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(The following is an interview of Dr. Jack Rasmus, by Taylan Tosun, of Turkey, on the topic of how global recessions transition to global depressions and the current global economy today. This interview appears in TeleSUR TV’s, the Latin American media outlets’s website. The full interview is available on Dr. Rasmus’s website, http://www.kyklosproductions.com, accessible from this blog.)

Published 18 October 2014
by Taylan Tosun, Turkey

TAYLAN TOSUN: Your 2010 book, ‘Epic Recession: Prelude to Global Depression’ provides a unique interpretation of the causes of the economic crash that occurred in 2008-09. You predicted the global economy would not fully recover from the crisis. You also warned this ‘Type II epic recession’, as you call it, could lead somewhat sooner to yet another financial crisis and this time a true global depression.

My first question is, what has changed essentially in the global capitalist system since the late 1970s that seems to suggest the system is shifting from productive investment to more financial asset speculative investing which you argue is fundamental to the instability in the global economy?

JACK RASMUS: The decade of the 1970s was one of severe economic crisis, especially for the advanced economies of the USA and Europe. A quarter century of USA economic dominance and easy growth since 1945 was coming to an end.

Competition between capitalist economies was beginning to intensify, with the recoveries of Europe and Japan. Internally, unions and labor parties were demanding a bigger share of national income and were having some successes. In response, key capitalist sectors and politicians began restructuring internally and developing new strategies. The first fundamental change was the USA’s abandonment of the old Bretton Woods international monetary system, where the US dollar was pegged to gold and other currencies loosely to the dollar in turn. That would have the result of capitalist economies’ central banks, especially the US Federal Reserve, constantly pumping fiat money supply into the US and global economy. Over time this led to the rapid over-expansion of liquidity in the global economy, to the creation of new highly liquid financial asset markets, to new forms of financial securities traded in these markets, and to the rise of a new global financial elite with massive economic power and eventual unprecedented political influence as well.

Further developments thereafter intensified these trends: controls on international money capital flows were eliminated in the 1970s and 1980s, led by the USA but quickly followed by others. That opened the door to a more rapid expansion of finance capital worldwide. Then in the 1990s a revolution in digital technology created the internet that further accelerated the globalization of forms of speculative finance. Concurrently, regulations on banks were removed to clear the obstacles from the global expansion of finance capital. So financial deregulation was the consequence, not the fundamental cause, of the growth of finance capital.

The more fundamental causes were the end of Bretton Woods, the shift of central banks thereafter to excessive liquidity creation, end of controls on international capital flows, and technology.
All of this accelerated the development of global speculative finance, since it paved the way for its true globalization. Capitalist investors discovered that it was easier to make money by creating money and speculating in financial assets they created instead of making (producing) real goods and assets.

Financial asset investment is therefore ‘crowding out’ real asset investment slowly worldwide. Global capitalism is slowing its rate of real investment. That’s why it is having trouble creating jobs and incomes for the rest. That’s why consumption is stagnating in the west, and why consumer debt is being offered as a substitute to households lagging in income growth. And that’s why the AEs are experiencing this ‘stop-go’ economic growth that continues. It’s a lack of real investment. But that slowing of real investment, it should be understood, is directly related to the shift to speculative financial investment by the global capitalist elite since the 1970s. The proliferation of shadow banks globally, the establishment of numerous highly liquid financial asset markets, and the creation of countless new financial security instruments to trade in those markets are all an expression, a reflection, of these changes. Together, they constitute what I call the new ‘global money parade’.
TOSUN: My second question is why do you define the last financial crisis as an ‘epic’ recession’, as a separate phenomenon from ‘normal’ recession?
RASMUS: I chose the term ‘epic’ recession to distinguish it from what has been called the ‘great recession’ that happened in 2007-09. I have a problem with that latter term. It was created by mainstream economists in 2009 in order to explain how that recession was different from the prior 10 recessions in the USA since 1948—i.e. that were ‘normal’. But the ‘great recession’ concept used by Krugman and others simply means it was ‘worse than’ a normal recession and ‘not as bad as’ a depression. That really tells you nothing. If one is to explain how the 2007-09 was different from previous recessions, it is important to explain how it was different both quantitatively and qualitatively. This I did in the first two chapters of my ‘Epic Recession’ book in 2010. In those chapters I provide a list of variables, both quantitative and qualitative, that constitute an ‘epic’ recession.
Because ‘normal’ recessions are due to shocks that destabilize the economy, traditional fiscal-monetary policies in capitalist economies since 1948 were able to restore stability. But depressions don’t respond to traditional fiscal-monetary policies very well. Nor do what I call ‘type II’ epic recessions, which I explain are ‘anterooms’ to a possible eventual depression. ‘Type I’ epic recessions are not as severe and can return to a normal recession condition. But ‘Type II’ epic recessions have a tendency to transform into depressions.

TOSUN: In your 2010 ‘Epic Recession’ book you describe inner dynamics of three successive phases: debt-deflation-default. Could you explain how this sequence leads to a big financial crisis?

RASMUS: To start, the explosion of excess liquidity globally by central banks and the expansion of ‘inside credit’ by the private banking system related to financial engineering and new securities creation together mean there is now massive total credit available for borrowing—far more than is needed to finance real asset investment. Investors and financial speculators put up part of their own money capital, but borrow the larger percentage. That leads to excessive debt creation.

When financial assets collapse in a banking crash, as happened in 2008, asset deflation occurs. Asset deflation then spills over to goods deflation, as lending by banks to non-bank businesses dries up and those businesses have to lay off millions. Mass layoffs mean less household income to purchase real goods and services. That in turn leads to rising business inventories and business reducing prices for real goods—i.e. deflation. The deflation in turn leads to rising defaults, as businesses can’t generate income to service their debt and previous loans.

TOSUN: In your book you refer to the ‘shadow banking system’ as a vehicle of the financial crisis. How’s that different from the classical banking system and how do shadow banks contribute to financial breakdown?

RASMUS: Shadow banks are the preferred financial investment institutions of the finance capital elite. That’s because they are basically unregulated. When a crisis occurs and the State intervenes to bail out the banking system with massive liquidity injections, a period follows when the State imposes some degree of financial regulation on the banking system, including the shadow banks. But capitalist investors eventually find a way to do a ‘run around’ the regulated banking system and create new, unregulated financial institutions again. They prefer the unregulated because they allow them, the investors, to take big risks and speculate big time. Big risks mean big profits. So following a crisis, investors rebuild their shadow banking system again. As this occurs the former, regulated banking sector demands the State allow them to engage in the risky high profit return speculative investing again. They demand financial deregulation and they eventually get it from the State. Then the two sectors, commercial regulated and shadow unregulated merge in various ways.

Because the shadow banks are linked to the commercial banks and in turn the real sector of the economy, when the shadow banks go bust in a crash, it spreads to the entire financial system and drags the entire edifice down. The banking system ‘freezes up’ in the wake of a crash and no one can get credit—including non-bank businesses, households, and even local government. The bigger the shadow system, the greater that the percentage of total investing is in financial asset speculation, the greater the risk factor of those investments, the more that debt has been used to finance the speculation—the greater the eventual financial bust when it comes.

TOSUN: How did the mortgage crisis in the USA turn into an ‘epic recession’ in the real economies of the many advanced capitalist countries?

RASMUS: The mortgage crisis occurred when the subprime mortgage securities market collapsed in price. About $4 trillion were issued in the period from around 2002-07. The mortgage crash did not ‘cause’ the crisis; it was the precipitating event for the financial crash. To understand the process, it is essential to understand the idea of ‘securitization’. Securitization occurs when a financial asset is combined with other financial assets to create a new security, a new financial asset. So securities are bundled together and then resold, often with a markup. Financial assets are based on real assets to begin with. A house is a real asset. The mortgage is the financial asset for it. But mortgages combined together create a mortgage bond. When the bond is sold, it means money is made on the bond as well as the original mortgage. When mortgage bonds are then combined with other financial assets, like an Asset Back Security, for example, it creates what’s called a Collateralized Debt Obligation (CDO). Some other ‘derivative’ instruments are also created in the same way, each built upon the other. This pyramid of securities is based, however, still on the original ‘house’ and mortgage, a real asset.
So we begin with financial assets based on real assets, but then financial assets based on other financial assets in the pyramid. But when the base of the period declines in value—i.e. the house—then the prices of all the financial assets built on it also eventually decline. That’s what happened with the subprime mortgage crash. Because many shadow and commercial banks were all in the game, lending each other to make subprime mortgages, the crash spread to all of them. Because other forms of credit were also connected, those too were afflicted with financial asset price deflation. A general credit crash set in. As credit dried up everywhere, the financial crash transformed into a sharp contraction of the real economy. Non-financial companies and households could not get loans from banks.

Payments on previous debt and loans could not be made, and defaults followed. That caused financial asset deflation to intensify. As the rest of the real economy contracts, asset deflation spreads to price deflation of goods and services in turn. Deflation leads to defaults and vice-versa, and in the process real debt rises. It becomes a vicious mutual self-amplifying process.

TOSUN: I’m living in an ‘emerging market’, Turkey, where after the short contraction of 2009 for us, and other emerging markets, our economies grew remarkably. How could such remarkable growth rates have been possible and to what extent were they healthy?

RASMUS: That’s because the massive liquidity injections by the central banks of the advanced economies—the USA, UK and now the Bank of Japan and soon the ECB—flowed out of those economies to a large degree to finance investment in the emerging markets (EMEs), especially China. China’s initial response to the 2009 crash was a massive fiscal stimulus, equal to around 15% of its GDP, which focused on direct government investment. China recovered rapidly. Because China’s recovery stimulated demand for commodities and other resources and goods produced by the EMEs, China ‘pulled up’ the EMEs. The EMEs were also the direct beneficiaries of the money capital inflows from the AE central banks. AE banks diverted the QE and zero rate loans to offshore markets, both into real asset investment and financial asset investment. Because the EMEs and China were growing, the stock and corporate bond markets in the EMEs boomed. The AE liquidity flowed also into speculation in foreign exchange currencies of the EMEs, real estate markets in the EMEs, and so on. So the combination of China rapid recovery and the US-UK-Europe monetary policies together benefited the emerging market economies like Turkey, the BRICS, and others like Mexico, Indonesia, etc.

Was this growth healthy? So long as the money capital flowed into these EME economies from the AEs and so long as China boomed. But now China is rapidly slowing in terms of growth, so demand for EME commodities, resources, and imports is slowing there. At the same time, the USA and UK are phasing out their QEs and are about to raise interest rates. That will reverse the money capital flows back to the AEs and slow the growth rates in the EMEs as well still further.

TOSUN: In a series of articles you wrote recently you observe that the center of the global crisis is shifting to the EMEs. Can you explain the reasons behind this shift?

RASMUS: It’s basically what I described above. Now that the central banks of the USA and UK have fully bailed out their banking systems via QE and zero rates, they realize there is no need to continue to do so by these monetary measures. The governors of the central banks realize that more liquidity injection won’t deliver much more results and, more importantly, that it is beginning to create new financial asset bubbles worldwide again. So they are reversing these policies. What it means is that, as interest rates rise in the USA-UK in 2015, money capital will start to flow out of the EMEs and back to the AEs. The stock and bond markets in the EMEs will begin to decline. Capital will leave the EMEs for the higher returns in the USA-UK. In turn, less capital in the form of foreign direct investment into the EMEs will also take place. The EME currencies will then decline and have already begun to do so. The EMEs will attempt to stem the capital outflows and currency declines by raising their own domestic interest rates to attract capital. But that will slow their domestic economies further. Those EMEs weakest in terms of exports to the AEs and China, will be hit the hardest. So we are entering another ‘phase’ of the epic recession globally.

TOSUN: Recent data shows the Eurozone, including France, Italy and even Germany are entering a recession and the Japan economy can’t bring about a recovery in any way. You claim that this state of affairs in Europe and Japan can interact with a weak recovery in the US and financial instabilities in China that may mean a new global recession. Can you explain the reasons why we can expect a new global recession?

For the remainder of this interview, go to Dr. Rasmus’s website, http://www.kyklosproductions.com

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Three major economies of Latin America—Brazil, Argentina, and Venezuela—entered recession in 2014. And in all three cases their recessions may be subtitled, ‘Made in the USA’.

After growing at 5% to 9% in annual GDP rates between 2010-2012, in 2013 all of the ‘big three’ economies of South America began to slow significantly. Both Brazil and Venezuela GDP grew at only around 1%-2% in 2013, while Argentina’s economy slowed from 9% in 2010 to 4%. Economic growth in Latin America’s other major economy, Mexico, slowed similarly—from 5.5% in 2010 to only 1% last year.

After slowing to a crawl in 2013, the bottom then dropped out in 2014. Both Argentina and Venezuela economies are projected to decline -2% to -3% this year. And with negative economic growth both quarters this past January to June, Brazil’s economy is on track to decline -0.5% to -1.0% in 2014. Elsewhere, Mexico this year continues to stagnant barely above recession levels, while other Caribbean and South American economies, like Peru, also now hover around zero growth.

So what’s behind the new recession in Latin America—in particular what’s driving the big 3 economies of Brazil, Argentina and Venezuela into recession? What happened to reverse their 5% to 9% GDP growth rates of 2010-2012 so dramatically by 2013? And will the forces behind that reversal continue and perhaps accelerate in 2015, driving these Latin American economies further and deeper into recession?

To answer these key questions it is necessary to step back a few years to the period immediately following the global economic crash and crisis of 2008-09.

Global Force #1: The $20 Trillion Global Liquidity Injection

The immediate response to the global crash by the advanced economies (AEs)—especially the USA, UK, and to a lesser extent the Eurozone—was a massive bailout of their banking systems. The USA central bank, the Federal Reserve (Fed)—with the United Kingdom’s central bank, the Bank of England (BoE) in close tow—have provided a massive, multi-trillion dollar injection of money capital (liquidity) to prevent the near total collapse of the global capitalist banking system.

This bailout and money injection has assumed two forms: zero interest rates (ZIRP) to the private banking system and a policy called ‘quantitative easing’ (QE), whereby the central banks essentially printed money and directly purchased trillions of dollars of toxic, virtually worthless bad assets held in the wake of the crash by private banks, shadow banks, and wealthy ‘ultra high net worth’ investors.

In the USA, this money injection by the US Fed alone would amount to more than $15 trillion. In the United Kingdom, another equivalent $2-$3 trillion. And in the Eurozone and Japan by 2014 an additional minimum $2 trillion more.
Monetary policy (QE, ZIRP) became the primary economic recovery policy in the AEs. Fiscal policy in the form of government spending and investment played, at best, only a token role (in USA, UK), a negative role (Europe), or virtually no role at all (Japan).

The USA economy introduced a token 5% of GDP fiscal stimulus in 2009-10, most of which were tax cuts for businesses and temporary subsidies to the US States for one year. The Obama administration’s approximate $800 billion fiscal stimulus in 2009-10 was then retracted in 2011 by a $1 trillion government spending cut. More cuts followed. A similar process occurred in the UK. The Eurozone’s followed ‘austerity’ fiscal policies, with not even a token fiscal stimulus, and deep reductions in government spending.

Global Force #2: China’s 15% Fiscal Stimulus

In contrast to the AE capitalist economies’ almost total reliance on monetary injections, China responded to the 2008-09 crash with a massive fiscal spending and direct government investment program amounting to approximately 15% of its GDP at the time—i.e. three times the size of the USA’s initial fiscal stimulus. The composition of China’s stimulus also differed. It was mostly direct government investment, whereas the USA’s was mostly business tax cuts and subsidies to States—neither of which generated much in terms of jobs and working class wage growth.

China’s economy recovered quickly and strongly in the wake of 2008-09, growing in the 10%-14% range. In contrast, with an opposite emphasis putting their banks and investors first in line for bailout, the capitalist AEs recovered only slowly, at half the normal historical growth rates following recession, or not at all—as in the case of the Eurozone and Japan which experienced ‘double dip’ and ‘triple dip’ recessions, respectively, after 2010.

This dichotomy in economic recovery policies—i.e. China focusing on fiscal solutions and direct government investment vs. the AEs focusing on massive money injections and token or negative government investment—is crucial to understanding the trajectory of the Latin American economies after 2010 and their current descent into recession today.

2010-12: Converging Forces Benefit Latin America
With weak or no recovery in their ‘real’ economies, the AE central banks’ massive money injections resulted in much of that money capital ‘flowing out’ of the AE economies and into China and the emerging market economies (EMEs)—including Latin America.

Some of the money capital inflows to Latin America went into financial market speculation in the stock, bonds, derivatives, real estate, currency markets in Latin America. But as China growth accelerated in 2010 and after, it required more natural resources, more commodities, and more semi-finished goods. Latin America could, and did, provide those to China. So money capital also flowed into real investment in Latin America—in expanding commodities and resources production to meet China demand, into semi-finished goods to be exported to China, and into further developing Latin American infrastructure. This real output growth in turn further boosted financial asset prices and speculation in Latin American financial asset markets.

So two global forces converged in 2010 to the benefit of Latin America: surging China demand and simultaneous AE central banks’ massive money injections that mostly ‘flowed out’ of the AE economies into the EMEs, including Latin America, that funded real investment to increase production to satisfy that China demand.

With their own AE real economies languishing, stagnating, and slipping in and out of recessions, AE private bankers borrowed the trillions of dollars of ‘free money’ from their central banks and invested that money capital directly offshore themselves to exploit the potential for higher rates of return in China, the EME’s and Latin America; alternatively, they loaned the free money from their AE central banks in turn to shadow banks, high net worth investors, and US multinational corporations that did the same.

As the Bank of International Settlements (BIS)—i.e. the bank of central banks—in Geneva noted in its most recent 2014 annual report, that hundreds of billions of dollars annually flowed into Latin America between 2010-2013—between $500 billion to perhaps $1 trillion—providing credit for expansion. Much of that massive money capital inflow now exists as debt on the balance sheets of Latin American business borrowers, debt that will have to be repaid in coming years even as the region’s economies now sink into recession. So the credit inflows and corresponding debt build-up in Latin America is primarily private business sector debt—not consumer or even government debt.

The money inflows expanded Latin American economic infrastructure, agriculture output and manufacturing production needed to satisfy the China demand. But as other EMEs grew along with China (BRICS, G-12, Australia, etc.) it generated another layer of global demand for Latin American goods and services. Latin American stock and other financial markets boomed even more along with rising production output, providing still more financial asset speculation. Shadow bankers—i.e. hedge funds, private equity firms, insurance and investment bankers—circled and swooped into the region. The massive money inflows also drove up the currency and real estate values in Latin American countries, offering yet another lucrative financial asset speculation opportunity.

2013-14: Forces Diverge & Latin American Recessions

In early 2013 the above converging forces began to shift and reverse, setting in motion the weakening of Latin American economies today, in 2014. China’s rapid economic growth began to significantly slow by late 2012, while simultaneously, in early 2013, the USA Fed central bank announced plans to reduce its massive money capital injections by discontinuing QE and thereafter by raising interest rates.

It is important to note, however, that the common source behind both China’s slowing and the Fed’s shift to discontinue QE and raise rates is the destabilizing behavior of the global finance capital elite—at the forefront of which have been the ultra high net worth financial speculators and their shadow banks, together sometimes referred to as the ‘vultures’, if one prefers.

Here’s the connection in brief:

The massive money injections by AE central bankers since 2009 have resulted in creating global financial asset bubbles in stocks, junk bonds, foreign exchange, Euro periphery government bonds, and divers other forms of financial asset speculation. By 2013, with bankers and investors more than bailed out by means of the, prior $20 trillion AE central banks’ money injections, AE central bankers in the USA-UK announced a shift in policy in the spring of 2013—i.e. to discontinue QE and then to raise interest rates to ‘recall’ some of the prior massive trillions of dollars of liquidity injection—in order to cool down some of the financial bubbles emerging.

In early 2013, the US Federal Reserve initially announced it would start reducing QE. The immediate result was a crisis in EME financial markets, including Latin America’s. In expectation of no QE and higher rates (and in turn a rising US dollar), money began flowing out of Latin America back to the USA and other AEs—into USA stock and junk bond markets, into the UK generating a London area construction sector bubble, and into Southern Eurozone sovereign bonds.

That prospect of accelerating money capital outflow precipitated Latin American currency declines, an initial round of capital flight from the region, a potential slowing of foreign direct investment (FDI) to the region, and rising inflation as the cost of imports accelerated due to the currency declines. Stock markets swooned in turn in response to all this. A number of Latin American governments responded in turn by raising their own domestic interest rates, in an effort to stem their currencies’ fall, re-attract the foreign money capital, and halt the stock market collapses. Their rise in rates only served to slow their economies further.

In recognition of the growing crisis in the region, the USA Federal Reserve quickly reversed itself and declared QE taper was not on its immediate agenda. But that declared phony ‘halt’ was only temporary. The Fed postponed action only until the USA resolved its October 2013 government shutdown confrontation between parties in Congress. Once over, the Fed again began reducing QE and has done so every month, ending altogether by December 2014.

However, of greater potential impact for Latin America is the growing drift of the US Fed toward raising US interest rates.
With no QE to fund money capital inflows to Latin America, and the prospect of higher US interest rates that would recall even more money capital back to the USA and AEs, problems of capital flight, declining currencies, rising import inflation, slowing FDI, as well as rising rates in Latin American economies returned even stronger by year end 2013. By 2014 the problems were of sufficient severity to push the region’s main economies into recession.
Simultaneous with the money capital reversal engineered by the US Fed and AE central banks, China also began slowing its economy in the spring of 2013 in an attempt also to ‘tame’ its own shadow bankers and financial speculators—aka ‘vulture’ hedge funds, private equity, etc.—who were creating destabilizing bubbles in its own currency, in regional construction, and in local government investment markets.

In May-June 2013 China reduced spending and its money supply growth to cool off its economy and check the speculative bubbles. But the policies slowed its real economy more than tamed the speculators. So it initially backed off, like the Fed had, in the summer of 2013. It introduced a mini-stimulus thereafter to restore growth. This stimulus—along with the Fed’s temporary reversal of QE in the summer of 2013—had the effect of temporarily cushioning Latin America’s drift toward recession in mid-2013. But China’s mini-stimulus in summer 2013 was not enough, and the China economy subsequently slowed further again. Once growing 10%-14% in 2010-12, China’s economy is now growing by less than 7% by most independent estimates. That slowing has in turn significantly reduced China demand for Latin American resources, commodities and semi-finished goods.

The combination of China demand slowing and AE money in-flows about to reverse precipitated once again by late 2013 a slowing of Latin American economic growth, and exacerbated related trends of declining currency values, declining stock values, capital flight, slowing FDI into the region, and rising import costs from the currency declines that are generating inflation as well.

Latin America’s recession today is thus largely the consequence of USA monetary policy shifts and slowing China growth and demand. But beneath that surface, the even more fundamental force behind both these apparent trends is the growing desperate efforts of global governments, in both the AEs and China, to somehow check the destabilizing behavior of global finance capitalists and their speculative investing in financial asset markets globally that threatens yet another global financial market implosion in the near future.

A Fundamental Contradiction

The essential point of both the China and USA Federal Reserve policy reversals of 2013-14—policy reversals that are now driving Latin America into recession—is that both policy shifts have their fundamental origins in the financial destabilization behavior of the global finance capital elite. The folks that gave us the 2008-09 financial crash and are in the process of creating yet another. The shift by the US Fed is clearly a response to try to head off further financial asset bubbles that have been building. Not as obvious is that China’s economic slowdown is also being driven, in significant part, by its efforts to reduce the influence of global financial speculators that have been destabilizing its foreign currency and local real estate markets where bubbles have been growing as well.

Indirectly then, the vulture finance capitalists, the global finance capital elite, the shadow banks and their ‘ultra high net worth’ mega-wealthy investors, are responsible for the slowing of Latin American economies in 2014.

A key contradiction in the global economy today is that, as AE central banks reduce money injections to slow financial bubbles, and thus avoid another financial crash that would drive the global economy into another depression, by raising interest rates in a global economy already slowing everywhere AE central bankers may in fact prematurely precipitate just the same outcome.

A Political Postscript

It should also be noted that certain recent USA government policies have also been exacerbating Latin America’s emerging recession. The USA is taking advantage of the emerging recessions in Latin America to put additional economic pressure on two of the region’s most important economies: Argentina and Venezuela. This further destabilization suggests that the USA may be ‘turning’ again toward a focus on Latin America in an effort to reassert its hegemony in the region and to roll back the progressive developments and governments there that have arisen in recent years. But how the USA is now attacking both Argentina and Venezuela—i.e. by defending the vulture capitalist hedge fund billionaires in the case of Argentina debt payments and by working with US multinational corporations to artificially create a dollar shortage and runaway inflation in the case of Venezuela in a USA effort to still further destabilize the slowing economies of both countries—is the subject of a subsequent essay and analysis.

Jack Rasmus is the author of ‘Epic Recession: Prelude to Global Depression’ (2010) and ‘Obama’s Economy: Recovery for the Few’ (2012) by Pluto Press, and the forthcoming ‘Transitions to Global Depression’ (2015). He hosts the weekly radio show, Alternative Visions, on the Progressive Radio Network. His website is: http://www.kyklosproductions.com and blog, jackrasmus.com.

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On November 4, 2014 the USA will hold its midterm Congressional elections. Obama and the Democrats face the very real possibility of losing control of the US Senate in November, having already lost control of the US House of Representatives in the previous 2010 midterm elections.

Additional landslide losses of the Democrats in 2010 at the state level also resulted in Republicans taking control of almost two thirds of the state governorships. Their new governors then quickly proceeded to redefine Congressional districts, to ensure the majority of Republican House members would be ‘safe’ in future elections. They also began introducing measures to restrict the right to vote in their states. Many of these measures will take effect in 2014, targeting mostly the poor, recent immigrant citizens, blacks and Latinos, students, the unemployed working class, and early voters—all of whom do not typically vote for Republicans. Other anti-democracy measures being prepared will follow by 2016.

Redefining Congressional districts and repressing voting rights means the US House of Representatives will remain firmly in control of Republicans in the coming 2014 midterm elections and for years to come.

On November 4, the USA will elect 36 Senators out of its 100 total. Of the 36 seats up for re-election, 21 are held now by Democrats. Twelve states appear contested, nine of which are in states that Obama lost in 2012 in his re-election. Polls show that voters in the 12 contested states favor Republicans in Congress by a margin of 50% to 40%. Republicans need to win only 6 of the 12 states to completely take over the US Senate.

The Republicans failed to take the Senate in the last election, in 2012, because they allowed ultra right wing Tea Party candidates to run for the Senate. Those candidates lost. But they have taken care of that. The US Chamber of Commerce and other big corporate donors and power brokers in the party have been directly intervening in the Republican Senate primaries everywhere this past year, to ensure that no Teaparty radicals will be running as Senate Republican candidates this November.

It thus appears highly likely that the Republicans will take the US Senate on November 4 as well as retain control of the US House of Representatives. Should that occur, conservative and pro-corporate interests will quickly mount an even more aggressive offensive against workers, immigrants, students, and the US people in general than they have to date. As Mitch McConnell, head of the Republicans in the US Senate and favorite of US corporate interests, recently put it: “ We will be pushing back…all across the federal government, we’re going to go after it”.

The Key Question of the Day

A question now appearing repeatedly in the media and the press, raised by pundits and politicians alike, is ‘should the Senate go Republicans, will it mean another two years of US government gridlock?’ However, the deeper question that should be asked, but the media is ignoring, is: ‘Should Obama lose the Senate, how much and how fast will he agree with the new pro-corporate, conservative, and pro-war initiatives by Congress that will immediately follow the midterm elections?’

High on the Republican immediate agenda for corporate America will undoubtedly be a new aggressive push for even more corporate tax breaks for big US multinational companies. Another legislative push will be to dismantle what little remains of bank regulation in the form of the feeble Dodd-Frank law passed in 2010. Another will be a piecemeal attack on Obama’s Affordable Care Act, likely exempting even more businesses from coverage than Obama himself has already allowed. Forget any action on environmental reform or immigrants’ rights. And watch for even more aggressive USA support for the post-coup Ukraine government and for Syrian rebels, certainly in money and perhaps in military aid as well.

How will Obama respond to this renewed pro-corporate, pro-war, anti-US worker offensive? Will he exercise his Presidential veto, as liberals and progressives naively will hope? Or will he — like prior Democratic presidents Jimmy Carter and Bill Clinton before him — cave in even further to those interests in his last two years in office?

A Pattern of Democratic Presidential Capitulations

Capitulation to corporate interests by Democratic presidents in their final two years in office has become a pattern in recent decades. It is what occurred in 1978-80 with Carter and in 1998-2000 in the case of Bill Clinton. Obama’s track record to date already shows a willingness to concede time and again to corporate interests on economic policy, and to the military-industrial complex and Neocons on foreign policy. When the pressure by those interests intensifies in 2015-16 for Obama with the loss of the Senate—just as it did for Carter and Clinton in their last two years in office—Obama’s willingness to make concessions at any price will likely grow further.

History repeats itself, as they say. But one might add: by re-combining and reordering similar events of the past.
In recent decades a pattern has emerged with Democratic Party politicians in office — Democratic presidents in particular. It goes like this: After Republicans wreck the US economy with policies ensuring their wealthy benefactors and corporate friends get richer even faster by ruining the economy, Democrats come in with promises to clean up the wreckage. Despite having a clear voter mandate and control of both houses of Congress and the Presidency in 1976, 1992, and again in 2008, Democrats repeatedly fail to clean up the mess. Corporate America and the wealthiest 1% are bailed out quickly, but not the rest of the country—i.e. the working classes. After the first two years, voter and popular disillusionment sets in. Democrats then quickly lose support in the US House of Representatives. That happened in 1978, 1994 and 2010, and by increasing margins each time.

In the following years Democrats then try to govern by placating, compromising, and cutting deals with the resurgent radical right and corporate interests. Concessions by Democrats further benefiting corporations and wealthy investor households (i.e. still more business tax cuts, more free trade, more social program cuts, more destruction of retirement systems and healthcare privatization, etc.) and still more Democrat-led military adventures follow (i.e. Carter’s bungled air invasion of Iran, Clinton’s attack on Somalia and Serbia, and Obama’s further attacks on Afghanistan, Libya, and ISIS-Syria).

Popular disillusionment with Democratic domestic and foreign policy thereafter deepens still further. The disillusioned refuse to vote. This sets the stage for yet another takeover by Republicans, who then reintroduce policies in new form—i.e. ‘old wine in new bottles’ as they say—warmed over old policies that wreck what’s left of the US economy again. This has been the cycle since 1976 now for almost four decades in the USA.

Democrats thus serve the role of taking the ‘heat’, as they say, for failed policies of Republicans and distract voters from the disaster of past Republican policies. The wealthy and corporate America get richer in the process leading up to the economic crises, then get promptly bailed out and even richer in the recovery. Working classes, in contrast, bear the brunt of the economic crises, aren’t bailed out in the recovery, and are called on to fight perpetual wars.

The repeated capitulation of Democratic presidents after their first two years in office has its origins in their failure to effectively address the economic crises in their first two years in office. That was true of Jimmy Carter, who failed to clean up the economic mess in 1976-78 inherited from Republican presidents, Nixon and Ford, in 1972-76. Carter’s failure led directly to his weakened political position and in turn to his ‘shift to the right’ and subsequent capitulation on economic and foreign policy during his final two years in office, 1978-80. It was similar for Clinton’s failed policies of 1992-94 and his later capitulation to corporate interests and foreign policy after 1998. Obama is now on track to repeat the process.

Obama’s Two Year Presidency

In the summer of 2010, as Obama was pumping trillions of dollars in tax cuts for corporations and investors and trillions more to bail out the banks, the US economy was still losing jobs, hundreds of thousands of homeowners were being evicted, and working class incomes were falling.

Instead of directly addressing these real problems with new policies and programs, Obama turned that summer to even more corporate preferred solutions to the economic crisis.
For example, in the summer of 2010 as unemployment continued to rise, he put his ‘jobs program’ in the hands of General Electric CEO, Jeff Immelt. Immelt’s solution to the continuing unemployment crisis was more free trade, more tax breaks for multinational manufacturing companies, so-called patent reform, and other pro-business initiatives that would do nothing for jobs. Obama’s solution for the still rising home foreclosures problem was to ignore the ‘robo-signing’ bank scandal that erupted in 2010, whereby banks were illegally throwing homeowners out of their homes. Tens of thousands of workers were still losing jobs and more than 300,000 a month were losing their homes during the summer of 2010. Obama’s answer was to let the States’ attorneys general deal with the housing issue and, along with Immelt, to push for more free trade agreements. Another $800 billion in business tax cuts were then passed at the end of 2010 and another $650 billion in bank bailouts were announced.

It is not surprising that American voters were not impressed with Obama’s first two years of performance. They voted in the midterm 2010 elections to replace no less than 64 Democratic members of the House of Representatives with Republicans, many of them of the reactionary ‘Teaparty’ faction variety.

Given the loss of the US House of Representatives in 2010—for which his policies and he himself must accept significant blame—Obama has not been able to achieve anything of any significance in terms of notable programs for the past four years, 2010-14. His presidency is perhaps best described as ‘crab-like’—moving sideways but essentially going nowhere. Given this fact, should Obama lose the Senate in the coming November 2014 midterm elections as well, he will be more than willing to agree to even more concessions to corporate interests than he even has to date. He’ll want to point to something, anything in his last two years in office to claim his presidency had some effect—just as Carter and Clinton did before him after 1978 and 1998. But, like Carter and Clinton, that ‘something’ will be a dead fish, wrapped in nice paper and sealed with tape to keep out the stink—at least until he leaves office.

The process of new concessions has in fact already begun. Corporate pressure to grant even more corporate tax cuts is rising as multinationals businesses challenge the administration with so-called ‘tax inversions’. They want total elimination of paying US taxes on offshore income.

Obama’s response has been a token threat to limit ‘inversions’ but not stop them. He’s been on record for years, moreover, in favor of cutting the corporate tax rate from present 35% to 28%. Some kind of ‘deal’ will no doubt follow the November election. Other evidence of more capitulation to come recently is his backtracking on promised immigration reform. While saying he would take executive action on this last June, he’s now put it off until after the November election. He’ll put it off again. The list of domestic policy retreats by the administration, and preparation for further such retreats, is indeed a long one.

On the foreign policy ‘war side’ it is obvious that the resurgent Neocons in the US State Dept., the media, and Congress have cleverly dragged Obama into the Ukraine conflict and have used the ISIS events in the Mideast to open a back door for the administration to go after Syria’s Assad without admitting publicly it is attacking that regime. One can only imagine what further military adventures will follow the November 2014 elections. Sending special forces into the Ukraine is not impossible. US military ‘boots on the ground’, as they say, in Iraq to confront ISIS is almost inevitable.

The Most Likely Scenario 2015-16

So get set for even more pro-corporate, anti-working class, and pro-war policies by the Obama administration should the Democrats lose the Senate in the upcoming November 2014 midterm elections. That has been the pattern since 1978 with Democratic Presidents.

All have had short, two year initial presidencies, proposing policies that fail to clean up the preceding Republican generated economic crises. Failure to resolve the economic messes sets the stage for the revival of those policies. Weakened by their prior failures, and in an effort to placate and attempt to compromise with corporate-military interests after the first two years, Democrat presidents typically ‘shift hard to the right’ in their final two years.
History does not repeat exactly. But Obama’s post 2014 scenario will probably look much like 1978 and 1998.

Sometimes resurging capitalist interests choose to dump their Democratic presidents altogether despite their concessions—replacing them with an even more compliant and useful Republican. That was the case of Jimmy Carter after 1978, who made concession after concession but was still abandoned in 1980 as corporate interests successfully pushed Ronald Reagan to the fore. They no doubt believed Reagan could deliver their new programs and proposals faster and more efficiently than might a second term Carter, who already showed himself to be quite politically inept.

Other times, corporate interests are willing to continue with a Democrat president a second term, so long as he shows signs he is able to continue to deliver—as Clinton clearly did in 1993-95 by delivering NAFTA free trade, by turning over the US Treasury policy to big banks like Citigroup to run, by his massive cuts to welfare spending, and by his ‘managed health care’ program that exempted health insurers from anti-trust laws and accelerated health insurance company price gouging. Once Clinton was mortally undermined with threats of impeachment in his second term, he capitulated still further to those interests in his final two years. The result in his final two years was comprehensive banking deregulation, more business tax cuts, free-trade like deals with China that cost three million lost jobs, allowing US tech companies to import to the USA hundreds of thousands of foreign workers on H1-B and L1 visas every year, oil industry deregulation, and promises even to consider social security privatization.

Now in his final two years, should he lose the Senate in 2014, like his Democratic predecessors Carter and Clinton before him Obama will almost certainly turn to even more concessions and capitulations to corporate interests on domestic economic policy and to Neocons and the military-industrial complex on foreign policy. He will seek further compromise with an even more aggressive anti-working class and pro-war Congress. That’s been the pattern, and no one should think it will change.

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Alternative Visions – Environmental Activists Discuss Sunday, Sept. 21 Demonstration & What Next – 09/20/14

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and at:


Jack Rasmus welcomes environmental activists, Michael Rubin and Glenn Turner, to discuss tomorrow’s major environment movement event, the demonstration in New York City and elsewhere in the USA (and globally) advocating the need for reducing global green house gas emissions to avoid a coming global environmental catastrophe. Jack and guests discuss the significance and the demands of the Sept. 21 events. Jack challenges guests to clarify the demands and future strategic objectives of the USA environmental movement. What comes next, after Sunday? Will the many environmental groups continue to unify or continue after Sunday to lead their separate struggles, only occasionally coming together for demonstrations that make no specific demands for change on the system. Will they unite with other groups and forces outside the environmental community—i.e. unions, community and ethnic groups, student organizations, religious organizations, forming a ‘united front’ to confront the destruction of the environment and ultimately the economy as well? Listen to the lively discussion, as Jack plays ‘devils advocate’ challenging environmental activists to evolve to a higher level of political action.

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The Jobs Crisis Goes Global

The following is an excerpt from a longer article published in teleSUR English. (see the author’s website, kyklosproduction.com/articles.html for the longer version)

“Three global capitalist research institutes recently released reports documenting a growing ‘global jobs crisis’. The World Bank, the OECD, and the International Labor Organization (ILO) all came to the same conclusion. The Group of 20 nations’ employment ministers thereafter meeting in Australia issued a joint statement on the three institutes’ conclusion that “the world’s largest economies are failing to create enough jobs and too many of those that are being produced are of a low quality to generate a meaningful boost to global growth” (The Financial Times, September 10, 2014). As the World Bank’s senior director for jobs put it, “there is little doubt there is a global jobs crisis”.

All three reports identify converging trends across all the advanced economies (AEs) of Europe, North America, and Japan. Not only is total unemployment rising long term, but the percentage of youth employment and the chronically long term jobless are also growing. So too are part time and temp jobs rising sharply as a percent of the labor force in the AEs.

Dimensions of the Jobs Crisis Today

The percent of long term jobless to total unemployment has risen from around one-fifth before the 2008 crash, to about one third today. Since the long term jobless tend to be concentrated among those older than 50 years, the AE economies’ job markets therefore appears to be deteriorating at ‘both ends’ of their labor force spectrum, the young and the older. Youth unemployment is rising to record high levels everywhere in the AEs. At the same time, those in the middle, 24 to 55 years old, are finding that jobs that are available are ’low quality’ part time, temporary, and contract ‘contingent’ jobs that provide far less pay, few benefits, broad exclusion from protective labor laws, and little security of continued employment.

In the USA in particular, a still fourth major jobs problem is also taking place, a harbinger perhaps for the other AEs as well: about 8 million Americans have completely ‘dropped out’ of the US labor force since 2007. They aren’t even counted among the unemployed and underemployed in the USA, given the erroneous way the USA defines and calculates employment and unemployment.

Rising youth unemployment, rising long term duration of unemployed, rising proportion of contingent labor for those even able to find employment, and millions altogether giving up on formal work means something is clearly wrong in AE labor markets and economies, is worsening, and increasingly appears structural and chronic—i.e. the ‘new normal’ as they now say, where the ‘new normal’ means, in effect, ‘we (capitalist policy makers) can’t or won’t do anything about it, so just learn to live with it’.

It is important to note that the global jobs crisis now documented by the above three global reports is simultaneously a global wage crisis.

Capitalist 21st Century Wage Strategy

When one looks at today’s deterioration of wages in the AEs from a class perspective, and not just in the limited way governments report wages, the picture is indeed dire. Millions more jobless today mean zero wages for those millions that should be factored into the total wage decline data but isn’t reflected in government figures. Only wage trends for those still with jobs is reported, and even then only for those with full time jobs. Millions more partly employed, working in part time, temp and contract jobs receive lower pay, which further reduces total wages for the working classes.

Millions more dropping out of the formal workforce, with some perhaps working in the ‘shadow economy’ at reduced and occasional pay, means still lower total wages for the class.

Reducing retirement and healthcare benefits, and/or raising the cost for those benefits for those still employed, constitutes yet another form of ‘wage reduction’. Then there’s the growing trend of outright wage theft that is a growing problem, especially in service sector jobs in the USA where employers increasingly just cheat workers out of part of their wages by payroll accounting tricks.

Then there are policies that allow inflation to undermine the purchasing power of minimum wage laws. Minimum wage law adjustments become more infrequent and less generous.

But all that is still not the entire story. Allowing workers’ pension plans to collapse altogether, into which they diverted part of their wages for years as a contribution to their pensions, means all those wage contributions are wiped out. That represents a form of ‘deferred’ wage reduction.

And it doesn’t stop there either. With less wages and income, workers are forced to turn to more credit and debt in order to finance their basic expenses. That too leads to a wage decline, as rising debt and interest payments lay claim in the present to workers ‘future’ wages not yet paid. Banks and credit card companies thus steal wages that haven’t even been paid yet by overloading workers with debt and credit, for which workers have little alternative given their lack of other forms of wage reduction .

21st century global capital has thus evolved multiple ways to reduce wages today.

But the biggest contribution to wage-earnings reduction for working households, the biggest impact, derives from the chronic rise in the millions of unemployed, the growing percentage of ‘contingent’ (part time, temp, contract) and ‘low quality’ jobs, and the millions forced into the ‘shadow economy’ of intermittent, occasional work, still lower paid, or even worse.

The Terrible Triad: Jobs, Wages & Inequality

The global jobs crisis also leads, according to the three ILO, OECD and World Bank reports, to a corresponding decline in disposable income and consumer spending, which contributes significantly to rising income inequality trends. So the jobs crisis means not only wage reduction but the rise of inter-class income inequality as well.

In the USA alone, median working class family incomes have fallen in real terms (adjusted for inflation) by more than 8%. That includes a 4% drop during the so-called ‘recovery’ since 2009. As corporate profits surged to historic record levels after 2009, and the wealthiest 1% saw their share of total incomes rise to 22%, more than ever before in US history, working class families’ incomes continued to deteriorate in the recovery. And that deterioration is not limited to the post 2007 recession period. It was going on since 2000, and even before that to the early 1980s.

The triple problems of jobs destruction, wage decline, and income inequality have become so severe in the AEs in general, not just the USA, that the global capitalist press, and capitalists themselves, are showing signs lately of growing concern about the trends and problem.

Given that, now that it is ‘safe’ to discuss the triple crisis, mainstream economists have jumped on the ‘income inequality’ bandwagon and have begun writing feverishly about it as well.

But while identifying the data indicating income inequality, economists have little to say so far as to its fundamental causes—and even less to say about the ‘jobs crisis’ as the crux of the problem triad. They identify the magnitude of the problem, but provide little explanation of the fundamental, originating causes—especially the fundamental ‘class basis’ of the problem in its inability to create enough decent paying jobs. Instead they limit themselves to calls for token tax reform, when the tax system is not the cause but just an enabler of the income transfers from the corporations to their owners, stock & bond holders, and senior managers; or suggest ways to reduce senior corporate executives’ excess compensation; or ways to tweak the minimum wage which, while benefiting the lowest paid a little, still leaves out the jobs and wage decline crisis for hundreds of millions of remaining workers.

It is not surprising that mainstream AE economists have not been successful at proposing theoretical solutions to the current global economy’s inability to generate a sustained recovery on a general scale. Nor is it surprising that capitalist politicians and policy makers in governments and central banks have been unable to do so in fact. Neither economists nor politicians have addressed, or are about to address, the fundamental problem of the global jobs crisis today raised in the three reports: the crisis of the decline in both the quantity and quality of jobs.

Jack Rasmus
September 19, 2014

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The following is a just published review of Jack Rasmus’s 2012 book, ‘Obama’s Economy: Recovery for the Few’, by John Hall, of Portland State University, that appears in the Autumn 2014 issue of ‘Review of Keynesian Economics’.

Review of Keynesian Economics, Vol. 2 No. 3, Autumn 2014, pp. 400-402

Jack Rasmus, ‘Obama’s Economy: Recovery for the Few’ (Pluto Press, London, UK 2012) 216 pp.

“Author Jack Rasmus tends to orient his research towards challenges facing the US economy. And in this recent title he carefully and skillfully delves into exploring what he regards as failures of the Obama administration’s policies, which can be justly summarized as ‘too little and too late.’ However, he stresses that the tepid recovery that began in 2009 did indeed generate one notable outcome, namely that the highest income earners in the United States increased their shares in national income, while the population at large suffered declines.

Rasmus describes the 2008 downturn as an ‘epic’ recession. He notes a Type I Epic Recession and a Type II Epic Recession, with the latter transitioning toward a depres¬sion. While he limits his book’s focus primarily to the US economy, Rasmus does call attention to the problems facing the European Union and the eurozone, which he attri-butes to the policy failures of uninspired leadership. In addition, with the once-impressive performances of the BRICS (especially China and Brazil) now cooling down, there is a real risk that failed leadership in the largest economies of the world could help to trigger a global depression. From this perspective, Rasmus sug¬gests that the 2008 downturn could be classified as a Type II Epic Recession.

In his ‘Introduction,’ Rasmus traces the spending of $11 trillion dollars in federal funds, then seeks to measure the outcomes. He notes three economic stimulus programs advanced by the Obama administration that cost about $3 trillion dollars. Then, more than $9 trillion were relied upon to support banks. After all of this spending, Rasmus fails to find any positive outcomes.

Although he does clarify that indicators of financial asset prices tended to recover from their 2008 levels, he stresses that non-financial indicators suggest only partial recovery of prior losses. While the groups that gained and lost are considered in more detail as the main topic of chapter 1, chapters 2 and 3 develop the idea that the Obama administration sought to deal with the downturn by shifting the emphasis away from an effective spending program and toward adjusting the system of taxation, and with the consequences of substantial job losses and rising unemployment that was not effectively addressed. Rasmus notes that direct and substantial aid to homeowners facing mortgage foreclosures were considered, but in the end, as Congress took control of TARP funds, direct assistance for Americans diminished. And then as much as $50 billion earmarked as foreclosure aid was channeled into the Home Affordability Modification Program (HAMP), which tended to provide funds for mortgage lenders dominated by large banks.

The lag between formulation of policy and implementation is considered in chapter 4, and is noted to have contributed toward the failure in offering a substantial stimulus to the US economy when it was needed.

Chapter 5 considers the 2010 Economic Recovery Program and notes that the administration sought to emphasize increasing exports instead of directly concentrating on restoring the 25 million jobs that were lost early on in the crisis.

Chapter 6 juxtaposes the midterm elections of 2010 with what Franklin Roosevelt and Jimmy Carter had to deal with at the time of their midterm elections. In particular, Rasmus offers details of Roosevelt’s National Industrial Recovery Act, or NIRA, as a way to offer contrasts between the two approaches. Rasmus emphasizes that the NIRA led toward a more comprehensive set of policies and programs and developed into what we appreciate as Roosevelt’s ‘New Deal,’ with programs that certainly helped citizens mitigate some of the difficulties associated with the Depression decade. With this as background, Rasmus critiques the tendencies of the Obama Administration to shift from an emphasis on a stimulus-driven recovery, to focusing upon deficit reduction.

This leads into the topic of chapter 7 and the relationships between deficit management and the likelihood of a second major contraction in 2013 taking place as a ‘double dip’ recession.

Chapter 8 offers details that suggest the US and world economy is indeed tending toward an economic depression. Rasmus considers several variables such as declines in consumption and investment spending, as well as government spending at the federal and state levels affecting, in particular, levels of public sector employment and the offering of public services such as education.

With its title,’ From Failed Recovery to Austerity Recession,’ chapter 9 details the opportunities missed through focusing upon budgetary austerity that have contributed toward an extended economic downturn.

Not giving over to a protracted lament on the hopelessness associated with the Obama administration’s politics and policies in this era of neoliberalism, Rasmus believes the US can avoid becoming mired in a depression. This is his expressed hope.

And with his chapter 10 he outlines a set of common-sense policies and creative institutional changes designed to promote short-term, medium-term, and long-term recovery. Rasmus’s proposed recovery program focuses on jobs, housing, and state and local government reforms. He includes detailed proposals for a fundamental restructuring of the tax, retirement, and banking systems. He offers proposals that, in my judgment, would help the US economy to achieve the kind of economic growth that would generate benefits for broad sectors of the population, including young people, those in their working years including the unemployed, and the elderly.

A lack of talent has never been a serious problem for America over its comparatively short history as an independent nation. In 2008 and 2012, President Obama demonstrated his ability to assemble a brilliant team to help get him elected. Why can he not do the same by bringing in a team of economic advisers with talents equal to the members of his core election team?
Reflecting back, it seems that over his two terms, President Bill Clinton certainly engaged some of the best talent in our economics profession. He not only brought in talent with well-honed analytical abilities and that communicated effectively with the public, he also brought in talent that remained loyal to his administration, and some to the very end of his 8-year term. Some decades earlier, President John Kennedy invited to Washington exemplary talent, and there were selected economists who rendered his Council of Economic Advisers as the hallmark of what we as talented American economists could offer our nation. Lamentably, our ‘Council of Economic Advisers’ got sidelined during the Bush era. Now we have a ‘National Economic Council’ that has been headed by leadership better credentialed in jurisprudence than in economics. Sadly, it seems to me that we shall likely remain locked-in with a status quo: not led, but rather managed by the cautious and uninspired.

Finding little reason for optimism related to improvements on the policy front during the remainder of the Obama administration, still I think this is a fine book that is both timely and crucial to digest, for the themes are fully pertinent to the current US political economy. The arguments are well founded and based upon empirical evidence that is carefully researched, selected, and presented. This book could serve advanced undergraduates and graduate students focused on the US macro economy, its challenges, and the failures – at least to date – of our political class to effectively address challenges related to the recent financial crisis and the failed policies that have not, so far, set the US economy on the road to a sustained recovery.

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Alternative Visions Radio Show – 09/06/14

The show is available to listen or download at either:




Host, Jack Rasmus, discusses the origins and evolution of Corporate Strategy in the USA since the 1970s and explains how that has played a central role in gutting union membership, undermining collective bargaining, and all but negating effective union political action. Jack describes the collapse of union membership and the net loss of 20 million potential union members since 1980, how corporations transformed collective bargaining from a means for workers to improve wages and benefits to a tool for taking away wages and benefits, and how union labor political action has collapsed into a policy of little more than providing money handouts to Democrats.

Jack explains how the failure of union strategy for organizing, bargaining, and political action is in large part due to the corresponding successes of corporate strategies that originated and began in the 1970s. Union strategic failures thus cannot be separated from Corporate strategic successes; they are both sides of the same coin.

Rasmus describes in detail how Corporate America in the 1970s reorganized and restructured itself to enable new strategies that took on the building trades unions, the teamsters union, and manufacturing unions, gutted their membership ranks, and effectively destroyed their union national, regional, and pattern bargaining power within a decade—by multiple means including double breasted operations, NLRB rule changes, industry deregulation, free trade, corporate tax incentives promoting offshoring & runaway shops, rise of tens of millions of temp workers and independent contractors not allowed to unionize, intensified open shop drives, and today’s de-unionizing of public employment, and other measures. Today’s economic (and increasingly political) class war in America, Rasmus explains, has its roots in corporate strategies formed in the 1970s, that continue to evolve and gain momentum today.

Rasmus concludes new, more effective union strategies will have to be accompanied by fundamental reorganization and restructuring of American Unions—just as had occurred in US history before.

For further on this theme, listeners are encouraged to read Rasmus’s four part series of articles appearing in the new Latin America media outlet, ‘teleSUR English’ at http://www.telesurtv.net/english/section/opinion/index.html.

(The series is also available at http://zcomm.org/author/jackrasmus/ and on his website, http://www.kyklosproductions.com/articles.html.)

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