what's the plan folks !
Time to Decide: Concentrated, Privatized Wealth or Shared Prosperity and Economic Democracy
One of the major conflicts of the era that is not often
highlighted for public debate is whether we want an economy that
privatizes government services and public resources and continues to
concentrate wealth; or whether we want to develop an economic democracy
that invests in the public interest and creates shared prosperity.
Journalist
Ted Koppel summarized the privatization trend: “We
are privatizing ourselves into one disaster after another…. We’ve
privatized a lot of what our military is doing. We’ve privatized a lot
of what our intelligence agencies are doing. We’ve privatized our very
prison system in many parts of the country. We’re privatizing the health
system within those prisons. And it’s not working well.”
The alternative, also growing rapidly albeit more quietly without corporate media coverage, is
economic democracy. This
is based on new models that give people greater control over their
economic lives, share wealth in an egalitarian way and allow people to
have more influence over the direction of the economy.
Privatization vs. Public Ownership
Privatization versus public ownership of services and resources is
one aspect of this debate, but there are also a host of other issues
that beg discussion. We will delve into many of these in detail in the
Economic Democracy Conference of the
Democracy Convention in
Madison, WI from August 7 to August 11. Presenters who are deeply
involved in their subjects will speak about big picture topics such as
what money is, ending debt and creating a new economy to more hands-on
topics such as creating socially-responsible businesses, alternative
currencies, affordable housing, public banks, saving the post office,
local investment, cooperatives and publicly-owned renewable energy. We
encourage you to attend the conference (the price is low to make it
possible for many to attend) and will provide reports and videos from
the conference on
It’s Our Economy for those who cannot make it.
The United States is moving on an aggressive, disastrous path of
privatization of government services. Some recent examples include the Air Force considering the
privatization of Cape Canaveral, NOAA privatizing satellite
weather services and
schools across the country privatizing education. Everything is on the table to be given over to private industry – airports,
roads, health services and water.
Just think how capitalist profiteers’ mouths must be watering at
these opportunities. The taxpayer spends hundreds of billions
developing Cape Canaveral and space exploration or weather satellite
technology, and then big business buys-in cheap and gets long-term
profits.
The bamboozling of the American public from corporate-funded
politicians speaking through the corporate mass media is hard to
believe. At its root, privatization is about profit for a few at the
expense of the many – the workers and people who need the services. How
do they sell this scheme to the public?
One key is self-created money scarcity – which should not even be an
issue. We say that money scarcity should not be an issue because
Modern Monetary Theory (MMT) demonstrates that government has the power to create money. This
video interview of economist Warren Mosler describes
MMT and how countries do not ever face a risk of being unable to pay
their debts but can use money in a functional way to meet the economic
needs of their country. Money scarcity is a driving force, as a chairman
of a major finance company said at a privatization conference, “
Desperate government is our best customer. There will be a lot of desperate governments out there.”
An example of how scarce resources are pushing toward
privatization is this health clinic in
Chicago. The clinic lost federal funding of a grant that paid for free
mammograms for Chicago women. To replace the funding they are seeking
to privatize the clinic. Will privatized clinics that seek profit
provide these free services? Another is the selling off of
post offices across the country.
How do profiteers make money from providing government services? Some
keys are job reduction, lower wages and fewer benefits for workers.
These are consistently part of privatization, so the process further
concentrates wealth at the top and weakens the middle class. In
Louisiana where
four LSU hospitals were privatized, thousands
of good paying middle class jobs were lost. Hundreds lost their jobs
permanently and those rehired were paid less with reduced
benefits. While an examination of health services has not been reported
on yet, profiteering often requires cutting costs that result in lower
access to services.
For these reasons, unions should fight privatization wherever they
see it. In Washington, DC the union that represents transit workers is
fighting plans to privatize bus service in
the nation’s capital. The contract, which includes a new trolley
system in DC, would cost $1.5 billion over 30 years. The union warns it
would result in 200 bus drivers losing their jobs and less bus routes
for passengers. He summarized the reality of privatization of public
services:
“We must keep public transportation public,” said Local 689
President Jackie Jeter. “When you start privatizing routes, you lose
your say. This is about giving the public their say.”
In fact, as has been seen in the growth of private prisons,
governments need to be wary. Cut backs on food and services have led to
prison riots in some states. As
an editorial in the Toledo Blade noted “Audits
in several states, including Ohio, have found that the vendor, the
Philadelphia-based catering giant Aramark, has charged for meals not
served, changed recipes to use cheaper ingredients, and skimped on
portions. A 2001 audit by then-Ohio Auditor Jim Petro found that the
state’s prison system paid Aramark for serving nearly 4.5 million meals,
instead of the 2.8 million meals it actually delivered, adding more
than $2 million to contract costs. On-site visits also found inexcusable
sanitation conditions, a lack of training, and “a near riot” at
breakfast over Aramark’s strict adherence to portion sizes.” When profit
is the goal – workers and services will be reduced to increase profit.
Underfunding of the transportation system is one area that is providing great
opportunities for privateers. For
years the American Society of Civil Engineers has been warning that the
US infrastructure is crumbling. As Business Week warned in 2007
“[i]nfrastructure is ultra-low-risk because competition is limited by a
host of forces that make it difficult to build, say, a rival toll road.
With captive customers, the cash flows are virtually guaranteed.” Who is
going to build a rival road? Where will the commuters go when tolls
rise?
When transportation is privatized, corporations control the
transportation infrastructure which is a life blood of the economy.
Control is ceded to private equity firms, out-of-state investment banks,
global construction companies and the shareholders of these
corporations. The big Wall Street banks – Goldman Sachs, JPMorgan and
Citigroup – are major players in roads for profit schemes. Profit
becomes the overriding concern, not the needs of the public.
One important example in the news this week was the potential
bankruptcy in Detroit. Many cities face cash shortfalls as cities have
been underfunded for decades by state and federal governments and have
very little ability to raise money. In Detroit, the mayor has been
replaced by an unelected city manager, Kevyn Orr, and the governor
announced the bankruptcy of the city. Many see this as an opportunity
for profiteers to buy city property at desperate-sale prices (prices,
set by an unelected city manager) – a
feeding frenzy for privatizers.
Labor unions, city workers and workers’ pensions will be hit hard.
Frank Hammer, a labor organizer in Detroit tells Real News “There
have been a lot of conversations under the emergency manager, and
certainly now under bankruptcy, about all the city assets that can be
put up in a fire sale to help the city, supposedly to help the city pay
off their debts. So they’re talking about, for example, selling what’s a
very cherished public park in the middle of the Detroit River called
the Belle Isle. They’re talking about selling that. They’re talking
about selling the art collection that’s housed in the Detroit Institute
of Art, which is apparently worth millions, and so that they’re going to
just have a feeding frenzy privatizing what previously were understood
to be public assets.”
Michigan radio reports that
everything is on the table, water, sewage treatment, art work, parks –
the privatizing profiteers are waiting to see what Orr offers.
Robert Reich points to Detroit as
an example of the bankruptcy of America’s social contract. Racial and
economic divides have resulted in many urban areas losing their
financial base as wealthy whites moved to the suburbs. While Detroit is
one of the poorest areas of the country, the Detroit Metro area “is
among the nation’s top five financial centers, the top four centers of
high-technology employment, and the second-biggest source of engineering
and architectural talent.” In Birmingham, Michigan, just across the
border from Detroit, $94,000 was the median income last year; and in
nearby Bloomfield Hills the median was more than $150,000. In Detroit, 1
out of 3 residents are in poverty, and the median income is $26,000.
Writers from New Economic Perspectives point out that
the real solution to all the Detroits in the country is for the
government to serve as employer of last resort and create a full
employment economy.
If government policy treated the Detroit region as all one, there
would be no bankruptcy and there would be enough resources to allow the
area to take care of itself. To Reich it is like big banks selling off
their bad assets and writing off the loss. The difference, of course,
is that when you talk about a city you are talking about people –
hundreds of thousands of people. Detroit exemplifies the wealth divide
in America, and the destruction of the social contract that included
social services, decent jobs and a more fair economy.
Some Corporate Functions Should Be Made Public Services
In fact, if the goal of the United States was a stronger economy for
all, better services and a fair economy, we would be discussing turning
some private functions into public services, accountable to the
voters. For example,
The Roosevelt Institute reported this week that
the United States ranks poorly in Internet services. In the US, the
internet is more costly and slower than the rest of the developed
world. Why? Because government has allowed the Internet to be
controlled by a series of monopolies like Verizon, Comcast, Time-Warner
and AT&T that do not compete with each other. This allows Internet
providers to charge whatever they want and provide whatever services
they like. Of course, the corporate media is putting out a different
message as revealed by two-
New York Times OpEds cited in the report by corporate interests that were published in one week.
Roosevelt points out that while Europe and Asia are upgrading, the US has no plans to do so. Right now, “the U.S.
is behind South
Korea, the UAE, Hong Kong, Japan, Taiwan, Latvia, Lithuania, Norway,
Sweden, Slovakia, Bulgaria, Portugal, Iceland, Denmark, Estonia,
Finland, and Norway. Very few Americans have the option to buy fiber to
the home connections at reasonable prices.”
Shouldn’t communication, like transportation, be a government
service? It is essential infrastructure for the economy and if it were
run as a public service that put the needs of the people and the economy
before profit for shareholders, we could create a plan to upgrade and
expand Internet with lower costs.
This week showed us another area where privatization and inadequate
regulation needs to be reconsidered – big Wall Street financial
institutions. Many
Americans see the big Wall Street banks as getting away with fraud, racketeering and money laundering and others go further and recognize the
obscenities of capitalism.
Bank profits are up in a big way –
even though unemployment is stuck at high levels, wages are shrinking
and more employees have part-time or temporary jobs. Why? For banks,
there is no money scarcity. They have easy funding of low-interest money
from the Federal Reserve; and they are protected if their investments
go bad by the federal government (i.e. the taxpayers). For example,
Simon Johnson reports that
JPMorgan has $200 billion in equity but a balance sheet of $2.5
trillion (under US accounting standards) and $4 trillion (under
international standards).
This highlights a problem with Modern Monetary Theory as it applies
to the US – in the US, the Federal Reserve creates money and provides it
to banks at low interest or banks create money through highly leveraged
loans. Real MMT would have the government creating money and using it
to fund projects that serve the public interest, e.g. infrastructure,
teachers, nurses, social workers, mass transit and greening of the
economy – not going into the balance sheets of banks and bonuses and big
salaries of their executives.
More people are seeing that the Dodd-Frank financial reforms were insufficient and are calling for more. Economic writer
William Grieder points out “When
Barack Obama boasted that his administration had put an end to ‘too big
to fail’ banks, it was probably the biggest fib of his presidency. The
legislation known as Dodd-Frank did no such thing but its passage
effectively closed the subject.” But, now he sees a new season of
reform, pointing to a proposal by Democrat Elizabeth Warren, Republican
John McCain and Independent Angus King for a 21
st Century
Glass-Steagall Act to separate risky investment finance from traditional
banking. The proposal would require a five-year transition period for
banks to downsize and undo their maze of risky connections to shadow
banking.
That is not the only reform proposed. Democrat Sherrod Brown and Republican David Vitter seek
to increase capital requirements on
the biggest banks up to 15%. While their bill did not get a hearing,
the Federal Reserve has increased requirements for the biggest 8 banks
to 6%, up from the 3% agreed upon by international regulators, i.e.
banks must have $6 to lend $100.
Others are
talking about alternative regulations if
Dodd-Frank fails, including greater regulation of derivatives,
providing greater competition to risky investments through prominent
offerings of safe investments, postal banks providing limited consumer
financial products and re-making of the regulatory structure to create a
single mega-regulator to prevent race-to-the-bottom regulations.
This week, a new scam of Goldman-Sachs was revealed, a scheme which raised aluminum prices
costing consumers $5 billion over the last three years. Goldman
bought an aluminum storage company three years ago, since then the
average wait time at the storage facility has gone up more than 20-fold,
from six weeks to 16 months, resulting in more revenues for storing the
aluminum. This means everything that uses aluminum, including
the cost of beer,
has increased. This was caused by the government loosening regulation
so that banks that invest in commodities can also own operations like
delivery, storage and inventory. During her final days in office, SEC
Chair, Mary Schapiro approved a plan that would allow JPMorgan, Goldman
Sachs and BlackRock, a large money management firm, to buy 80 percent of
the copper available on the market on behalf of investors and hold it
in warehouses. What do you think will be the impact on copper prices?
The Fed can end all this if it declines to extend the exemptions that
allowed Goldman and Morgan Stanley to make major investments in
nonfinancial businesses, but pressure will be needed to make that
happen.
Pressure Building From Below
That pressure is building. There are many positive signs.
Occupy and its offshoots are
taking action to both oppose policies that go against the public
interest and to build new systems that protect people and the planet.
The newest project is the
Occupy Money card that
can be used as a debit card without financing the big banks. Another is
to stop the transnational corporate power grab, the Trans-Pacific
Partnership, through
www.FlushTheTPP.org.
People are taking action to solve the still problematic housing market. An investment fund,
Boston Capital, is buying distressed houses and then selling them back to homeowners at a reduced cost of 40%’. The city of
Richmond, California is seizing underwater houses threatened with foreclosure through eminent domain and selling them back to homeowners at an affordable rate.
More broadly,
this week Delaware, among the most pro-corporate states and the home of one million corporations, became the 19
th state to enact laws permitting
“Benefit Corporations.” These
corporations allow companies to put people before profit. Their charter
mission includes serving the public interest, not just making profit.
Whether B corporations will be akin to “green washing” or real change
toward public benefit remains to be seen.
Likewise, there are businesses that do take corporate social responsibility seriously, as
Mohamed Yunus describes. He also states that “most of those companies don’t
believe in
CSR; they do it because it has become a cost of doing business. We
can’t argue with good actions, no matter what motive drives them. But at
heart such corporations are still the same soulless, profit-driven
entities.” Time will tell whether CSR is beneficial overall or hides the
harmful practices of some large corporations.
We do know that we are in a time of transition, an era that will
define the next economy. The effects of the neo-liberal economic agenda
of privatization simultaneous with de-funding of public assets and
services are becoming more obvious. People are fighting back in a number
of ways. And greater awareness of economic democracy and modern
monetary theory is growing. One thing is clear: it is going to take
action from below to create an economy that puts people and the planet
before profits.
Kevin Zeese, JD and Margaret Flowers, MD are participants in PopularResistance.org; they co-direct It’s Our Economy and co-host Clearing the FOG shown on UStream TV and heard on radio. Their twitters are @KBZeese and MFlowers8.
Charles Q. Choi has
written for Scientific American, The New York Times, Wired, Science and
Nature, among others. In his spare time, he has traveled to all seven
continents, including scaling the side of an iceberg in Antarctica,
investigating mummies from Siberia, snorkeling in the Galapagos,
climbing Mt. Kilimanjaro, camping in the Outback, avoiding thieves near
Shaolin Temple and hunting for mammoth DNA in Yukon.
They
noted that Obamacare involves the creation of a massive consolidated
database of information about everybody who participates in the health
insurance exchanges. The exchanges are supposed to make it easier for
average people to get health insurance by creating an online market
place for policies. A large percentage of the cost of insurance will be
covered by a federal tax credit.
