merrill Lynch Canada Inc.); and but arguably now we know better why the Gateway – to the West Coast.28 Kathleen Taylor (Chair of the Royal Bank Canadian federal government has asked a As reported in 2013, BlackRock is the of Canada). Bank of America Merrill Lynch banker to biggest shareholder in ExxonMobil (owner With two Royal Bank of Canada direc- advise on the proposed Canada Infrastruc- of Imperial Oil) and Shell Oil29, two of the tors on the CPPIB, this brings us back to ture Bank. tarsands producers pushing for pipeline ac- Gordon Nixon, the former head of the cess to tidewater on Canada’s coasts. Royal Bank of Canada and now a board PR Firms’ Involvement member of Larry Fink’s BlackRock – the In the globalized economy, giant inves- Struggling Local Governments top shareholder in Bank of America Mer- tors expect to be able to pry open and seize Provinces and municipalities across Can- rill Lynch and also the world’s largest in- the public assets of any country, including ada are struggling financially, as neoliberal vestment company, which may have been those in the developed world. Moreover, federal governments since the mid-1990s “herding” investors in worrying ways. “asset recycling” sounds so much nicer than have cut transfer payments and further As it turns out, BlackRock’s Larry Fink is “structural adjustment program.” downloaded costs onto local governments also involved with CPPIB’s Mark Wiseman According to speaking notes, CPPIB’s (which have the least ability to raise rev- in a venture called Focusing Capital on the Mark Wiseman told the Canadian Austra- enues, basically through property taxes and Long Term (FCLT), apparently a think- lian Chamber of Commerce last September, user fees).

4 | Economic Reform March–April 2016 www.comer.org Many governments have tried P3s, often Hidden History The Trudeau government’s appointment with disastrous results. In December 2014, For decades (1938 to 1974), the pub- of a banker from Bank of America Merrill Ontario’s Auditor General Bonnie Lysyk licly owned Bank of Canada funded a wide Lynch to advise on creating a new infra- blasted the Liberals’ use of private money to range of public infrastructure projects – the structure bank is the most politicized ap- finance new hospitals and transit, revealing Trans-Canada Highway, the St. Lawrence pointment possible, aside from appointing that Infrastructure Ontario’s use of P3s had Seaway, airports, hospitals, universities, etc. BlackRock’s Larry Fink himself. cost $8 billion more taxpayer dollars than – by providing near-zero interest loans to We’ll know more about what this pro- traditional public financing would have.30 provincial governments. None of these in- posed Trojan Horse looks like when (and Lysyk also criticized a “high-risk” $224 frastructure projects caused inflationary if) the advisor’s report is released in the next million government loan to keep afloat problems in the economy, and none caused few months. the biotech MaRS office tower in Toronto, our governments to become indebted to at the time mostly vacant. As the Toronto private and foreign lenders.34 That hidden Joyce Nelson is an award-winning freelance Star reported, “Four years ago [2010], the history is now emerging, thanks to the ef- writer/researcher and the author of five books. Liberals approved a rule change allowing forts of many. the MaRS loan to go ahead after a US By contrast, the proposed Canada In- End Notes developer partnering on the project failed frastructure Bank looks like a Trojan Horse 1. Gordon Isfeld, “Stephen Poloz defends the central bank’s independence from Finance Department,” Financial Post, to fill the building [with tenants]…. Gord that could usher in more indebtedness to April 13, 2016. Nixon, chair of the MaRS board, said the private lenders and more corporate control 2. Jason Fekete, “Stakes are huge as Liberal government moves non-profit organization is in ‘advanced ne- – as neofeudal landlords – over necessary forward on Canada Infrastructure Bank,” Ottawa Citizen, gotiations’ that could lift the white elephant infrastructure such as water and wastewater March 18, 2016. to 95 percent occupancy. ‘I’m confident systems, electricity systems, etc. 3. Pam Martens and Russ Martens, “One Forgotten Docu- ment Casts Embarrassing Light on Krugman’s ‘Sanders Over that we will be able to lease up the build- The founding members of COMER the Edge’ Column,” Wallstreetonparade.com, April 12, 2016. ing and get this project back on track,’ said have long questioned neoliberalism’s eco- 4. “The Rise of BlackRock,” The Economist, December 7, Nixon, the former chair of the Royal Bank nomic model based on exponential growth, 2013. of Canada.”31 with escalating private profits considered 5. Ibid. Many Ontarians certainly remember the supreme. 6. “The Monolith and the Markets,” The Economist, December 7, 2013. Auditor General’s remarks about $8 billion As COMER Vice-chair Herb Wiseman 7. Katrina Brooker, “Can This Man Save Wall Street?” Fortune, in P3 cost overruns. told me by email, “P3s are not really about November 10, 2008. More recently, Lysyk revealed Ontario’s government financing because of scarce 8. “BlackRock Announces Appointment of Gordon M. Nix to mismanagement of the electricity system money, but another con job by the corpora- Board of Directors,” Business Wire, July 30, 2015. through vastly overpaying IPPs (indepen- tions to expand their operations in order 9. “The Monolith and the Markets,” The Economist, December dent power producers). The Auditor Gen- to enhance shareholder value. It is made to 7, 2013. 10. Ibid. eral determined that because of the terms look like governments are asking for this 11. Ryan Tracy and Sarah Krouse, “One Firm Getting What for this partial privatization of electricity form of help when in fact it serves the cor- It Wants in Washington: BlackRock,” The Wall Street Journal, production, between 2008 and 2014 Ontar- porate interests for never-ending growth on April 20, 2016. ians overpaid for electricity by as much as a finite planet.” 12. Ibid. $37 billion.32 Globe and Mail columnist Konrad Yaka- 13. Ellen Brown, “Our Banks Own Airports, Control Power Plants and Much More – How Can We Stop Them from So with P3s and partial privatizations buski has urged “sober second thought” Controlling the Lifelines of the Economy?” AlterNet, August now considered somewhat “toxic” by much about infrastructure spending, citing ex- 26, 2013. of the taxpaying public, it appears that a amples in Spain, Greece and Japan (seduced 14. Adam Mayers, “Why the CPP is snapping up ports and new euphemism of “asset recycling” has by low borrowing rates from private lenders) dorms: Mayers,” Toronto Star, March 7, 2016. been created, along with a new strategy of where massive spending has created “money 15. Scott Deveau (Bloomberg), “Canadian pension funds urge Trudeau to think big on infrastructure: ‘We’re looking for 35 selling off assets in order to build new ones. pit” infrastructure that nobody uses. projects of scale,’” Financial Post, March 16, 2016. Conveniently enough, all this is happening Yakabuski noted, “If government spend- 16. Ibid. at the same time that rates for borrowing ing on superlatively smooth highways, sleek 17. Daniel Hurst and Paul Farrell, “Senate blocks government’s from private lenders are low. subways and far-stretching fast trains was the ‘asset recycling’ model,” The Guardian, July 18, 2014. The growing hype about “asset recy- ticket to success, Japan, Spain and Greece 18. CUPE, “Ours to keep: municipal public services and as- sets,” cupe.ca, May 28, 2015. cling” might well appeal to politicians, un- would lead the global economy. Instead, 19. Canadian Press, “Hydro One Debuts On TSX In Canada’s less the public catches on and understands infrastructure spending has been a major Largest IPO In 15 Years,” November 5, 2015. 36 what’s happening. source of their debt-induced woes.” Yaka- 20. Benjamin Dachis, “Getting More Buildings for our Bucks: Pension managers team up with private buski refers to “our infrastructure envy,” Canadian Infrastructure Policy in 2016,” The C.D. Howe investors to take stakes in big assets, such as suggesting that Canada is being herded Institute, January 13, 2016. 21. Joyce Nelson, “The Rockefeller Files, Part 3: Ontario elec- Australia’s Port of Melbourne – the country’s down a path that other governments have tion and privatization,” Rabble.ca, June 6, 2014. largest container terminal and the so-called already followed into further massive debt 22. Andy Blatchford (Canadian Press), “Liberals consider non- “jewel in the crown” – which the govern- to private lenders. government investors to help pay for infrastructure,” Toronto ment is hoping will sell/lease for $6 billion Renowned economist Michael Hudson Star, April 24, 2015. in order to finance other works.33 (author of Killing the Host) bluntly warns 23. Ibid. 24. Amy MacPherson, “Where Your CPP Money Really Goes: Needlessly starved for capital, govern- that this path is “the road to debt serfdom,” Parts 1 and 2,” Huffington Post, January 17 and 22, 2013. ments are doing everything but take back with a rising financial oligarchy “impover- 25. Mark Wiseman, “Building the Case for a Long-Term Per- their own monetary powers. ishing the 99%.”37 spective,” CPP Investment Board, September 16, 2015. www.comer.org March–April 2016 Economic Reform | 5 26. The Canadian Press, “TransCanada cuts ties with US pub- article raises many important questions and His job description says it all: “Claudine lic relations firm Edelman,”CBC News, November 26, 2014. concerns. told me that there was two primary objec- 27. Rafe Mair, “A PR Flack’s Guide to LNG: Dream Team tries to repair industry’s image,” Thecommonsensecanadian. What is the job description for the Chief tives of my work. First, I was to justify ca, March 15, 2015. of Infrastructure? What is his status – his huge international loans that would funnel 28. Gary Mason, “Alberta, BC discuss deal to swap pipeline for role – that he should be advising the Finance money back to MAIN and other US com- electricity,” The Globe and Mail, April 20, 2016. Minister on such matters? Why involve P3s? panies (such as Bechtel, Haliburton, Stone 29. “The Rise of BlackRock,” The Economist, December 7, Why is that worrisome? Why do we put & Webster, and Brown & Root) through 2013. up with the influence of lobbies and the massive engineering and construction proj- 30. Rob Ferguson, “Auditor general blasts Liberals’ public- private funding and ‘high-risk’ MaRS loan,” Toronto Star, shortcomings of “regulation”? Why should ects. Second, I would work to bankrupt December 9, 2014. we sacrifice the commons to build and the countries that received those loans (af- 31. Ibid. maintain infrastructure, or forever pay tolls ter they had paid Main and the other US 32. “Coming soon: Ontario’s green energy fiasco, the sequel,” for the use of infrastructure we’ll probably contractors, of course), so that they would , April 29, 2016. The Globe and Mail never get to own? be forever beholden to their creditors and 33. Lucille Keen, “Asset recycling not beyond the new Labor,” afr.com, April 13, 2016. Why does the endorsement of Australia’s would present easy targets when we needed 34. Joyce Nelson, “Bank of Canada Lawsuit,” Watershed Senti- Asset Recycling Model by the President and favours, such as military bases, UN votes, nel, January 11, 2016. CEO of the Canadian Pension Plan Invest- or access to oil and other natural resources.” 35. Konrad Yakabuski, “Infrastructure spending is no miracle ment Board remind me of Aesop’s Fable of One of several recommendations that cure,” The Globe and Mail, April 23, 2015. the fox who, catching sight of his reflection Perkins makes is to: “Demand responsible 36. Ibid. in the river he was crossing, lost his bone investments. Insist that your pension funds, 37. Michael Hudson and Gordon Long, “Wall Street Has Taken Over the Economy and Is Draining It,” Counterpunch. when he opened his mouth to go after the mutual funds, and other investments be org, May 2, 2016. one he saw in the water? dedicated to serving the public interest and Somehow, ideas like engaging public creating an environmentally sustainable, Our Comment pensions in “Aggressive trading” and “Riski- resource-regenerative, socially just world. We are living in a remarkable age of er Markets,” and of “[shifting] public hold- Let the funds and corporations where you transformation – perhaps even a defining ings to private interests” suggest that all too own stock know that you want them to be moment in the course of human evolution. constant pattern where “they” play, and, successful, and that this means participating We face serious choices; we need to know when things go wrong, “we” pay! in the creation of a life economy.” what our options are. And we need to act Wonder what the new bank might cost In Killing the Host, the eminent econo- on them. us? A “free lunch?” For whom? mist, Michael Hudson, comments: “From A separate bill, Bill 143, the Munici- What we do know about this proposed Greece and Rome to today’s world, the driv- pal Improvements Assistance Act, proved for bank is troublesome. What about what we ing force in the transition from democracy loans to municipalities. “an act to assist don’t know: to oligarchy has been the fight by creditors municipalities by making self-liquidating Lest, dear, patient reader, you may by against debtors. From the United States to improvements,” Bill 143 was passed in now, be thinking me a bit too cynical, please Europe, creditors are taking over govern- 1938. It was rescinded in 1975. consider the following points and pertinent ment agencies to control public policy and In The Public Bank Solution, chapter 17, comments. the tax system to undermine debtor rights, Ellen Brown traces the “Canadian Move- The extent to which the monopoly of privatize public property in their own hands ment for Monetary Sovereignty: Rise and money has blunted and blocked human and impose the modern equivalent of debt Fall.” She points out that, “For over three progress – has stunted and corrupted the serfdom…. decades, “The Bank of Canada used its human potential – is inestimable “In this way, the controls over state pow- lucrative credit-creating tools for the benefit Surely, given the truth about money and er are subtly maneuvered from democratic of the public. The Canadian Government power, it’s time to recognize that money is a means to the demands of the oligarchs. The funded infrastructure and social programs commons, and that everyone has a right to state will remain in financial hands until the simply by advancing the credit needed to adequate purchasing power. This is no “pipe power of oligarchs to control government accomplish them.” dream.” It makes a lot more sense than kill- fiscal and monetary policy is checked, along She goes on to explain that this ended ing the host. with their rhetorical deception as to how after Canada joined the Basel Commit- By the same token, money must serve economies work…. tee of the Bank for International Settle- life, and the common good. “Financial tacticians start by limiting ments (BIS), in 1974, and that Committee Debt is hardly a new problem; but the the sphere over which democratic choice is discouraged governments from borrowing extraordinary need to put it in its place is. allowed. Control over the Executive Branch from their own central banks interest-free, In Debt, the IMF, and the World Bank, of government is shifted to central banks and encouraged them to borrow instead Éric Toussaint and Damien Millet have and treasuries staffed by bank apparatchiks. from private creditors, including large inter- chronicled the use of debt – which they de- The cover story for this regulatory capture is national (my emphasis) banks. scribe as a “mechanism of dominance” – to that central bank “independence” from par- “By 2012,” she adds, “The Government gain control over developing nations. They tisan politics is a “hallmark of democracy” had paid C$1 trillion in interest – twice its predicted that the same treatment would – as if making financial policy indepen- national debt.” come to the rest of us. It has. dent from oversight by elected legislators is That debt has been used to justify an John Perkins, in New Confessions of An democratic!… austerity program ever since. Economic Hit Man (Berrett Koehler, 2016) “The neo-rentier objective is three-fold: Joyce Nelson’s wonderfully informative recounts his involvement in the same tactic. to reduce economies to debt dependency, to 6 | Economic Reform March–April 2016 www.comer.org transfer public utilities into creditor hands, cial oligarchy is to create global authorities Let’s not wait until the CIB is a fait ac- and then to create a rent-extracting toll- to override governments. (Like the BIS!)” compli! Let’s make sure our MPs know that booth economy. The financial objective is Mindful of Santayana’s warning that we already have an Infrastructure bank tried to block governments from writing down those who fail to remember their history are and true, and that we want them to use it debts when bankers and bondholders over- doomed to repeat it, let’s recall what Cana- – as Canadian governments used it to our lent. Taken together, these policies create a dians learned from the Great Depression, advantage between 1938 and 1974 – for its one-sided freedom for rentiers to create a and give thanks for the straight thinking intended purpose. travesty of the classical ‘Adam Smith’ view that gave us then a central bank – a central Let’s share the good news, confirmed by of free markets. It is a freedom to reduce the bank that is uncharacteristically – public. the Bank of Canada’s first governor, Graham indebted majority to a state of deepening And let’s honour that legacy and put it to Towers, that: dependency, and to gain wealth by stripping work for us in our phase of the same struggle Anything physically possible and desirable public assets built up over the centuries…. that created it. Let’s not follow the CIB bait can be made financially possible! “The path of least resistance to a finan- into the trap of perpetual debt! Élan Critics Slam Secrecy Around Bank Fine By Sunny Freeman, Toronto Star, April 7, The centre has legal power to use its give Fintrac a legal headache. Meanwhile, he 2016 discretion on whether to publicly name feels powerless when trying to get answers Financial institution fined $1.1M by mon- companies it has fined. The recent unnamed about why it fined his company, which now ey-laundering watchdog should be named, financial institution isn’t the only case where faces bankruptcy over what he says is an group says. it has taken exception – the companies unjust fine. That’s what a wide-ranging group of involved in 34 of the 74 monetary penal- “The banks are not just going to sit back critics – from lawyers to investor advocates ties the agency has levied since 2008 have and have their names slipped, but a small to companies whose infractions have been not been disclosed, said spokesman Darren company – we can’t do anything,” he said. made public – want to know about the Gibb. “All they’re doing is putting the smaller first penalty against a bank by the Financial In the case of the bank, the agency de- businesses out of business and the bigger Transactions and Reports Analysis Centre cided it was in the public interest to publish businesses who have the legal clout to con- of Canada. the details of the penalty to “send a strong test it, obviously they’re not naming names The terrorism and money-laundering message of deterrence” in a timely man- because of the fact that these companies will watchdog, known as Fintrac, announced ner rather than name the institution after do something.” Tuesday that it has issued a $1.1-million a potentially lengthy appeal process. The The first Canadian bank penalty has fine against an undisclosed financial institu- financial institution has already paid the come to light amid heightened awareness tion for failing to report a suspicious trans- $1.1-million penalty. about money laundering in the wake of the action and various other infractions. Companies have the right to appeal an so-called Panama Papers, which implicate “Our criminal and administrative law re- imposed penalty – which can include a fine numerous Canadians in dubious banking gime is based on disclosure of wrongdoing, amount and a public notice – to Fintrac’s practices around the world. not on secrecy of wrongdoing,” said Chris- director Gerald Cossette, who is ultimately The name of the violating bank should tine Duhaime, a lawyer who specializes in responsible for any decision. be disclosed because shareholders should be anti money-laundering law. Gibb said there are legal reasons why he entitled to know whether they are investing “Joe Average who is fined for any admin- cannot comment on Fintrac’s decision to in a company that is violating financial dis- istrative infraction is not afforded secrecy withhold the name, but added that neither closure standards, said Neil Gross, executive in this way and the rules should apply to the types nor the sizes of institutions are fac- director of the Canadian Foundation for all Canadians, legal and natural personals, tors in whether to disclose a name. Advancement of Investor Rights. equally, from banks to Joe Average.” “We’ve named the sector, we’ve named “For the bank in question, shareholders Fintrac said Tuesday’s announcement is the violations and we think it’s better to would have a legitimate interest in knowing meant to deter others from failing to report. send a strong message of deterrence right that the bank management have taken steps But the bank’s name was not added to across the regime than to wait potentially to ensure that there is future compliance of a list of violators published on the agency’s years and years for a review and appeal pro- Fintrac requirements,” he said. website. The home page shows the name of cess to unfold.” Fintrac’s Gibb said the legislation is not many smaller companies, such as jewelry Michael Baumbach is director of To- meant to be punitive, but aimed at changing stores, independent securities dealers and ronto-based Diamond Exchange Toronto non-compliant behaviour. real estate brokerages. Inc. which was fined $12,750 and named ❧ ❧ ❧ Fintrac collects millions of pieces of data by Fintrac in March. He says the agency from 31,000 businesses every year and ana- is unfairly punishing smaller firms like his Our Comment. What good are watch- lyzes them for suspicious activity. Those jewelry business, which is trying hard to dogs who, should one of the children slip businesses are legally required to report comply, while letting bigger players with downstairs to the cookie jar during the certain financial activities – anything from deeper pockets off the hook. night, wake up the whole household – yet, cash transactions of more than $10,000 to a He believes the bank’s name was kept se- won’t bark when they detect an armed and disguised customer. cret because it has resources at its disposal to hooded stranger in the house? Élan www.comer.org March–April 2016 Economic Reform | 7 The Lies of Neoliberal Economics (or How America Became a Nation of Sharecroppers) By Chris Hedges and Michael Hudson, Democrat, but especially if you are a Demo- the stories of Queen Elizabeth going to the CounterPunch, April 1, 2016 crat – that’s really the Wall Street wing of the economist… This is an edited transcript of part two of American political system. The Republicans HEDGES: “How come none of you knew?” Chris Hedge’s Days of Revolt interview with are for the corporate monopoly, oil and gas HUDSON: Right. The fact is, if every- Michael Hudson. wing of it. body on Wall Street called these mortgages CHRIS HEDGES: So, we spoke in previ- As soon as Obama got in, Hank Paul- liars’ loans, if they knew that they’re made ously about the parasitic quality of the banks, son – the Republican Treasury Secretary for NINJAs, for people who can’t pay, all of hedge funds and the speculative class that has – was talking to Barney Frank and said, you Wall Street knew that it was fraud. in essence cannibalized the country – includ- know, we were supposed to, under TARP, The key is that if you’re a really smart ing, interestingly, industry itself, and forced have some of the money to go for debt criminal, you have to plan to get caught. down the throats of the American public an writedown. The plan is how to beat the rap. On Wall unsustainable debt peonage, whether that’s HEDGES: Explain TARP. Street, if you buy garbage assets, how do you through student loans, predatory credit card HUDSON: TARP was Troubled Asset make the government bail you out? That interest rates where it’s that bait and switch Relief Program. It was supposed to treat was what the president of the United States – where you get zero percent interest and next banks as if they were troubled. If you’re a is for, whether it was Obama or whether it thing you know, you’re paying as high as 26 criminal and you’re stealing from people, would have been John McCain…. percent, 23 percent…. that was called “troubled.” There’s a lawsuit HEDGES: Or Bush. MICHAEL HUDSON: If you miss a recently in in the news about a rich boy HUDSON: Or whether it would be payment. drove his car and killed four people. His Hillary today, or Trump. Their job is to bail HEDGES: If you miss a payment. Mort- defense was, “It’s not my fault, I have af- out Wall Street and make the people pay, gages, with many houses now underwater fluenza. I’m so rich that I don’t have a social not Wall Street. Because Wall Street is “the because of 2008. I want to look first at the self- sense. So of course I drove away. But I’m people” who select the politicians – who identified liberal class within the Democratic innocent, because I’m rich. What do you know where their money is coming from. If Party, including Barack Obama. It often uses expect?” you have a campaign contributor, no matter the language of economic justice, and will even Essentially that’s the Goldman Sachs whether it’s Wall Street, or locally if it’s a chastise Wall Street rhetorically, but has been view of the economy. You cause collateral real estate developer, you all know who your as committed to this neoliberal project as the damage all over, but that’s what Wall Street backers are. Republicans. does. You can’t punish them for it. They’re The talent you need to have as a politi- HUDSON: The key of demagogic poli- just doing what a predatory financial insti- cian is to make the voters think that you’re tics is to realize that the people who are re- tution does. So Obama said “No, I’m not going to be supporting their interests… ally backing you are your campaign funders. going to do that,” [meaning write down the HEDGES: And what’s that great Groucho Your job as a politician is to say, “I can mortgage debts as he had promised voters Marx quote? deliver this constituency to your backers.” in Column A]. He came in and appointed HUDSON: The secret of success is sin- Obama was a genius at doing what Don- Wall Street’s main lobbyist, Tim Geithner, cerity. If you can fake that, you’ve got it ald Trump is trying to do today: taking a as Treasury Secretary. made. constituency. That’s his column A: a focus HEDGES: You spend a lot of time in your HEDGES: Well, and that’s kind of it. You group listing everything the constituency book, Killing the Host, on him. know, there’s Ron Suskind in his book, what’s wants. They want debt relief. They want HUDSON: That’s right. Geithner ap- it called? better jobs. They want higher minimum pears in almost every dirty dealing episode HUDSON: Confidence Men. wage. of the book. He was the bagman. He was the HEDGES: Confidence Men. He inter- HEDGES: And not trade agreements like person who [Sheila Baoir] accused of block- views someone on Wall Street, and asks why NAFTA and… ing the FDIC when it wanted to take over they’re so hostile to Obama when he’s so protec- HUDSON: Right. And then column B, Citibank, which not only was broke but was tive of Wall Street. And the answer is, because that he didn’t tell them, was what the cam- a criminalized organization. if we keep being publicly hostile, he can always paign backers on Wall Street want. Obama HEDGES: Explain just quickly why it do what we want. was picked essentially by Robert Rubin, was criminalized. HUDSON: This is like Uncle Remus who then became head of Citibank after HUDSON: Citibank, along with Coun- and the Briar Patch, when Br’er Rabbit having come out of the Goldman Sachs. trywide Financial, was making junk mort- keeps saying, don’t throw me into the briar Obama was picked by Rubin of Wall Street gages. These were mortgages called NINJA. patch. And finally the fox throws him into to promise was he was going to really do. It They were called liars’ loans, to people with the briar patch, and the rabbit runs away, was what any president today is going to do: no income, no jobs and no assets. You had singing “Born and bred in the briar patch.” A politician’s job is to deliver whoever voted this movie, The Big Short, as if some genius He runs away and is happy. The moral is for you to your backers, who are on Wall on Wall Street discovered that the mortgages that there’s a pretense that if a politician Street. Whether you are a Republican or a were all going to go down. And you have talks against Wall Street and can vocalize

8 | Economic Reform March–April 2016 www.comer.org people’s resentment, that he must under- came out with his own autobiography, making profits. You’re just getting more and stand them and thus will support them. Barofsky reviewed it and exposed him as a more people convinced that you’re making HEDGES: Well, that’s what Hillary Clin- liar who should go to jail. money. And you’re paying the early entrants ton’s doing in spades. Geithner was suitably rewarded by get- out of the money from new subscribers. HUDSON: Yes, exactly. There’s a mov- ting a rich job on Wall Street. The Japanese That’s what Bernie Madoff did. The whole ie, La dolce vita, by Fellini, with Anita Ek- call that “descent from heaven.” When economy has become a Madoff scheme. berg. You have the Italian reporter Marcello you take your rewards, having sold out the HEDGES: And largely through real estate, go after Ekberg, and then her boyfriend economy to your backers, you get a nice job right? comes up to him and says, “I can under- and end up rich for life. HUDSON: Largely through real estate, stand you.” Then whomp, he hits him right HEDGES: So, let’s talk a bit about what because that’s the largest asset. in the face. That basically is what we have this means for the future, because there’s been HEDGES: So the worth of your house here. The politician says to the voters, “I no brakes put on this kind of criminal and ostensibly rises and rises and rises, and you feel your pain. I can understand you.” And fraudulent behavior on the part of the specula- believe that you have created it – that this is a they think oh, he understands it. Then the tive class. Bubbles have been re-inflated with form of wealth creation. politician hits them in the face and backs public funds. I think you had written an ar- HUDSON: Here’s the problem that Wall Street, and tries to privatize pension ticle in Harper’s magazine before 2008 saying existed in 2008. Either Obama could have funds, privatize Social Security. And doesn’t this – we’re all going to have a big car wreck. saved the economy, or he could have saved send a single banker to jail, by appointing Since we’re playing the game again, what’s go- Wall Street. He chose to save Wall Street. Justice Department people who are vet- ing to happen? Are they going to be able to go And the only way to save Wall Street, if ted by Wall Street and treat them simply a back and loot the US Treasury the way they banks have made a lot of bad loans, is to “troubled” rich. did before? help them not go bankrupt. So what do you So essentially Wall Street campaign con- HUDSON: What’s ahead first of all is do? You give them more money. tributors have a veto over who you’re going that the economy hasn’t recovered since The theory, the pretense in the media, to appoint as Secretary of the Treasury. They 2008. People talk about that there’s been a is that banks will make money by lending want the… recovery, but the recovery has only been for to industry to build more factories and hire HEDGES: Attorney General. the One Percent. The 99 Percent know they people. HUDSON: Yeah, Attorney General, to haven’t recovered. That’s why they’re voting HEDGES: And credit dried up for small make sure that nobody has to pay the price for Trump, and that’s why they’re voting for businesses and consumers. for financial crime. Then the Council of Sanders. But they’re blaming themselves. HUDSON: That’s right. Wall Street Economic Advisors comes to assure people There’s a tendency of victims to blame knew that the real estate market was already that Wall Street really is adding to the econ- themselves. And the other part of that… loaned up. In other words, the game was omy, and if you can only do what the Federal HEDGES: But let’s be clear: The media over. Nobody could pay any more of their Reserve is doing. So Janet Yellen says, let’s doesn’t explain the economic reality at all. income for rent or for mortgages. Banks give the banks more money, and the econo- They’re always talking about the recovery. couldn’t even make more credit card loans. my can borrow its way out of debt…if only HUDSON: That’s the point. The result So they began to cancel their credit card we can have enough quantitative easing. of the media telling people that is to create exposure. What they did was they gamble So the Federal Reserve has given Wall a Stockholm syndrome: The victim, the on foreign currency. Street $4.5 trillion. That $4.5 trillion could kidnap victim, identifies with the victim- HEDGES: And student debt. have been used to write down the debt. And izer. The thinking is that if only we can give HUDSON: And student debt. then we wouldn’t have a problem. Then ev- more money to Wall Street, it will save us. HEDGES: Because it’s guaranteed. erybody would have a lower costs of living. So if the Federal Reserve can only pump HUDSON: That’s right. They make, the The $4.5 trillion could have been spent into more money into the economy…. government… the economy. They talk about the Federal Reserve cre- HEDGES: I mean, the government guar- HEDGES: We could have saved people ating money with a helicopter. But the Fed- anteed them. from being foreclosed and driven from their eral Reserve’s helicopter only drops money HUDSON: Since the 2008 crash the homes. over Wall Street. It doesn’t drop money over government has guaranteed almost all new HUDSON: Yes. But that wasn’t what the economy. People don’t get it. The Fed mortgage loans. Up to 43% of the bor- Obama did. doesn’t say, “We’re going to add $200 to rower’s income, that was guaranteed. Stu- HEDGES: Even though he promised that everybody’s checking account so they can dent loans, all guaranteed. But basically the he would. And then he turned around, he ear- have more money and pay their debts.” It’s banks made money abroad. If you could marked some money to save people who were only lending money to Wall Street. borrow at one-tenth of a percent from the being pushed out of their homes. And then he And what does Wall Street do? It lends Federal Reserve, you could buy Brazilian never spent it. out money. So the solution to the debt prob- loans, bonds paying 9% or more. You could HUDSON: That’s right. It wasn’t spent. lem that we’re in – debt deflation – is to lend gamble on writing default swaps in Greece. That’s what Niel Barofsky, the SIGTARP even more money. And when Greece had real problems, the head – Special Inspector General for TARP That’s what makes the economy a Ponzi fact that the German and French banks had – found out. He said, wait a minute, they’re scheme, as you mentioned at the begin- made too many loans to it, the IMF was go- not spending any of it. It’s a fraud. And he ning of the first half of this interview. In a ing to write down the Greek debt. But then wrote a whole book, Bailout, describing the Ponzi scheme, people seem to make a lot of Geithner got on the phone with Europe, lies Geithner told. Then, when Geithner money, but that’s because you’re really not and Obama went to the G20 meetings and www.comer.org March–April 2016 Economic Reform | 9 said, “Look, you can’t write off the Greek ended up almost driving Greece out of the do burden sharing in NATO, the financial debt, because the American banks have es- European Union. Wall Street was willing ministries have to do burden sharing with sentially turned into horse race betters. We to tear Europe apart politically just for the the US Treasury. have casino capitalism. They have bet and Wall Street investment banks – basically HEDGES: So let’s talk a bit about what promised to guarantee, the Greek bonds. four banks – to make gains by insuring the this means, where we’re headed. If the Greek bonds are written down, the Greek debt, by treating the financial market HUDSON: It means that markets are American banks will go under. And if we go like a horse race. not growing, because the American con- under, we promise we’re going to bring you That’s where we are now. It’s not really sumer has to spend so much money paying down too. We’re going to bring down the about imperialism draining foreign econo- the banks and paying taxes that they don’t European banks. Do you really want that mies. It’s Wall Street making bets. And es- have enough money to buy more goods and to happen?” sentially it’s by Wall Street running the Eu- services. So the gambles made by Wall Street ropean Central Bank. Just like Europe has to HEDGES: One of the things you pointed

BOOK REVIEW “Dark Money” by Jane Mayer This is a must read for anyone who letter, trashing the public service unions and to the influence of Big Money, although wants to understand the reality of US poli- attacking public education. most of their backers, such as George Soros, tics today. Big money has always played The rise of the Tea Party after Obama’s have a more progressive agenda. Obama’s a significant role, but the Supreme Court election in 2008 was widely heralded as a dependence on Wall Street money led to his rulings in Citizens United and Speech Now populist reaction to Wall Street and cor- administration’s weak response to the 2008 has made it the dominant factor. In Mayer’s rupt elites. However with the backing of financial collapse. The result is a very un-vir- well documented book, the US has become the Kochtopus, it was soon transformed tuous circle. The more influence Big Money a de facto oligarchy. into an anti-government, right wing move- acquires, the more public policy is altered The prime organizing force behind this ment which was used to divert anger away to allow them to make even more profits, trend is the Koch brothers. Immensely from the banks and towards government, which in turn gives them more influence. wealthy ($41 billion), they, along with their unions and the unemployed. This strategy The result is rising inequality – “a system billionaire allies control a cast network of was very successful in the 2010 elections, controlled by a handful of ultra-wealthy “philanthropic” institutions, think tanks, which produced Republican gains in Con- people who got rich from the system.” lobbyists, and superpacs. This “Kochtopus” gress and in many states. The victories in Donald Trump has made a point of re- promotes minimal government, low taxes, the states allowed Republicans to control fusing Kochtopus money for his campaign. the “free market,” deregulation, privatiza- the 2011 redistricting process and to make He claims his own wealth gives him immu- tion and cuts to welfare, social security and voting more difficult for minorities and the nity from the influence of corporate money. Medicare. They reject the science of climate poor. In states like Texas, Ohio, Florida, Hence he is anathema to the Republican warming and oppose all environmental North Carolina and more, they were able establishment, but it remains to be seen if regulations, unions, minimum wages and to gerrymander electoral districts to ensure his opposition to free trade, Wall Street and food stamps. But they demand, and receive, Republican wins. In several state elections, corporate welfare is genuine. vast subsidies and tax breaks for themselves. for example, the Democrats won the popu- By contrast, Bernie Sander’s campaign The Kochs have been convicted many times lar vote, but the Republicans won the most is an inspiration. His program directly con- of violations of environmental laws, but seats. fronts that of the Kochs and there is no have been let off with fines. Many of their The Kochtopus has succeeded in mak- doubt of his authenticity. His phenomenal allies have been convicted of tax evasion, ing the GOP the party of the very wealthy. fundraising ability (average donation $27) insider trading and many other crimes, but Candidates are asked to take the ‘no tax in- reflects his widespread support, especially never imprisoned. crease, no environmental regulations’ pledge among the young. Clinton, on the other The Koch campaign began a generation in order to receive Koch funds. Moderates hand, is beholden to Wall Street and big ago as an effort to change the conversation are denied money and forced out. John Democratic money. While Sanders is un- by setting up ‘foundations’ and think tanks Boehner, majority leader of the House of likely to win the presidency, his campaign to subsidize supportive writers and publish- Representatives, was displaced when he shows that resistance is still possible. ers, fund chairs at universities and push wouldn’t bow to the extremists. Governor ❧ ❧ ❧ their message among the intellectual elite. John Kasich of Ohio criticized the Koch op- Then, because of the regulatory threat to position to Obamacare, in April 2014, and Our Comment. Dave Gracey is the their business, they moved to lobbying and was ostracized. His campaign for president retired principal of an alternative school direct involvement in state and national was denied funds and has withered. It is in downtown Toronto. He is a long-time campaigns. Their interventions led to the remarkable that Trump’s campaign also had member of COMER whose extensive con- defeat of several Democratic incumbents no backing from the Kochtopus and has tribution has included many excellent ar- and the elections of otherwise obscure Re- flourished so far. Whether it will ultimately ticles in COMER journals. This review of publicans, such as Scott Walker in Wiscon- succeed remains to be seen. Dark Money is a welcome introduction to an sin. He proceeded to follow the script to the The Democratic party is not immune invaluable resource! Élan

10 | Economic Reform March–April 2016 www.comer.org out in your book, which I didn’t know, is that ernment debt, technically. It’s on the liabili- HEDGES: But is it working? I don’t think when we measure the economy we actually ties side of the balance sheet. What people the lie of neoliberal economics is being swal- count the paying off of debt, credit card debt, thought was an asset turns out to kept afloat lowed by larger segments of the population, whatever it is, as a form of savings. by debt. But rather than the rising tide of including the people gathered around Trump. HUDSON: That’s right. After 2008 the debt raising all boats, it raises the yachts, HUDSON: That’s right. They know savings rate jumped way up. But the saving but the rest of the economy is underwater, that something’s wrong, but they don’t isn’t available. But to an accountant, if you to make a metaphor. know what it is, because nobody’s spelling owe less money, then actually you’ve done HEDGES: So, spell it out for people. out how the economy actually works. That’s the same as paying it out of saving. So we’re What’s going to – I mean, we’ve lost control of why I wrote my book, to say here’s what’s in a savings economy. The savings rate in this predatory or parasitic force. happening. The reason I was able to warn 2008 was zero. Actually, it was minus 2% HUDSON: Well, you can look at the about the crisis a year before it happened when you take into account borrowing from future as what’s happening in Greece, what was that I had the charts that were published foreigners. The whole economy was essen- happened in Russia after their traumatic in Harper’s. My charts were cited in the tially consumers maintaining their living shock therapy. America’s in for shock ther- Financial Times as the only charts by those standards by running up their credit card apy, no matter who wins the presidential… who did foresee the crisis and said just how debt, and by taking out what Alan Greens- HEDGES: So play it out for me. What’s it and why it would happen. pan called cashing out on your house’s rising going to look like? Anyone who does Wall Street charts value, by taking out an equity mortgage HUDSON: Well, more people are go- about the ability to pay sees that this is what loan. But that’s not really cash. That’s taking ing to have higher and higher charges for happened in the 1920s. Anybody who did on more debt. what they spend for medical care. More charts like that can tell that there’s an inter- So you had an inside-out vocabulary. for schooling. More just to break even. section, a breaking point, and there’s a crisis. America was going into debt thinking it And they’re going to have to draw down America now is having the same crisis that would get rich, and all of a sudden it finds, their existing savings, or they’re going to Argentina had, that Greece had, that Latvia it’s in a state of what you said, debt peonage, have to downsize, or they’re going to have had, that Russia had. These economies are where the wage workers and others have to to default. The rate of default is still rising our future. And it’s going to go down and pay any increase in wages they get; it goes to very sharply on student loans. And these are down in a slow crash. pay down… loans you can’t wipe out in bankruptcy. HEDGES: But could it go down and HEDGES: Because you’re spending all of HEDGES: Not unless you’re dead. And down, and what we end up with is a form of your income to service the interest rather than it’ll go to your parents, if they’re still around. neofeudalism, a rapaciously wealthy, oligarchic paying off the principal. And that’s why wages HUDSON: That’s the point. The par- elite with a kind of horrifying police state to have been suppressed since the ’70s. The specu- ents have countersigned. Meanwhile, the keep us all in order? lative class on Wall Street does not want people students who have taken out these loans HUDSON: This is exactly what hap- to be able to pay off their debt. are having to live at home with the parents. pened in the Roman Empire. HUDSON: This was the one thing that They can’t afford to buy a house. And if HEDGES: Yes, it did. Alan Greenspan contributed to economic you can’t buy a house it’s really hard to get HUDSON: You had the great Roman theory: the Traumatized Worker Syndrome. married. I was in China recently, and my historians, Livy and Plutarch – all blamed He said, the reason you’ve had this huge translator there said that women in China the decline of the Roman empire on the productivity gain without any wage increase are looking for a husband who can get his creditor class being predatory, and the is workers are afraid to go on strike, or even own house, because you need a house to latifundia. The creditors took all money, to complain about working conditions, be- have children. All that has stopped here. and would just buy more and more land, cause they’re just one paycheck away from When you have this phenomenon in displacing the other people. The result in homelessness. Greece, Russia or other places, you have Rome was a Dark Age, and that can last a HEDGES: Which is true. shrinking birth rates, rising mortality rates very long time. The Dark Age is what hap- HUDSON: And if they miss a credit and disease rates, shorter life spans. Latvia pens when the rentiers take over. card payment, all of a sudden their credit followed this policy and lost 20% of its If you look back in the 1930s, Leon card fee escalates to 29%. Even if they’re late population since the late 1990s. You have Trotsky said that fascism was the inability on a utility bill, the bank will raise the fee. a huge emigration from Iceland, from of the socialist parties to come forth with HEDGES: So what does this mean? I Greece. There’s nowhere for Americans to an alternative. If the socialist parties and mean, what’s going to happen? emigrate to. media don’t come forth with an alternative HUDSON: It means a slow crash. It HEDGES: Right. And you say in the book to this neofeudalism, you’re going to have means what was… that really, the only option left is a form of debt a rollback to feudalism. But instead of the HEDGES: Which we’ve already begun, slavery or revolt. military taking over the land, as occurred haven’t we? HUDSON: That’s exactly it. But the en- with the Norman conquest, you take over HUDSON: Yes. we’re in a slow crash zymes that the parasite have inculcated via the land financially. Finance has become now. All this was analyzed in the 1930s the control of the media tell people it’s not the new mode of warfare. Not militarily – when it was called debt deflation by Irving Wall Street’s fault, it’s not the parasite’s fault, except in Europe, of course – but simply Fisher. But debt doesn’t appear in the text- it’s your fault. The victims haven’t been able financially. You can achieve the takeover books. They talk about saving, but not debt. to make enough money to pay the One of land and the takeover of companies by The fact is, all money is debt of one form or Percent, the victimizers. That’s financial af- corporate raids. another. The cash in your pocket is a gov- fluenza after kills an economy. Continued on page 16 www.comer.org March–April 2016 Economic Reform | 11 Why Public Debt Is a Good Thing By Lars Syll, Real-World Economics Re- therefor essentially fall on the taxpayers that is paid by the taxpayers on the one hand, view Blog, March 28, 2016 ultimately had to pay for the irresponsibility but on the other hand, interest on the bonds “…The US economy has, on the whole, of government. The moral character of the that finance the debts goes to those who done pretty well these past 180 years, sug- argumentation was a salient feature – ac- lend out the money. gesting that having the government owe cording to Hume, “either the nation must To both Keynes and Lerner it was evident the private sector money might not be all destroy public credit, or the public credit that the state had the ability to promote full that bad a thing. The British government, will destroy the nation.” employment and a stable price level – and by the way, has been in debt for more than Later on in the 20th century economists that it should use its powers to do so. If three centuries, an era spanning the Indus- like John Maynard Keynes, Abba Lerner that meant that it had to take on a debt and trial Revolution, victory over Napoleon, and Alvin Hansen would hold a more posi- (more or less temporarily) underbalance its and more. tive view on public debt. Public debt was budget – so let it be! Public debt is neither “But is the point simply that public debt normally nothing to fear, especially if it was good nor bad. It is a means to achieving two isn’t as bad as legend has it? Or can govern- financed within the country itself (but even over-arching macroeconomic goals – full ment debt actually be a good thing? foreign loans could be beneficient for the employment and price stability. What is “Believe it or not, many economists economy if invested in the right way). Some sacred is not to have a balanced budget or argue that the economy needs a sufficient members of society would hold bonds and running down public debt per se, regardless amount of public debt out there to function earn interest on them, while others would of the effects on the macroeconomic goals. well. And how much is sufficient? Maybe have to pay the taxes that ultimately paid If “sound finance,” austerity and a balanced more than we currently have. That is, there’s the interest on the debt. But the debt was budgets means increased unemployment a reasonable argument to be made that part not considered a net burden for society and destabilizing prices, they have to be of what ails the world economy right now as a whole, since the debt cancelled itself abandoned. is that governments aren’t deep enough in out between the two groups. If the state Now against this reasoning, exponents debt.” – Paul Krugman could issue bonds at a low interest rate, of the thesis of Ricardian equivalence, have Indeed. unemployment could be reduced without maintained that whether the public sector Krugman is absolutely right. Why? necessarily resulting in strong inflationary finances its expenditures through taxes or Through history public debts have gone pressure. And the inter-generational burden by issuing bonds is inconsequential, since up and down, often expanding in periods of was no real burden according to this group bonds must sooner or later be repaid by rais- war or large changes in basic infrastructure of economists, since – if used in a suitable ing taxes in the future. and technologies, and then going down in way – the debt would, through its effects In the 1970s Robert Barro attempted periods when things have settled down. on investments and employment, actually to give the proposition a firm theoretical The pros and cons of public debt have be net winners. There could, of course, be foundation, arguing that the substitution been put forward for as long as the phenom- unwanted negative distributional side ef- of a budget deficit for current taxes has no enon itself has existed, but it has, notwith- fects, for the future generation, but that was impact on aggregate demand and so budget standing that, not been possible to reach mostly considered a minor problem since, as deficits and taxation have equivalent effects anything close to consensus on the issue – at Lerner put it,”if our children or grandchil- on the economy. least not in a long time-horizon perspective. dren repay some of the national debt these The Ricardo-Barro hypothesis, with its One has as a rule not even been able to payments will be made to our children and view of public debt incurring a burden for agree on whether public debt is a problem, grandchildren and to nobody else.” future generations, is the dominant view and if – when it is or how to best tackle it. Central to the Keynesian influenced among mainstream economists and politi- Some of the more prominent reasons for view is the fundamental difference between cians today. The rational people making up this non-consensus are the complexity of the private and public debt. Conflating the one the actors in the model are assumed to know issue, the mingling of vested interests, ideol- with the other is an example of the atomis- that today’s debts are tomorrow’s taxes. But ogy, psychological fears, the uncertainty of tic fallacy, which is basically a variation on – one of the main problems with this stan- calculating ad estimating inter-generational Keynes’ savings paradox. If an individual dard neoclassical theory is, however, that it effects, etc., etc. tries to save and cut down on debts, that doesn’t fit the facts. In classical economics – following in the may be fine and rational, but if everyone From a more theoretical point of view, footsteps of David Hume – especially Adam tries to do it, the result would be lower ag- one may also strongly criticize the Ricardo- Smith, David Ricardo, and Jean-Baptiste gregate demand and increasing unemploy- Barro model and its concomitant crowding Say put forward views on public debt that ment for the economy as a whole. out assumption, since perfect capital mar- was as a rule negative. The good budget An individual always have to pay his kets do not exist and repayments of public was a balanced budget. If government bor- debts. But a government can always pay debt can take place far into the future and rowed money to finance its activities, it back old debts with new, through the issue it’s dubious if we really care for generations would only give birth to “crowding out” of new bonds. The state is not like an indi- 300 years from now. private enterprise and investments. The vidual. Public debt is not like private debt. Today there seems to be a rather wide- state was generally considered incapable if Government debt is essentially a debt to spread consensus of public debt being ac- paying its debts, and the real burden would itself, its citizens. Interest paid on the debt ceptable as long as it doesn’t increase too

12 | Economic Reform March–April 2016 www.comer.org About Our Commenters Élan is a pseudonym representing two of the The Panama Papers, Bail-Ins original members of COMER, one of whom is now deceased. The surviving member and the Push to Go Cashless could never do the work she is now engaged in were it not for their work together over By Ellen Brown, The Web of Debt Blog, ety” idea is such a bad one. When no one is many years. This signature is a way of ac- April 12, 2016 able to use cash, financial histories will be knowledging that indebtedness. Exposing tax dodgers is a worthy endeavor, easily available via electronic bank records.” Herb Wiseman is a long-time member of but the “limited hangout” of the Panama Pa- Michael Snyder of InvestmentWatch- COMER who has, for some time, served as pers may have less noble ends, dovetailing with Blog.com also links the Panama Papers with COMER’s information officer. He is currently the War on Cash and the imminent threat of the push to go cashless: also co-chair on the COMER Executive. He massive bail-ins of depositor funds. “…[W]ith this Panama Paper leak and is a highly knowledgable and experienced The bombshell publication of the “Pan- all its pre-conditioning against tax havens, political activist with a life-long interest in ama Papers,” leaked from a Panama law people aren’t realizing yet that very soon, matters of political economy. firm specializing in shell companies, has once Negative Interest Rates and Bail-Ins triggered both outrage and skepticism. In are being openly discussed and prepared for much and too fast. If the public debt-GDP an April 3 article titled “Corporate Media implementation, the whole tax haven or tax ratio becomes higher than X % the likeli- Gatekeepers Protect Western 1% From dodger discussion in the media will quickly hood of debt crisis and/or lower growth Panama Leak,” UK blogger Craig Murray switch from talking about corrupt billion- increases. writes that the whistleblower no doubt had aires and shell companies half way around But in discussing within which margins good intentions; but he made the mistake the world, and instead will be talking about public debt is feasible, the focus, however, of leaking his 11.5 million documents to something much closer to home…. is solely on the upper limit of indebtedness, the corporate-controlled Western media, “In my strong opinion this whole thing and very few asks the question if maybe which released only those few documents is all part of the coming capital control war, there is also a problem if public debt be- incriminating opponents of Western finan- which ties directly in with the coming tran- comes too low. cial interests. Murray writes: “Do not expect sition to a biometric digital currency, the The government’s ability to conduct an a genuine expose of western capitalism. The implementation of Negative Interest Rates, “optimal” public debt policy may be nega- dirty secrets of western corporations will the rollout of large scale systemic bail-ins, tively affected if public debt becomes too remain unpublished. Expect hits at Russia, and the demonization and eventual crimi- small. To guarantee a well-functioning sec- Iran and Syria and some tiny “balancing” nalization of physical assets that are out- ondary market in bonds it is essential that western country like Iceland.” side of direct taxation control (which again the government has access to a functioning Iceland, of course, was the only country would be done using the pre-conditioned market. If turnover and liquidity in the sec- to refuse to bail out its banks, instead throw- guise of ‘tax havens,’ with physical precious ondary market becomes too small, increased ing its offending bankers in jail. metals and physical cash being the main volatility and uncertainty will in the long Pepe Escobar calls the released Panama targets).” run lead to an increase in borrowing costs. Papers a “limited hangout.” The leak dove- Ultimately there’s even a risk that market tails with the attempt of Transparency In- War on Corruption or War on Savers? makers would disappear, leaving bond mar- ternational to create a Global Public Benefi- What we may be witnessing here is the ket trading to be operated solely through cial Ownership Registry, which can collect 1% going after the 10% of people who, brokered deals. As a kind of precautionary ownership information from governments according to German researcher Margrit measure against this eventuality it may be around the world; and with UK Prime Kennedy, do not need to borrow but are argued – especially in times of financial Minister David Cameron’s global anti-cor- “net savers.” Today the remaining 90% are turmoil and crises – that it is necessary to ruption summit next month. According to “all borrowed up.” Either they are unwilling increase government borrowing and debt to The Economist, “The Panama papers give to borrow more or the banks are unwilling ensure – in a longer run – good borrowing him just the platform he needs to persuade to lend to them, since they are poor credit preparedness and a sustained (government) other governments, and his own, to turn risks. Who, then, is left to feed the machine bond market. their tough talk of recent years into action.” that feeds the 1%, and more specifically the The question if public debt is good and The Daily Bell suspects a coordinated 0.001%? The power brokers at the top seem that we may actually have to little of it is one global effort linked to the push to go cash- to want it all, and today that means going of our time’s biggest questions. Giving the less. It’s all about knowing where the money after those just below them on the financial wrong answer to it – as Krugman notices – is and who owns it, in order to tax it, regu- food chain. The challenge is in squeezing will be costly: late it, “sanction” it, or confiscate it: money from people who don’t need to bor- The great debt panic that warped the US “Without privacy, authoritarianism row. How to legally confiscate their savings? political scene from 2010 to 2012, and still flourishes because it is impossible to build Enter bail-ins, negative interest, all-dig- dominates economic discussion in Britain and expand private networks that would act ital currencies, and the elimination of “tax and the eurozone, was even more wrong- as a deterrent…. A worldwide transparency havens.” headed than those of us in the anti-austerity regime virtually guarantees abuses and cor- Bail-ins allow the largest banks to gamble camp realized. ruption from those in power. with impunity with their depositors’ money. Continued on page 17 “This is a reason why the “cashless soci- If the banks make bad bets and become www.comer.org March–April 2016 Economic Reform | 13 insolvent, they can legally confiscate the chasing goods and services. Today virtually tion” measures designed to determine where deposits to balance their books, through all money is created by banks when they the money is and who owns it. an “orderly resolution” scheme of the sort make loans; and when old loans are paid Postscript: Bail-ins under the new 2016 mandated in the Dodd-Frank Act. off, new ones must be taken out to maintain European Recovery and Resolution Di- Negative interest is a fee or private tax on the money supply. Central banks have tradi- rective began officially today, April 10, in holding funds in the bank. tionally dropped interest rates to stimulate Austria. Ominously, it was in Austria that a Eliminating cash prevents the bank runs this continual borrowing, but interest rates major bank bankruptcy triggered the Great that these assaults on people’s savings would have now effectively been pushed to zero. Depression in 1931. otherwise trigger. Money that exists only The argument is that they can be pushed as digital entries cannot be withdrawn and below zero – but only if cash withdrawals, Ellen Brown is an attorney, president of the stored under a mattress. and hence bank runs, are not an option. Public Banking Institute, and author of twelve Exposing tax havens shows the predators That is the argument; but as Paul Craig books including the best-selling Web of Debt. where the money is and who has title to it, Roberts, former Assistant Secretary of the In The Public Bank Solution, her latest book, facilitating its confiscation and preventing Treasury for Economic Policy, observes: she explores successful public banking models the funding of massive rebellions against “The notion is that the economy’s poor eco- historically and globally. Her websites are Web confiscation. nomic performance is not due to the failure of Debt, Public Bank Solution, and Public of economic policy but to people hoarding Banking Institute. Orchestrated at Davos their money. The Federal Reserve and its That could help explain those coordinat- coterie of economists and presstitutes main- Our Comment ed developments we’ve been seeing across tain the fiction of too much savings despite The course of economic policy over the the central-bank-controlled world, prolifer- the publication of the Federal Reserve’s own past three or four decades reads like a cata- ating particularly after the January summit report that 52% of Americans cannot raise logue of desperate measures to freeze history of the World Economic Forum in Davos, $400 without selling personal possessions or – to control humanity, in an unsustainable, Switzerland, where the global elite gather to borrowing the money.” increasingly corrupt and inequitable politi- discuss the hot economic issues of the day. In an article titled “Exposing the Hidden cal economy. According to one Morgan Stanley at- Agenda of Davos 2016,” Zerohedge reports The breathtaking success of these mea- tendee, a notable topic this year was the on a flurry of activity during and after Da- sures is rooted in what people are prevented need for “a rapid introduction of a cashless vos related to the push to go cashless. But from knowing. society so that even more negative deposit stimulating demand may just be the cover There is an imperative need to share the interest rates could be introduced in Europe story for something darker behind this or- information and insights available to us to offset likely secular stagnation.” With the chestrated effort. through alternative media like the Web of use of physical cash curtailed, JP Morgan Debt Blog and to develop a vibrant habit of estimates the European Central Bank could Rescuing the Economy or the Banks? discourse around what really matters. ultimately bring interest rates as low as nega- Of greater concern at Davos than “secu- We need to set up opportunities in what- tive 4.5%. lar stagnation” was the imminent insolven- ever circles we move, to consider together “Secular stagnation,” the official justifi- cy of some major banks. Ambrose Evans- what is going on around us, and what we cation for negative interest, means a chronic Pritchard, writing in January from Davos, need to do, to move forward. shortfall in demand: not enough money quoted William White, former chief econo- One of the ideas we had better look into mist of the Bank for International Settle- is that of the cashless society, in terms of its ments, who warned: police-state implications and its potential Bob Campbell “The situation is worse than it was in for complete control of our money system. 2007. Our macroeconomic ammunition to No doubt, it will be presented to us as a SADLY, COMER has lost another fight downturns is essentially all used up…. blessed way to deal with “treasure islands.” colleague. Bob Campbell died, in his “European banks have already admitted To see the whole thing as “all part of the 100th year, at Sunnybrook Veterans’ to $1 trillion of non-performing loans: they coming capital control war” is to add 2 + 2 Residence, in February. are heavily exposed to emerging markets and get 4. Bob was born in Glasgow, Scot- and are almost certainly rolling over further Money is power. Why wouldn’t “the land. His family immigrated to Canada bad debts that have never been disclosed. power brokers at the top… want it all”? in 1922. He attended the University “The European banking system may have This coordinated tactic reflects how criti- of Toronto, and Osgoode Hall Law to be recapitalized on a scale yet unimagined, cally ill the system has become. It depends School. He served in the RCAF, in and new “bail-in” rules mean that any deposit on exploitation. And as most of us have England and Europe, during WWII. holder above the guarantee of €100,000 will now been exploited to the full – “secular We were one of many organiza- have to help pay for it.” [Emphasis added.] stagnation” is driving the 1% to exploit the tions lucky enough to benefit from It seems the War on Cash is being waged, 10% left who can still be made to cough up Bob’s many outstanding qualities and not to stimulate the economy, but to save what it takes “to feed the machine that feeds abilities, and his deep commitment to the lucrative private banking scheme at all the 1%”! justice. costs. Quelling the riots likely to result from Surely the rest of us, meanwhile, have a We were privileged to know him, the mass confiscation of deposits could also roll to play that we had better identify and and to call him friend. underlie the heightened push for a global to which we would do well to measure up! “security state” and for those “anti-corrup- Élan

14 | Economic Reform March–April 2016 www.comer.org Socialism in America Is Closer Than You Think By Gar Alperovitz, The Nation, February debate. The traditional socialist idea of “na- longer active). A number of these compa- 11, 2016 tionalized industry” is beyond the pale, and nies have attempted to combine unions Experiments with public ownership are the vast majority of progressives have so far with ESOP ownership. A related approach thriving across the country. The challenge is to avoided discussing alternatives to the statist is being tested in new union/co-op efforts link them and scale them up. socialist model. backed by the United Steelworkers. In 1970, the great liberal economist Despite his self-definition as a demo- Cities have also begun to support other John Kenneth Galbraith declared that the cratic socialist, Sanders has offered what is forms of public ownership. Communi- “Democratic Party must henceforth use the essentially a strong liberal or social-dem- ties as diverse as Philadelphia, Pittsburgh, word ‘socialism.’ It describes what is need- ocratic program of progressive taxation, and Santa Fe, New Mexico, are working ed.” Like many others, however, Galbraith financial regulation, single-payer healthcare, to establish municipally owned banks. In largely dropped the subject in subsequent increased Social Security and income-sup- Boulder, Colorado, climate-change activ- years. The response to Bernie Sanders’s in- port programs, and environmental regula- ists have triumphed over intense corporate surgent presidential campaign, along with tion. Although he backs worker-owned opposition in two major referendum battles polls showing that large numbers of young companies, Sanders explicitly disavowed to municipalize the local utility. More than people and minorities in America have a government ownership of businesses in his 250 community land trusts – a model of positive view of socialism, suggest that this major theme-setting speech at Georgetown city and neighborhood development in once-forbidden concept may no longer be University last November. which land is socialized to prevent gentrifi- taboo. The general argument for democratized cation – have been set up across the country, More than 40 percent of Americans un- ownership has always been much broader building on the foundational work done by der the age of 30 view socialism favorably, than simply capturing profits for social use. the Champlain Housing Trust in Burling- according to the most recent YouGov poll. At the same time, new resources have ton, Vermont. Positive responses among black Americans become available to support the construc- Some 450 communities have also estab- have ranged between 29 and 41 percent in tion of a serious alternative system – one lished municipally owned Internet systems, recent surveys. A 2011 Pew Research Center that is “socialist” in content and vision, but commonly against powerful corporate op- poll that omitted the “undecided” option also highly democratic and accountable in position. In recent years, legislators in 17 found that 49 percent of its young partici- structure. It is a system that could become states have introduced bills to create state- pants viewed socialism favorably. increasingly viable as Americans’ disillusion- owned public banks like the nearly century- The most obvious source of this sea ment with traditional strategies continues old Bank of North Dakota. Roughly the change is the failure of traditional ap- to grow. same number of states have considered leg- proaches to address the nation’s most press- In recent years, there has been a steady islation to establish single-payer healthcare ing problems: growing inequality, poverty, buildup of interest in new forms of democ- programs. In 2016, voters in Colorado will economic insecurity, global warming, per- ratized ownership. Worker-owned coopera- decide via referendum on the single-payer petual war, and the decay and violence tives, neighborhood land trusts, and munic- ColoradoCare initiative. visited on black communities. Side by side ipal corporations all democratize ownership None of these efforts have had a major with the increasing concentration of wealth in one way or another, but they do so in de- impact yet, but they all offer blueprints for has been the ever more blatant exploitation centralized rather than statist fashion. The the development of a larger platform – along of the political power that wealth confers trajectory of change is impressive. Examples with concrete and actionable examples of on elites and major corporations, most of successful worker ownership range from what a radically new economy would look obviously by the Koch brothers and their Cooperative Home Care Associates in New like at the level of enterprise, neighborhood, right-wing allies. York City to the Evergreen complex of so- municipality, and state. Importantly, many Widespread dissatisfaction with the sta- lar, greenhouse, and laundry cooperatives “nonpolitical” Americans – some of whom tus quo creates a climate receptive to sweep- in Cleveland. Mayors and city councils in even identify as conservatives (as opposed ing change. But such a climate can also places like Austin, Texas; Madison, Wiscon- to right-wing ideologues) – support such devolve into indifference or cynicism if clear sin; Richmond, California; and New York efforts. Rhetoric aside, these conservative alternatives are not presented. With that in City have started to provide direct financial Americans also commonly oppose big gov- mind, how might a practical and politically or technical support for these developments, ernment, big banks, and big corporations, viable alternative to our current system actu- suggesting a new nexus of political power. and are often open to alternatives. ally be constructed? What would socialism Older forms of worker ownership – most During the 1930s, strategies based on look like in 21st-century America? notably employee stock-ownership plans, or the seemingly modest efforts developed by At the core of the traditional socialist ESOPs – leave much to be desired, but they the states in their “laboratories of democ- argument has always been the judgment nonetheless offer a similar sense of what a racy” became the basis for key elements of that democratic ownership of the nation’s more expansive buildup in democratized the New Deal – including labor law, Social wealth – and especially what Marx called ownership might look like. Approximately Security, and a range of other programs. the “means of production” – is essential. The 7,000 ESOP enterprises exist nationwide, Modern experiments with socialized owner- question of ownership, however, has rarely largely owned by about 13.9 million work- ship suggest a trajectory with similarly far- been mentioned in conventional political ers (roughly 3.3 million of whom are no ranging implications. This will remain true www.comer.org March–April 2016 Economic Reform | 15 no matter who wins the 2016 presidential current “growth at all costs” system toward economist and self-proclaimed socialist E.F. race. a more sustainable model. Public forms of Schumacher, author of the classic Small Is A new politics could infuse local exam- enterprise can also be made far more trans- Beautiful, judged that “the idea of private ples of public ownership with fresh energy, parent than private firms, and they’re more ownership becomes an absurdity” on a larger and perhaps scale them up. open to regulation, especially concerning scale. Americans witnessed this during the The great 20th-century conservative climate change. And, critically, they can be most recent financial crisis, when the federal economist Joseph Schumpeter once said excluded from funding political campaigns. government de facto nationalized several that the left had missed the boat in its argu- An obvious question is what to do about banks, two auto companies, and the insur- ments for systemic change. “If radicals were large-scale industry – a subject that many ance ­giant AIG. The government gave them not so fond of chivying the bourgeois,” he have simply avoided, preferring instead back once the crisis was over, but when the declared, they would have realized that not to focus on local strategies. Yet even the next crisis hits, a future progressive govern- having to depend on taxes was “one of the most significant titles to superiority” they Sharecroppers from page 11 construction projects.” The second, was could have advanced in favor of their vision. The Wall Street vocabulary is one of con- to “work to bankrupt the countries that Indeed, a number of states have gained a quest and wiping out. You’re having a replay received these loans…so that they would great deal of experience owning and man- in the financial sphere of what feudalism be forever beholden to their creditors and aging land, real estate, and mineral rights was in the military sphere. would present easy targets when [the US] – and many use the proceeds to fund social HEDGES: And in essence, we become a needed favours, such as military bases, UN services and reduce taxes, although this fact kind of nation of sharecroppers. votes, or access to oil and other natural hasn’t received much attention. HUDSON: That’s exactly right, having resources.” Almost 150 years ago, for instance, Tex- to shop at the company store. It was pointed out to him that he would as’s Permanent School Fund took control of HEDGES: At the company store. be well paid “to cheat countries around the about half the land and associated mineral HUDSON: Yes. globe out of billions of dollars,” and that rights in the public domain. In 1953, the HEDGES: Well, that lays it out. I think “a large part of his job [was] to encour- state added coastal “submerged lands” to it illustrates the point that we need a vision to age world leaders to become part of a vast the portfolio after the federal government counter the vision of predatory, parasitic capi- network that promotes US commercial relinquished them. Each year, distributions talism. If we don’t get a vision very soon, we’re interests and that, in the end, those lead- from the earnings support education in in for a dark age. ers become ensnared in a web of debt that every county of Texas ($838.7 million in HUDSON: And the job of the politi- ensures their loyalty.” He goes on to point fiscal year 2015 alone). Another fund, the cian is to promise the nice vision, and then out that “a symbiotic relationship developed Permanent University Fund, owns more double-cross the constituents. between governments, corporations, and than 2 million acres of land and helps un- HEDGES: Well, so far, unfortunately, multinational organizations. derwrite the state’s public-university system. they’ve done it very well. Today, he asserts, “the same old tools… In these and other cases, social ownership are applied at the highest levels of business supports public education in ways that also Michael Hudson’s new book, Killing the and government. EHMs are ubiquitous. significantly reduce the tax burden. Host, is published in e-format by Counter- They stroll from the corridors of the White Similar sovereign-wealth funds exist in Punch Books and in print by Islet. He can be House through the US Congress, along Louisiana, New Mexico, Wyoming, and reached via his website, mh@michael-hudson. Wall Street, and into the boardrooms of North Dakota. Alaska, of course, famously com. Chris Hedges’s latest book is Days of every major company. Corruption at the top collects and invests revenue from extraction Destruction, Days of Revolt, illustrated by has become legitimized because corporate of the state’s oil and minerals. Dividends are Joe Sacco. EHMs draft the laws and finance the politi- paid out annually to state residents as a mat- cians who pass them.” ter of legal “right” – the only practical model Our Comment As I read Michael Hudson’s Killing the in the United States of publicly supported Debt, the IMF, and the World Bank: Sixty Host, I recognize the same “MO” now burn- income with no additional work require- Questions, Sixty Answers by Éric Toussaint ing its way throughout the developed world. ment. In 2008, under the governorship of and Damien Millet cataloged the use of In addition to such obviously needed Tea Party favorite Sarah Palin, each resident debt as a “mechanism of dominance.” They changes as ending private funding of cam- received $2,069 – over $10,000 for a family traced its destructive path throughout de- paigns, promoting an educated electorate, of five – from these “socialized” funds. That veloping countries and predicted that the and effecting further electoral reform, all year, Palin also signed into law a bill that rest of us would soon learn all about it – this brings to mind our present government’s gave every resident an extra $1,200 from the first-hand. proposal for a new infrastructure bank. state’s natural-resource revenues. John Perkins has spelled out that strategy, Aside from the fact that we already have The general argument for public owner- step by step as it played out in the devel- an infrastructure bank, why on earth would ship has always been much broader than oping world where he plied his talents an we look to Merrill Lynch and the Bank of simply capturing profits for social use. For Economic Hit Man (EHM). America for advice on how we Canadians one thing, unlike private corporations, pub- His work had two primary objectives. can best fund our badly neglected infra- licly owned enterprises are not required to The first was “to justify huge internation- structure? grow to meet Wall Street’s demand for ever- al loans that would funnel money back Why do I find the very suggestion some- increasing profits – a critical consideration to Main, the corporation for which he how ominous?! in any serious effort to move beyond our worked…through massive engineering and Élan

16 | Economic Reform March–April 2016 www.comer.org ment might well turn them into publicly a comprehensive plan to develop a robust, TVA in his annual budget, but a group owned features of a new system. (Breaking collaborative, sustainable, and equitable of Republican legislators, concerned with up the banks, as some have proposed, would regional food system by 2060. higher prices for consumers and less money likely produce a subsequent reconsolidation The most important precedent for a for their states, vigorously (and successfully) of power – as AT&T and Standard Oil long-term regional plan is the Tennessee opposed the idea. A new and more radical showed after they were broken up.) Valley Authority. Established by the New regionalism might also draw some lessons A major problem involves the inevitable Deal, this public-energy corporation cur- from the conservative Appalachian Regional institutional power that comes with such rently serves 9 million people in seven states. Commission (ARC), which has recently large scale. During the 1960s and ’70s, At one point in the 1930s, Franklin Roos- funded innovative efforts to help move the the pathbreaking radical historian William evelt supported legislation that would have area away from a coal economy. One such Appleman Williams suggested that one way created seven “little TVAs” as a step toward effort is Kentucky’s Shaping Our Appala- for socialists to deal with this challenge was a much more expansive economic-develop- chian Region (SOAR), which is working to focus on regions rather than the national ment plan. “If we are successful here,” he to develop local food systems, broadband system as a whole – especially in a country argued, “we can march on, step by step; in a Internet infrastructure, new businesses, the size of the United States. like development of other great natural ter- youth engagement, and a stronger cultural Modern innovators are bringing a similar ritorial units within our borders.” identity. The Chesapeake Bay Commission, idea to life as they experiment with regional Although many mid-century theorists which includes Maryland, Pennsylvania, models. “Bio-regional” efforts that anchor and planners believed in the promise of and Virginia, has brought together a broad economic, social, and environmental de- such regional proposals, the development coalition to deal with the pollution that velopment in natural regions can be found of a more expansive, democratic, and eco- threatens the ecological health of a shared in places as diverse as the Connecticut Val- logically sustainable regionalist vision was regional resource. ley and the Ozark Mountains. The Kan- hampered by the centralizing thrust of the California – itself equivalent in scale sas Area Watershed Council, for example, New Deal and then cut short by World War to a sizable region (and appropriately un- supports sustainable development in the II. The TVA itself lost direction and largely derstood as such) – is a national leader in prairie region through a range of projects succumbed to bureaucratic and other cor- developing regional climate-change solu- and community-building events, and the rosive pressures. tions. In October 2015, Governor Jerry Salmon Nation project is bringing a similar Nevertheless, as today’s regional efforts Brown signed the most comprehensive perspective to the Pacific Northwest. Nine show, the concept has endured. It’s also and far-reaching climate-change bill that states, mainly in New England, have formed worth noting that conservative support for any state has enacted since California first the Regional Greenhouse Gas Initiative decentralized forms of public ownership passed landmark climate-change legislation to reduce emissions. Another effort, Food may not be totally foreclosed. In 2013, in 2006. The new law requires state utilities Solutions New England, has put forward President Obama proposed privatizing the to purchase 50 percent of their power from renewable sources by 2030; it also doubles Public Debt from page 13 budget) exceeded all other expenditures the energy-efficiency requirements of build- Not only were governments that listened except for two – seniors and health care. It ings and provides incentives for creating to the fiscal scolds kicking the economy even exceeded defence. These huge trans- the charging stations needed by electric when it was down, prolonging the slump; fers of tax dollars as interest (debt service vehicles. not only were they slashing public invest- charges) to the wealthy money-lenders exac- Another promising strategy is to com- ment at the very moment bond investors erbate the inequality growing in our society. bine elements of these various approaches. were practically pleading with them to Public debt is part of the money supply and There is no reason that large-scale enterpris- spend more; they may have been setting us of course must be managed in the interest es couldn’t be structured as joint ventures up for future crises. of the public. Currently public debt and that would include worker, community, And the ironic thing is that these foolish elements of this article ignore public good. and regional institutions. Many states and policies, and all the human suffering they Simply stated public debt should be localities across the country collaborate to created, were sold with appeals to prudence balanced between public and private in- manage, regulate, and share the benefits of and fiscal responsibility. stitutions and should be primarily used to publicly owned electric utilities. Roughly fund infrastructure needed by the country. 25 percent of the nation’s electricity is, in Our Comment If private pension funds need more stable fact, supplied by publicly owned firms and This article ignores the relationship be- portions of their portfolio, they should be co-ops. In conservative Nebraska, every tween monetary and fiscal practices and allowed to purchase government bonds. If resident and business gets its electricity from continues the current political obfuscation citizens are looking for more stable invest- a local public utility or cooperative. In both between the two. Its linear focus on bond ments for their savings they may be encour- liberal and conservative states, examples markets obscures the feedback systems and aged to buy savings bonds. of public ownership – municipally owned non-linear impacts. The issue is to whom To reiterate. It is silly to talk about pub- hospitals, hotels, convention centers, transit the debt is owed not the amount. When lic debt being too high or too low because systems, ports, and airports, among many public debt, held by the private sector, in- it diverts us from looking at who actually other services – are ubiquitous. A new poli- creases, it puts constraints on the fiscal prac- holds the debt and its public value. Bring tics might one day infuse these local efforts tices often justifying austerity programmes. that issue into the discussion and we might with fresh purpose and energy, and perhaps In Canada the current level of federal debt get somewhere. scale them up to the state or regional level. service charges (even in the past balanced Herb Wiseman Continued on page 19 www.comer.org March–April 2016 Economic Reform | 17 Stakes Are Huge as Liberal Government Moves Forward on Canada Infrastructure Bank Jason Fekete, Ottawa Citizen, March 18, minister, and the Finance Department’s re- his study says. 2016 lationship with PPP Canada, a Crown cor- But it could also offer “credit enhance- As the federal Liberal government pre- poration that delivers public infrastructure ment” services – such as loan guarantees, a pares to deliver its first budget on Tues- through public-private partnerships (P3). reserve fund to cover lenders in case of bor- day, behind the scenes it has been slowly The broad structure of the Canada In- rower default, and loan loss insurance – that laying the groundwork for a mammoth, frastructure Bank was laid out in the Lib- improve the chances the loans will be repaid multibillion-dollar undertaking that could eral party’s election platform, which said by borrowing municipalities and provinces. revolutionize how infrastructure projects are the CIB will “provide low-cost financing for The report notes that, on average, the planned and funded in Canada. new infrastructure projects.” federal government borrows money at rates A federally backed Canada Infrastructure The bank will offer “loan guarantees and approximately 1.25 percentage points lower Bank (CIB) that would make it easier and small capital contributions” to provinces than large municipalities and around one more affordable for municipal and provin- and municipalities where a lack of access to percentage point lower than provinces that cial governments to finance capital projects capital is a barrier to projects proceeding. have provincial financing authorities, like was a key election promise by Prime Minis- “The federal government can use its Ontario and British Columbia. ter Justin Trudeau and the Liberals. strong credit rating and lending authority If financing through the CIB can shave While it’s expected the budget will ad- to make it easier and more affordable for one percentage point off of the cost of a dress the government’s commitment to cre- municipalities to build the projects their municipality or province borrowing $500 ate the CIB, the exact structure and mandate communities need,” the platform says. million, it would save the borrower $100 of the CIB – including how project financ- “Lending from the CIB will be linked to million in interest payments over a 35-year ing and approval would work and whether balance sheet assets, and won’t require any loan term, the study says. it will be a Crown corporation – won’t be increase in the federal government’s accu- In his report, titled “Creating An Ef- determined until the coming months. mulated deficit.” fective Canadian Infrastructure Bank,” Si- Municipal and provincial governments, The Canada Infrastructure Bank also emiatycki says municipal and provincial large firms and the broader financial mar- will issue green bonds to fund projects government don’t have a problem accessing kets are closely watching the government’s like electric vehicle charging stations and financing, but do have trouble paying it blueprint for the bank and exactly how it networks, renewable energy transmission back because of revenue challenges. will operate because the stakes are huge: lines, and building retrofits, the Liberals However, he believes “the real benefit” The creation of the CIB could save lower have promised. would come by creating an infrastructure levels of government hundreds of millions The Federation of Canadian Municipali- bank that is a “centre of excellence” in proj- of dollars on large capital projects by allow- ties, in its budget submission, recommended ect delivery by providing rigorous proj- ing them to access low-interest financing the federal government work with the FCM ect evaluation and procurement expertise, from the federal government and its top on the design of the Canada Infrastructure along with the financing component. credit rating. Bank to help reduce administrative burdens, The bank must fund “shovel worthy” Ottawa has already taken steps to move ensure both renewal of capital projects and projects that will realize long-term econom- the CIB project forward. new construction are eligible for funding, ic benefits, rather than just “shovel ready” It has recruited a Canadian investment and that it allows for maturities exceeding projects that could end up being a drain on banker working at Bank of America Merrill 30 years. public finances. Lynch in the US to help design the CIB The FCM, which represents nearly 2,000 “We have a chronic history of picking and advise Infrastructure Minister Amarjeet local governments across the country, also projects that don’t deliver on its benefits,” Sohi on the project. wants affordable housing construction to Siemiatycki said in an interview. The adviser will work pro bono as an be eligible for infrastructure bank financing. His report recommends the Canada In- unpaid volunteer and will be based out of A federal infrastructure bank can pro- frastructure Bank be capitalized with funds Sohi’s office for up to six months, begin- duce widespread benefits for communi- that are on top of – and not a replacement ning in late March. The individual will also ties across the country, including more for – existing federal capital grants, and that work with large pension funds in Canada as affordable financing for municipalities and a primary focus be on lending services for part of the Liberal government’s efforts to provinces, but that’s just one component of large infrastructure projects worth at least persuade them to invest in Canadian infra- what should be included in it, says a recently $10 million. structure such as transit projects. released report from Matti Siemiatycki, an Lending from the CIB will be linked to bal- Meanwhile, the government has also associate professor in the Department of ance sheet assets, and won’t require any increase created a new, executive group position of Geography and Planning at the University in the federal government’s accumulated deficit. Chief, Infrastructure at Finance Canada to of Toronto. As well, all projects applying for financial advise Finance Minister Bill Morneau on The bank could provide low-interest support from the bank should have a cred- the development of the Infrastructure Bank, loans directly to governments and private ible, independent study of the project’s costs the plans and priorities of the Infrastructure project sponsors to finance infrastructure, and benefits.

18 | Economic Reform March–April 2016 www.comer.org There are various forms of infrastructure of low-interest financing? and cons of investing their funds in infra- banks and capital financing authorities scat- Why on earth would Canada look to structure such as transit projects – especially tered across Canada, the US and the world, Bank of America Merrill Lynch to help when such investments are not necessary. including: design CIB? (Meanwhile, a recent study by This proposal should be studied in the • In Western Canada, the Municipal the American Levy Institute, cites Canada context of similar enterprises throughout Finance Authority of British Columbia as an outstanding example of how well a the developing world and the EU. provides low-cost financing to municipal public central bank can fund a country’s What could be at stake is national sov- governments, while the Alberta Capital infrastructure needs and serve the common ereignty and political and economic de- Finance Authority finances capital projects good without undue inflation or debt.) mocracy. for municipalities, school boards and other Pensioners might want to study the pros Élan local entities; • The Ontario Financing Authority and Socialism from page 17 Infrastructure Ontario provide financing None of this is to suggest that large- avers that this third option is steadily de- to public sector organizations and munici- scale political change is imminent or inevi- mocratizing wealth over time and creating palities to help finance capital projects like table. Social, economic, and environmental the underlying institutional blocks of a transit, roads and health facilities; conditions – to say nothing of assaults on new system, inserting new institutions into • In the US, Democratic frontrunner traditional liberties – are likely to get worse the system, and transforming it piece by Hillary Clinton has promised a $25-billion, before they get better. For precisely this rea- piece toward a more equal and democratic government-owned national infrastructure son, the systematic development of a practi- society. He provides numbers to show the bank as a key plank in her platform, with cal alternative to the status quo is critically significant growth in worker co-operatives, the hopes it will help unlock hundreds important. coalitions of co-operatives, community de- of billions of dollars in private capital for The change we need will not come from velopment corporations, and community American infrastructure; the top. As we’ve seen in countless ways, our and public sector forms of banking all of • Overseas, the European Invest- current political system limits the potential which keep money in the local economy or ment Bank is owned by the EU’s 28 for traditional progressive strategies. A new as he calls it democratizing wealth. He also member states and provides financ- vision – one that encompasses fresh political notes that ultimately larger scale institu- ing and advice for infrastructure projects strategies as well as new political-economic tional changes are also essential especially in that meet the bloc’s policy objectives; content – must be built from the bottom regard to the financial, banking and health In the United Kingdom, the UK Green up. The overarching goal must be to develop care systems.” https://beyondcollapse.word- Investment Bank, which is owned by the a set of ideas that challenge the dominant press.com/2012/03/17/occupy-economics- British government, invests public funds ideologies and move the country in a funda- how-the-occupy-movement-has-helped-to- in green infrastructure projects and mo- mentally new direction. shift-the-economic-paradigm-2 bilizes private sector capital into the green The Sanders insurgency, the polling Janet M. Eaton, March 18, 2012 economy; and data, and the growing experimentation with • The Beijing-based Asian Infrastructure a range of alternatives all suggest that we You may recall that Galbraith also pointed Investment Bank, which just opened its may be on the brink of a new era – an ex- out that “the new [was] already with us,” doors, finances sustainable infrastructure tended and difficult period in which a new and that the first step to the change neces- projects in Asia that promote economic de- economy is slowly forged. Such a system sary would be “the emancipation of belief.” velopment and regional co-operation. might perhaps be called a “pluralist com- What’s behind this “sea change” is not a monwealth” to reflect its diverse forms of new level of thinking – that’s always been Our Comment common ownership. But whatever we call there – but a new intensity, a new degree of The stakes are indeed huge! Canadians it, it is time to start discussing this system convergence – a global response to a global could forfeit their tried and proven public more openly and to refine its practical ele- corporatocracy that has not only made “the central bank! No wonder the government ments. As ever-greater numbers of Ameri- failure of traditional approaches” clear, but has been laying the groundwork for its suc- cans are forced to ask fundamental ques- has so exacerbated “the nation’s most press- cessor “behind the scenes.” tions about where their nation is going, we ing problems” as to perhaps trigger Gal- The most revolutionary aspect of this must start offering the answers. braith’s “emancipation of belief.” “multibillion-dollar undertaking” will be The wide range of examples cited are the self-perpetuating privatization of debt Comments particularly encouraging in what they reveal that has characterized Canada’s monetary In an earlier article I wrote on “Occupy about the “trajectory of change.” policy since 1974, when the government Economics,” I referred to Gar Alperovitz’s The impetus to take back the commons is very much “behind the scenes” – chucked approach to a paradigm shift based on re- key in the development of a true alternative. the lessons of the Great Depression and distribution of wealth as distinguished from Alperovitz’s “Evolutionary Reconstruc- ceased using the Bank of Canada, borrow- reform of the present system or revolution: tionism,” is an attractive option. We Cana- ing instead from private banks at compound “The third process, Evolutionary Recon- dians have a distinct advantage on this score, interest. By 2012, that change of policy had structionism, Alperovitz defines as a Third in our traditional socialist bent, and in our cost Canadian taxpayers 1.1 trillion dollars Way wherein, beneath the radar, a new para- public central bank. in unnecessary debt service on the national digm has been emerging quietly over the Alas, that advantage is under siege. We debt alone. past decades. Instead of regulating wealth have work to do. “From the bottom up”? How will the government raise its share (reform) or seizing wealth (revolution) he Élan www.comer.org March–April 2016 Economic Reform | 19 port either pure socialism or at least the next best thing – Swedish-style social democracy. The Decline of Manufacturing Which brings us back to Bernie Sanders, Hillary Clinton, and the generally leftward- and the Rise of Big Banks swing that’s sweeping the entire Democratic Party. By Thom Hartman, Program, February Do Americans really prefer our way of Say what you want about the feasibility 18, 2016 doing things to the Scandinavian way of of his “democratic socialism,” but the argu- The big Republican knock against Bernie doing things? ment that it’s somehow out of step with Sanders – and, to some extent, the knock on Well, contrary to what you might hear what the American people want is just flat- Hillary Clinton and any Democrat – is that on Fox So-Called News, they don’t. out wrong. they want America to be more like Europe, Americans actually really like socialism, Americans do want socialism, even if in particular Northern Europe. in particular Swedish-style democratic so- they’ve been bludgeoned by decades of Cold Bernie’s socialist policies might work fine cialism, the kind Bernie Sanders is promot- War era propaganda into believing that it’s for Scandinavia, Republicans say, but they’re ing as part of his political revolution. an affront to our democracy. pretty much DOA in the good old US of A. A couple of years ago, Harvard Univer- The Republican attacks against progres- Marco Rubio even went so far as to joke sity business professor Michael Norton and sive ideals will likely continue and will get at a recent debate that Bernie would actu- Duke University Psychology professor Dan even harsher as we move into the general ally be better off just running for president Ariely conducted a study in which they election, but as progressives convincingly of Sweden. showed Americans three different pie charts. make their case to the American people that Now, Sweden doesn’t actually have a The first pie chart represented how democratic socialism is the way to go, those president (it’s a constitutional monarchy wealth is distributed here in America, with Republican attacks will fall on deaf ears. with a king as its head of state and a prime the richest 20 percent of all Americans con- A specter is haunting America, the spec- minister as its head of government), but Ru- trolling 84 percent of all wealth. ter of the death of the middle class, and bio’s point here is still pretty obvious. The second pie chart represented how Americans increasingly believe that Europe- Basically, he’s saying that even if it were a wealth is distributed in Sweden, a much an-style Democratic Socialism is the cure. good idea, Bernie Sanders’ Sweden-style so- more equal society in which the richest And genuinely progressive candidates across cialism would never work in the US because 20 percent of the population controlling a America – who did really well in the past damnit, this is America and we don’t like much smaller share of all wealth – around few election cycles – are poised to do better pinko commies here. 18 percent. than ever. Conservative columnist David Brooks The third chart represented an imaginary gives another version of this argument in his society in which wealth was distributed Our Comment latest op-ed for The New York Times. equally among all sectors of the population. “What’s in a name? A rose by any other He writes, “There’s nothing wrong with After showing people these three charts, name would smell as sweet” (Shakespeare, living in Northern Europe. I’ve lived there Norton and Ariely then asked them which Romeo and Juliet). myself. It’s just not the homeland we’ve style of wealth distribution they preferred. This report on the Harvard study re- always known. Bernie Sanders’ America The responses to this question were stun- minds me of TV coverage when public is starkly different from Alexander Ham- ning. health care was being debated in the US. ilton’s or Alexis de Tocqueville’s America, A full 92 percent of people said they pre- It featured pictures of hysterical Americans or even Bill Clinton’s and Barack Obama’s ferred a Swedish style of wealth distribution. being interviewed on the street, screaming America.” 77 percent, meanwhile, said they actu- angrily against public health care: “That’s But is that really true? ally preferred a perfectly equal distribution socialism!… That’s communism!” Is Sweden-style social democracy really of wealth. The results of this study are most en- as alien to the American way of thinking as So what’s the takeaway from all this? couraging in that they suggest that people David Brooks says it is? Easy: Americans overwhelmingly sup- do know what’s best for them and that – perhaps most of them – want what is just and right. They just can’t recognize it when they see it, for the bias into which they have been “bludgeoned” – hence, the Pavlovian reaction (Ivan Pavlov, 1849-1936, Russian physiologist, Nobel Prize for medicine, 1904; famous for experimental work on the impact of conditioning on behaviour). The study also suggests that such “knee- jerk” reactions might be overcome by changing circumstances and by the manner in which alternatives are presented. I have read studies that indicated that 80% of human behaviour is learned. Élan

20 | Economic Reform March–April 2016 www.comer.org