The Fourth World War

The Fourth World War

Directed by Rick Rowley. With Suheir Hammad

4th World War - taken from a speech by Marcos calling the war against globalization the 4th World War - is a brief, documentary of radical resistance to global capitalism

Despite the titanic struggles of dispossessed peoples around the world, the wealth of nations continues to reside in fewer and fewer hands. The economies of poor countries collapse under vicious IMF policies, and capitalism's global 'clubs' thrive ever and ever upward. Meanwhile, people keep struggling, ultimately downward.

The saddest truth: Adolph Hilter, when talking about the West, could be have been talking about modern America

In this Anglo-French world there exists, as it were, democracy, which means the rule of the people by the people. Now the people must possess some means of giving expression to their thoughts or their wishes. Examining this problem more closely, we see that the people themselves have originally no convictions of their own. Their convictions are formed, of course, just as everywhere else. The decisive question is who enlightens the people, who educates them? In those countries, it is actually capital that rules; that is, nothing more than a clique of a few hundred men who possess untold wealth and, as a consequence of the peculiar structure of their national life, are more or less independent and free. They say: 'Here we have liberty.' By this they mean, above all, an uncontrolled economy, and by an uncontrolled economy, the freedom not only to acquire capital but to make absolutely free use of it. That means freedom from national control or control by the people both in the acquisition of capital and in its employment. This is really what they mean when they speak of liberty. These capitalists create their own press and then speak of the 'freedom of the press.'

In reality, every one of the newspapers has a master, and in every case this master is the capitalist, the owner. This master, not the editor, is the one who directs the policy of the paper. If the editor tries to write other than what suits the master, he is ousted the next day. This press, which is the absolutely submissive and characterless slave of the owners, molds public opinion. Public opinion thus mobilized by them is, in its turn, split up into political parties. The difference between these parties is as small as it formerly was in Germany. You know them, of course - the old parties. They were always one and the same. In Britain matters are usually so arranged that families are divided up, one member being a conservative, another a liberal, and a third belonging to the labor party. Actually, all three sit together as members of the family, decide upon their common attitude and determine it. A further point is that the 'elected people' actually form a community which operates and controls all these organizations. For this reason, the opposition in England is really always the same, for on all essential matters in which the opposition has to make itself felt, the parties are always in agreement. They have one and the same conviction and through the medium of the press mold public opinion along corresponding lines. One might well believe that in these countries of liberty and riches, the people must possess an unlimited degree of prosperity. But no! On the contrary, it is precisely in these countries that the distress of the masses is greater than anywhere else. . . .

It is self-evident that where this democracy rules, the people as such are not taken into consideration at all. The only thing that matters is the existence of a few hundred gigantic capitalists who own all the factories and their stock and, through them, control the people. The masses of the people do not interest them in the least. They are interested in them just as were our bourgeois parties in former times - only when elections are being held, when they need votes. Otherwise, the life of the masses is a matter of complete indifference to them.

Rising temperatures and dying oceans

Oceans’ Growing Acidity Alarms Scientists

by Les Blumenthal

WASHINGTON - Seven hundred miles west of Seattle in the Pacific at Ocean Station Papa, a first-of-its-kind buoy is anchored to monitor a looming environmental catastrophe.

Forget about sea levels rising as glaciers and polar ice melt, and increasing water temperatures affecting global weather patterns. As the oceans absorb more and more carbon dioxide and other greenhouse gases, they’re gradually becoming more acidic.

And some scientists fear that the change may be irreversible.

At risk are sea creatures up and down the food chain, from the tiniest phytoplankton and zooplankton to whales, from squid to salmon to crabs, coral, oysters and clams.

The oceans are already 30 percent more acidic than they were at the beginning of the Industrial Revolution, as they absorb 22 tons of carbon dioxide a day. By the end of the century, they could be 150 percent more acidic.

“Everything points to dramatic effects,” said Richard Feely, an oceanographer with the National Oceanic and Atmospheric Administration in Seattle. “There are suggestions the entire ecosystem could change over time.”

Originally, scientists thought the oceans could be one of the solutions to the buildup of greenhouse gases, as they absorb about one-third of the carbon dioxide that’s emitted worldwide. But they now know that the fundamental chemistry of the oceans has changed, and the possible impacts seem to grow more nightmarish as research accelerates.

“It seems like it is a one-way street, and that is alarming,” said Steven Emerson, a professor of oceanography at the University of Washington. “The pH of the oceans could be lowered permanently.”

Emerson was the lead scientist on the team that built the buoy at Ocean Station Papa, where weather measurements have been taken since the 1940s. The 10-foot-diameter buoy is equipped with an array of sensors that, among other things, measure the amount of carbon dioxide that’s being absorbed by the North Pacific and the pH, or acid levels, of the ocean. Anchored in water 5,000 feet deep, the buoy relays its information to onshore scientists via satellite.

Of all the oceans in the world, the North Pacific could be the most vulnerable to acidification.

As the oceans’ deepest waters circulate around the globe, they eventually arrive in the North Pacific, where they rise near the surface before plunging deep again to continue their global journey. When the water arrives in the North Pacific, it’s already acidic from the carbon produced by decaying organic material during its 1,000-year journey from the North Atlantic through the Indian Ocean and across the Pacific, Feely said.

As it surfaces, or upwells, in the North Pacific, the water absorbs even more carbon dioxide from the air. Cold water absorbs more carbon dioxide than warm water does.

“The older water is in the Pacific, the newer water is in the Atlantic,” Feely said. “There’s 10 percent more carbon dioxide in the Pacific than in the Atlantic.”

Corrosive water 600 to 700 feet deep already has been detected off the continental shelf of Washington state, Oregon and Alaska, Feely said.

“It’s butting right up against the coast,” he said. “The concern is when it gets to the continental shelf, what it will do to the fisheries.”

The increasing acidity can eat away at the shells of crabs, oysters, clams and nearly microscopic organisms known as krill and pteropods. It also inhibits calcification, the process in which these animals rebuild their shells. Without shells, most of the animals probably would die.

Krill and pteropods are a major food source for juvenile salmon, herring, pollock, cod, mackerel and other fish.

“When you start messing with the lower end of the food chain, it can dramatically affect the higher end of the food chain,” Feely said.

Squid also are sensitive to higher acidity, which affects their blood circulation and respiration. Colonies of coral, including those in tropical waters and those found deep off the Northwest coast, could disappear.

Feely said that 500 million to 1 billion people worldwide depended on fish for survival. Sharp declines in fish populations would affect their lives.

Eventually, the acidification will reach into inland waters, affecting oyster beds and clamming areas.

Earlier this month, the Senate Commerce Committee passed a bill co-sponsored by Sen. Maria Cantwell, D-Wash., that would create a comprehensive ocean-acidification research and monitoring program. A similar measure has been introduced in the House of Representatives.

Cantwell said she expected her Oceans, Atmosphere, Fisheries and Coast Guard subcommittee of the Commerce Committee to hold hearings in the Northwest on ocean acidification early next year.

“It’s a little-known fact, not widely understood, but it is clear our oceans are suffering,” Cantwell said.

A San Francisco environmental group, the Center for Biodiversity, has asked 10 states - Washington, Oregon, California, Alaska, Hawaii, Florida, New York, New Jersey, Maine and Delaware - to declare their coastal waters “impaired” under the Clean Water Act because of rising acidity. Such a move could clear the way for the states to regulate carbon-dioxide emissions.

“Though we believe the science is there, the political will may not be there,” said Miyoko Sakashita, a lawyer for the Center for Biodiversity. “At least this will raise awareness among policymakers.”

Though cuts in carbon dioxide and other greenhouse-gas emissions might slow or reverse global warming, scientist say it could take thousands of years or longer to reverse the increased acidity of the oceans.

“For all practical purposes this is permanent,” Emerson said. “That’s not true of temperature. But with ocean acidification the time scales are long.”

Original article posted here.

The contrast between a Moron as president, and what a president SHOULD look like (which is why he is being conspired against in Iowa)

Naomi Klein and the Shock Doctrine on Bill Maher (even though he is a denier, he still can present good guests)

Once again the Asia Times shows why it is weazl's favorite paper: the most comprehensive geopolitical analysis in print in a newspaper

SUPER CAPITALISM, SUPER IMPERIALISM

PART 1: A Structural Link

By Henry C K Liu

Robert B Reich, former US Secretary of Labor and resident neo-liberal in the Clinton administration from 1993 to 1997, wrote in the September 14, 2007 edition of The Wall Street Journal an opinion piece, "CEOs Deserve Their Pay", as part of an orchestrated campaign to promote his new book: Supercapitalism: The Transformation of Business, Democracy, and Everyday Life (Afred A Knopf).

Reich is a former Harvard professor and the former Maurice B Hexter Professor of Social and Economic Policy at the Heller School for Social Policy and Management at Brandeis University. He is currently a professor at the Goldman School of Public Policy at the University of California (Berkley) and a regular liberal gadfly in the unabashed supply-side Larry Kudlow TV show that celebrates the merits of capitalism.

Reich's Supercapitalism brings to mind Michael Hudson's Super Imperialism: The Economic Strategy of American Empire (1972-2003). While Reich, a liberal turned neo-liberal, sees "supercapitalism" as the natural evolution of insatiable shareholder appetite for gain, a polite euphemism for greed, that cannot or should not be reined in by regulation, Hudson, a Marxist heterodox economist, sees "super imperialism" as the structural outcome of post-World War II superpower geopolitics, with state interests overwhelming free market forces, making regulation irrelevant. While Hudson is critical of "super imperialism" and thinks that it should be resisted by the weaker trading partners of the US, Reich gives the impression of being ambivalent about the inevitability, if not the benignity, of "supercapitalism".

The structural link between capitalism and imperialism was first observed by John Atkinson Hobson (1858-1940), an English economist, who wrote in 1902 an insightful analysis of the economic basis of imperialism. Hobson provided a humanist critique of neoclassical economics, rejecting exclusively materialistic definitions of value. With Albert Frederick Mummery (1855-1895), the great British mountaineer who was killed in 1895 by an avalanche while reconnoitering Nanga Parbat, an 8,000-meter Himalayan peak, Hobson wrote The Physiology of Industry (1889), which argued that an industrial economy requires government intervention to maintain stability, and developed the theory of over-saving that was given a glowing tribute by John Maynard Keynes three decades later.

The need for governmental intervention to stabilize an expanding national industrial economy was the rationale for political imperialism. On the other side of the coin, protectionism was a governmental counter-intervention on the part of weak trading partners for resisting imperialist expansion of the dominant power. Historically, the processes of globalization have always been the result of active state policy and action, as opposed to the mere passive surrender of state sovereignty to market forces. Market forces cannot operate in a vacuum. They are governed by man-made rules. Globalized markets require the acceptance by local authorities of established rules of the dominant economy. Currency monopoly of course is the most fundamental trade restraint by one single dominant government.

Adam Smith published Wealth of Nations in 1776, the year of US independence. By the time the constitution was framed 11 years later, the US founding fathers were deeply influenced by Smith's ideas, which constituted a reasoned abhorrence of trade monopoly and government policy in restricting trade. What Smith abhorred most was a policy known as mercantilism, which was practiced by all the major powers of the time. It is necessary to bear in mind that Smith's notion of the limitation of government action was exclusively related to mercantilist issues of trade restraint. Smith never advocated government tolerance of trade restraint, whether by big business monopolies or by other governments in the name of open markets.

A central aim of mercantilism was to ensure that a nation's exports remained higher in value than its imports, the surplus in that era being paid only in specie money (gold-backed as opposed to fiat money). This trade surplus in gold permitted the surplus country, such as England, to invest in more factories at home to manufacture more for export, thus bringing home more gold. The importing regions, such as the American colonies, not only found the gold reserves backing their currency depleted, causing free-fall devaluation (not unlike that faced today by many emerging-economy currencies), but also wanting in surplus capital for building factories to produce for domestic consumption and export. So despite plentiful iron ore in America, only pig iron was exported to England in return for English finished iron goods. The situation was similar to today's oil producing countries where despite plentiful crude oil, refined petrochemical products such as gasoline and heating oil have to be imported.

In 1795, when the newly independent Americans began finally to wake up to their disadvantaged trade relationship and began to raise European (mostly French and Dutch) capital to start a manufacturing industry, England decreed the Iron Act, forbidding the manufacture of iron goods in its American colonies, which caused great dissatisfaction among the prospering colonials. Smith favored an opposite government policy toward promoting domestic economic production and free foreign trade for the weaker traders, a policy that came to be known as "laissez faire" (because the English, having nothing to do with such heretical ideas, refuse to give it an English name). Laissez faire, notwithstanding its literal meaning of "leave alone", meant nothing of the sort. It meant an activist government policy to counteract mercantilism. Neo-liberal free-market economists are just bad historians, among their other defective characteristics, when they propagandize "laissez faire" as no government interference in trade affairs.

Friedrich List, in his National System of Political Economy (1841), asserts that political economy as espoused in England, far from being a valid science universally, was merely British national opinion, suited only to English historical conditions. List's institutional school of economics asserts that the doctrine of free trade was devised to keep England rich and powerful at the expense of its trading partners and it must be fought with protective tariffs and other protective devices of economic nationalism by the weaker countries.

Henry Clay's "American system" was a national system of political economy. US neo-imperialism in the post WWII period disingenuously promotes neo-liberal free-trade against governmental protectionism to keep the US rich and powerful at the expense of its trading partners. Before the October Revolution of 1917, many national liberation movements in European colonies and semi-colonies around the world were influenced by List's economic nationalism. The 1911 Nationalist Revolution in China, led by Sun Yat-sen, was heavily influenced by Lincoln's political ideas - government of the people, by the people and for the people - and the economic nationalism of List, until after the October Revolution when Sun realized that the Soviet model was the correct path to national revival.

Hobson's magnum opus, Imperialism, (1902), argues that imperialistic expansion is driven not by state hubris, known in US history as "manifest destiny", but by an innate quest for new markets and investment opportunities overseas for excess capital formed by over-saving at home for the benefit of the home state. Over-saving during the industrial age came from Richardo's theory of the iron law of wages, according to which wages were kept perpetually at subsistence levels as a result of uneven market power between capital and labor. Today, job outsourcing that returns as low-price imports contributes to the iron law of wages in the US domestic economy. (See my article Organization of Labor Exporting Countries [OLEC]).

Hobson's analysis of the phenology (study of life cycles) of capitalism was drawn upon by Lenin to formulate a theory of imperialism as an advanced stage of capitalism: "Imperialism is capitalism at that stage of development at which the dominance of monopolies and finance capitalism is established; in which the export of capital has acquired pronounced importance; in which the division of the world among the international trusts has begun, in which the division of all territories of the globe among the biggest capitalist powers has been completed." (Vladimir Ilyich Lenin, 1916, Imperialism, the Highest Stage of Capitalism, Chapter 7).

Lenin was also influenced by Rosa Luxemberg, who three year earlier had written her major work, The Accumulation of Capital: A Contribution to an Economic Explanation of Imperialism (Die Akkumulation des Kapitals: Ein Beitrag zur ökonomischen Erklärung des Imperialismus), 1913). Luxemberg, together with Karl Liebknecht a founding leader of the Spartacist League (Spartakusbund), a radical Marxist revolutionary movement that later renamed itself the Communist Party of Germany (Kommunistische Partei Deutschlands, or KPD), was murdered on January 15, 1919 by members of the Freikorps, rightwing militarists who were the forerunners of the Nazi Sturmabteilung (SA) led by Ernst Rohm.

The congenital association between capitalism and imperialism requires practically all truly anti-imperialist movements the world over to be also anti-capitalist. To this day, most nationalist capitalists in emerging economies are unwitting neo-compradors for super imperialism. Neo-liberalism, in its attempts to break down all national boundaries to facilitate global trade denominated in fiat dollars, is the ideology of super imperialism.

Hudson, the American heterodox economist, historian of ancient economies and post-WW II international balance-of-payments specialist, advanced in his 1972 book the notion of 20th century super imperialism. Hudson updated Hobson's idea of 19th century imperialism of state industrial policy seeking new markets to invest home-grown excess capital. To Hudson, super imperialism is a state financial strategy to export debt denominated in the state's fiat currency as capital to the new financial colonies to finance the global expansion of a superpower empire. No necessity, or even intention, was entertained by the superpower of ever having to pay off these paper debts after the US dollar was taken off gold in 1971.

Monetary Imperialism and Dollar Hegemony
Super imperialism transformed into monetary imperialism after the 1973 Middle East oil crisis with the creation of the petrodollar and two decades later emerged as dollar hegemony through financial globalization after 1993. As described in my 2002 AToL article, Dollar hegemony has to go, a geopolitical phenomenon emerged after the 1973 oil crisis in which the US dollar, a fiat currency since 1971, continues to serve as the primary reserve currency for international trade because oil continues to be denominated in fiat dollars as a result of superpower geopolitics, leading to dollar hegemony in 1993 with the globalization of deregulated financial markets.

Three causal developments allowed dollar hegemony to emerge over a span of two decades after 1973 and finally take hold in 1993. US fiscal deficits from overseas spending since the 1950s caused a massive drain in US gold holdings, forcing the US in 1971 to abandon the 1945 Bretton Woods regime of fixed exchange rate based on a gold-backed dollar. Under that international financial architecture, cross-border flow of funds was not considered necessary or desirable for promoting international trade or domestic development. The collapse of the 1945 Bretton Woods regime in 1971 was the initial development toward dollar hegemony.

The second development was the denomination of oil in dollars after the 1973 Middle East oil crisis. The emergence of petrodollars was the price the US, still only one of two contending superpowers in 1973, extracted from defenseless oil-producing nations for allowing them to nationalize the Western-owned oil industry on their soil. As long as oil transactions are denominated in fiat dollars, the US essentially controls all the oil in the world financially regardless of specific ownership, reducing all oil producing nations to the status of commodity agents of dollar hegemony.

The third development was the global deregulation of financial markets after the Cold War, making cross-border flow of funds routine, and a general relaxation of capital and foreign exchange control by most governments involved in international trade. This neo-liberal trade regime brought into existence a foreign exchange market in which free-floating exchange rates made computerized speculative attacks on weak currencies a regular occurrence. These three developments permitted the emergence of dollar hegemony after 1994 and helped the US win the Cold War with financial power derived from fiat money.

Dollar hegemony advanced super imperialism one stage further from the financial to the monetary front. Industrial imperialism sought to achieve a trade surplus by exporting manufactured good to the colonies for gold to fund investment for more productive plants at home. Super imperialism sought to extract real wealth from the colonies by paying for it with fiat dollars to sustain a balance of payments out of an imbalance in the exchange of commodities. Monetary imperialism under dollar hegemony exports debt denominated in fiat dollars through a permissive trade deficit with the new colonies, only to re-import the debt back to the US as capital account surplus to finance the US debt bubble.

The circular recycling of dollar-denominated debt was made operative by the dollar, a fiat currency that only the US can print at will, continuing as the world's prime reserve currency for international trade and finance, backed by US geopolitical superpower. Dollars are accepted universally because oil is denominated in dollars and everyone needs oil and thus needs dollars to buy oil. Any nation that seeks to denominate key commodities, such as oil, in currencies other than the dollar will soon find itself invaded by the sole superpower. Thus the war on Iraq is not about oil, as former Federal Reserve chairman Alan Greenspan suggested recently. It is about keeping oil denominated in dollars to protect dollar hegemony. The difference is subtle but of essential importance.

Since 1993, central banks of all trading nations around the world, with the exception of the US Federal Reserve, have been forced to hold more dollar reserves than they otherwise need to ward off the potential of sudden speculative attacks on their currencies in unregulated global financial markets. Thus "dollar hegemony" prevents the exporting nations, such as the Asian Tigers, from spending domestically the dollars they earn from the US trade deficit and forces them to fund the US capital account surplus, shipping real wealth to the US in exchange for the privilege of financing further growth of the US debt economy.

Not only do these exporting nations have to compete by keeping their domestic wages down and by prostituting their environment, the dollars that they earn cannot be spent at home without causing a monetary crisis in their own currencies because the dollars they earn have to be exchanged into local currencies before they can be spent domestically, causing an excessive rise in their domestic money supply which in turn causes domestic inflation-pushed bubbles. While the trade-surplus nations are forced to lend their export earnings back to the US, these same nations are starved for capital, as global capital denominated in dollars will only invest in their export sectors to earn more dollars. The domestic sector with local currency earnings remains of little interest to global capital denominated in dollars. As a result, domestic development stagnates for lack of capital.

Dollar hegemony permits the US to transform itself from a competitor in world markets to earn hard money, to a fiat-money-making monopoly with fiat dollars that only it can print at will. Every other trading nation has to exchange low-wage goods for dollars that the US alone can print freely and that can be spent only in the dollar economy without monetary penalty.

The victimization of Japan and China
Japan is a classic victim of monetary imperialism. In 1990, as a result of Japanese export prowess, the Industrial Bank of Japan was the largest bank in the world, with a market capitalization of $57 billion. The top nine of the 10 largest banks then were all Japanese, trailed by Canadian Alliance in 10th place. No US bank made the top-10 list. By 2001, the effects of dollar hegemony have pushed Citigroup into first place with a market capitalization of $260 billion. Seven of the top 10 largest financial institutions in the world in 2001 were US-based, with descending ranking in market capitalization: Citigroup ($260 billion), AIG ($209 billion), HSBC (British-$110 billion), Berkshire Hathaway ($100 billion), Bank of America ($99 billion), Fanny Mae ($80 billion), Wells Fargo ($74 billion), JP Morgan Chase ($72 billion), RBS (British-$70 billion) and UBS (Swiss-$67 billion). No Japanese bank survived on the list.

China is a neoclassic case of dollar hegemony victimization even though its domestic financial markets are still not open and the yuan is still not freely convertible. With over $1.4 trillion in foreign exchange reserves earned at a previously lower fixed exchange rate of 8.2 to a dollar set in 1985, now growing at the rate of $1 billion a day at a narrow-range floating exchange rate of around 7.5 since July 2005, China cannot spend much of it dollar holdings on domestic development without domestic inflation caused by excessive expansion of its yuan money supply. The Chinese economy is overheating because the bulk of its surplus revenue is in dollars from exports that cannot be spent inside China without monetary penalty. Chinese wages are too low to absorb sudden expansion of yuan money supply to develop the domestic economy. And with over $1.4 trillion in foreign exchange reserves, equal to its annual GDP, China cannot even divest from the dollar without having the market effect of a falling dollar moving against its remaining holdings.

The People's Bank of China announced on July 20, 2005 that effective immediately the yuan exchange rate would go up by 2.1% to 8.11 yuan to the US dollar and that China would drop the dollar peg to its currency. In its place, China would move to a "managed float" of the yuan, pegging the currency's exchange value to an undisclosed basket of currencies linked to its global trade. In an effort to limit the amount of volatility, China would not allow the currency to fluctuate by more than 0.3% in any one trading day. Linking the yuan to a basket of currencies means China's currency is relatively free from market forces acting on the dollar, shifting to market forces acting on a basket of currencies of China's key trading partners. The basket is composed of the euro, yen and other Asian currencies as well as the dollar. Though the precise composition of the basket was not disclosed, it can nevertheless be deduced by China's trade volume with key trading partners and by mathematical calculation from the set-daily exchange rate.

Thus China is trapped in a trade regime operating on an international monetary architecture in which it must continue to export real wealth in the form of underpaid labor and polluted environment in exchange for dollars that it must reinvest in the US. Ironically, the recent rise of anti-trade sentiment in US domestic politics offers China a convenient, opportune escape from dollar hegemony to reduce its dependence on export to concentrate on domestic development. Chinese domestic special interest groups in the export sector would otherwise oppose any policy to slow the growth in export if not for the rise of US protectionism which causes shot-term pain for China but long-term benefit in China's need to restructure its economy toward domestic development. Further trade surplus denominated in dollar is of no advantage to China.

Emerging markets are new colonies of monetary imperialism
Even as the domestic US economy declined after the onset of globalization in the early 1990s, US dominance in global finance has continued to this day on account of dollar hegemony. It should not be surprising that the nation that can print at will the world's reserve currency for international trade should come up on top in deregulated global financial markets. The so-called emerging markets around the world are the new colonies of monetary imperialism in a global neo-liberal trading regime operating under dollar hegemony geopolitically dominated by the US as the world's sole remaining superpower.

Denial of corporate social responsibility
In Supercapitalism, Reich identifies corporate social responsibility as a diversion from economic efficiency and an un-capitalistic illusion. Of course the late Milton Friedman had asserted that the only social responsibility of corporations is to maximize profit, rather than to generate economic well-being and balanced growth through fair profits. There is ample evidence to suggest that a single-minded quest for maximizing global corporate profit can lead to domestic economic decline in even the world's sole remaining superpower. The US public is encouraged to blame such decline on the misbehaving trading partners of the US rather than US trade policy that permits US transnational corporation to exploit workers in all trading nations, including those in the US. It is a policy that devalues work by over-rewarding financial manipulation.

Yet to Reich, the US corporate income tax is regressive and inequitable and should be abolished so that after-tax corporate profit can be even further enhanced. This pro-profit position is at odds with even rising US Republican sentiment against transnational corporations and their global trade strategies. Reich also thinks the concept of corporate criminal liability is based on an "anthropomorphic fallacy" that ends up hurting innocent people. Reich sees as inevitable an evolutionary path towards an allegedly perfect new world of a super-energetic capitalism responding to the dictate of all-powerful consumer preference through market democracy.

Reich argues that corporations cannot be expected to be more "socially responsible" than their shareholders or even their consumers, and he implies that consumer preference and behavior are the proper and effective police forces that supersede the need for market regulation. He sees corporations, while viewed by law as "legal persons", as merely value-neutral institutional respondents of consumer preferences in global markets. Reich claims that corporate policies, strategies and behavior in market capitalism are effectively governed by consumer preferences and need no regulation by government. This is essentially the ideology of neo-liberalism.

Yet US transnational corporations derive profit from global operations serving global consumers to maximize return on global capital. These transnational corporations will seek to shift production to where labor is cheapest and environmental standards are lowest and to market their products where prices are highest and consumer purchasing power the strongest. Often, these corporations find it more profitable to sell products they themselves do not make, controlling only design and marketing, leaving the dirty side of manufacturing to others with underdeveloped market power. This means if the US wants a trade surplus under the current terms of trade, it must lower it wages. The decoupling of consumers from producers weakens the conventional effects of market pressure on corporate social responsibility. Transnational corporations have no home community loyalty. Consumers generally do not care about sweat shop conditions overseas while overseas workers do not care about product safety on goods they produce but cannot afford to buy. Products may be made in China, but they are not made by China, but by US transnational corporations which are responsible for the quality and safety of their products.

Further, it is well recognized that corporations routinely and effectively manipulate consumer preference and market acceptance often through if not false, at least misleading advertising, not for the benefit of consumers, but to maximize return on faceless capital raised from global capital markets. The subliminal emphasis by the corporate culture on addictive acquisition of material things, coupled with a structural deprivation of adequate income to satisfy the manipulated desires, has made consumers less satisfied than in previous times of less material abundance. Corporations have been allowed to imbed consumption-urging messages into every aspect of modern life. The result is a disposable culture with packaged waste, an obesity crisis for all age groups, skyrocketing consumer debt, the privatization of public utilities that demand the same fee for basic services from rich and poor alike, causing a sharp disparity in affordability. It is a phenomenon described by Karl Marx as "Fetishism of Commodities".

Marx's concept of Fetishism of Commodities
Marx wrote in Das Kapital:[1]

The relation of the producers to the sum total of their own labor is presented to them as a social relation, existing not between themselves, but between the products of their labor. This is the reason why the products of labor become commodities, social things whose qualities are at the same time perceptible and imperceptible by the senses … The existence of the things qua commodities, and the value relation between the products of labor which stamps them as commodities, have absolutely no connection with their physical properties and with the material relations arising therefrom. It is a definite social relation between men that assumes, in their eyes, the fantastic form of a relation between things. In order, therefore, to find an analogy, we must have recourse to the mist-enveloped regions of the religious world. In that world, the productions of the human brain appear as independent beings endowed with life, and entering into relation both with one another and the human race. So it is in the world of commodities with the products of men's hands. This I call the Fetishism which attaches itself to the products of labor, as soon as they are produced as commodities, and which is therefore inseparable from the production of commodities. This Fetishism of Commodities has its origin … in the peculiar social character of the labor that produces them.

Marx asserts that "the mystical character of commodities does not originate in their use-value" (Section 1, p 71). Market value is derived from social relations, not from use-value which is a material phenomenon. Thus Marx critiques the Marginal Utility Theory by pointing out that market value is affected by social relationships. For example, the marginal utility of door locks is a function of the burglary rate in a neighborhood which in turn is a function of the unemployment rate. Unregulated free markets are a regime of uninhibited price gouging by monopolies and cartels.

Thus the nature of money cannot be adequately explained even in terms of the material-technical properties of gold, but only in terms of the factors behind man's desire and need for gold. Similarly, it is not possible to fully understand the price of capital from the technical nature of the means of production, but only from the social institution of private ownership and the terms of exchange imposed by uneven market power. Market capitalism is a social institution based on the fetishism of commodities.

Democracy threatened by the corporate state
While Reich is on target in warning about the danger to democracy posed by the corporate state, and in claiming that only people can be citizens, and only citizens should participate in democratic decision making, he misses the point that transnational corporations have transcended national boundaries. Yet in each community that these transnational corporations operate, they have the congenital incentive, the financial means and the legal mandate to manipulate the fetishism of commodities even in distant lands.

Moreover, representative democracy as practiced in the US is increasingly manipulated by corporate lobbying funded from high-profit-driven corporate financial resources derived from foreign sources controlled by management. Corporate governance is notoriously abusive of minority shareholder rights on the part of management. Notwithstanding Reich's rationalization of excessive CEO compensation, CEOs as a class are the most vocal proponents of corporate statehood. Modern corporations are securely insulated from any serious threats from consumer revolt. Inter-corporate competition presents only superficial and trivial choices for consumers. Motorists have never been offered any real choice on gasoline by oil companies or alternatives on the gasoline-guzzling internal combustion engine by car-makers.

High pay for CEOs
Reich asserts in his Wall Street Journal piece that modern CEOs in finance capitalism nowadays deserve their high pay because they have to be superstars, unlike their bureaucrat-like predecessors during industrial capitalism. Notwithstanding that one would expect a former labor secretary to argue that workers deserve higher pay, the challenge to corporate leadership in market capitalism has always been and will always remain management's ruthless pursuit of market leadership power, a euphemism for monopoly, by skirting the rule of law and regulations, framing legislative regimes through political lobbying, pushing down wages and worker benefits, increasing productivity by downsizing in an expanding market and manipulating consumer attitude through advertising. At the end of the day, the bottom line for corporate profit is a factor of lowering wage and benefit levels.

Reich seems to have forgotten that the captains of industry of 19th century free-wheeling capitalism were all superstars who evoked public admiration by manipulating the awed public into accepting the Horatio Alger myth of success through hard work, honesty and fairness. The derogatory term "robber barons" was first coined by protest pamphlets circulated by victimized Kansas farmers against ruthless railroad tycoons during the Great Depression.

The manipulation of the public will by moneyed interests is the most problematic vulnerability of US economic and political democracy. In an era when class warfare has taken on new sophistication, the accusation of resorting to class warfare argument is widely used to silence legitimate socio-economic protests. The US media is essentially owned by the moneyed interests. The decline of unionism in the US has been largely the result of anti-labor propaganda campaigns funded by corporations and government policies influenced by corporate lobbyists. The infiltration of organized crime was exploited to fan public anti-union sentiments while widespread corporate white collar crimes were dismissed as mere anomalies. (See Capitalism's bad apples: It's the barrel that's rotten)

Superman capitalism
As promoted by his permissive opinion piece, a more apt title for Reich's new book would be Superman Capitalism, in praise of the super-heroic qualities of successful corporate CEOs who deserve superstar pay. This view goes beyond even fascist superman ideology. The compensation of corporate CEOs in Nazi Germany never reached such obscene levels as those in US corporate land today.

Reich argues that CEOs deserve their super-high compensation, which has increased 600% in two decades, because corporate profits have also risen 600% in the same period. The former secretary of labor did not point out that wages rose only 30% in the same period. The profit/wage disparity is a growing cancer in the US-dominated global economy, causing over-production resulting from stagnant demand caused by inadequate wages. A true spokesman for labor would point out that enlightened modern management recognizes that the performance of a corporation is the sum total of effective team work between management and labor.

System analysis has long shown that collective effort on the part of the entire work force is indispensable to success in any complex organism. Further, a healthy consumer market depends on a balance between corporate earnings and worker earnings. Reich's point would be valid if US wages had risen by the same multiple as CEO pay and corporate profit, but he apparently thought that it would be poor etiquette to raise embarrassing issues as a guest writer in an innately anti-labor journal of Wall Street. Even then, unless real growth also rose 600% in two decades, the rise in corporate earning may be just an inflation bubble.

An introduction to economic populism
To be fair, Reich did address the income gap issue eight months earlier in another article, "An Introduction to Economic Populism" in the Jan-Feb, 2007 issue of The American Prospect, a magazine that bills itself as devoted to "liberal ideas". In that article, Reich relates a "philosophical" discussion he had with fellow neo-liberal cabinet member Robert Rubin, then treasury secretary under Bill Clinton, on two "simple questions".

The first question was: Suppose a proposed policy will increase the incomes of some people without decreasing the incomes of any others. Of course Reich must know that it is a question of welfare economics long ago answered by the "pareto optimum", which asserts that resources are optimally distributed when an individual cannot move into a better position without putting someone else into a worse position. In an unjust society, the pareto optimum will perpetuate injustice in the name of optimum resource allocation. "Should it be implemented? Bob and I agreed it should," writes Reich. Not exactly an earth-shaking liberal position. Rather, it is a classic neo-liberal posture.

And the second question: But suppose the people whose incomes will rise are already wealthier than everyone else. Although no one will lose ground, inequality will widen. Should it still be implemented? "I won't tell you where he and I came out on that second question," writes Reich without explaining why. He allows that "we agreed that people who don't share in such gains feel relatively poorer. Widening inequality also further tips the balance of political power in favor of the wealthy."

Of course, clear thinking would have left the second question mute because it would have invalidated the first question, as the real income of those whose nominal income has not fallen has indeed fallen relative to those whose nominal income has risen. In a macro monetary sense, it is not possible to raise the nominal income of some without lowering the real income of others. All incomes must rise together proportionally or inequality in after-inflation real income will increase.

Inequality only a new worry?
But for the sake of argument, let's go along with Reich's parable on welfare economics and financial equality. That conversation occurred a decade ago. Reich says in his January 2007 article that "inequality is far more worrisome now", as if it had not been or that the policies he and his colleagues in the Clinton administration, as evidenced by their answer to their own first question, did not cause the now "more worrisome" inequality. "The incomes of the bottom 90% of Americans have increased about 2% in real terms since then, while that of the top 1% has increased over 50%," Reich wrote in the matter of fact tone of an innocent bystander.

It is surprising that a former labor secretary would err even on the record on worker income. The US Internal Revenue Service reports that while incomes have been rising since 2002, the average income in 2005 was $55,238, nearly 1% less than in 2000 after adjusting for inflation. Hourly wage costs (including mandatory welfare contributions and benefits) grew more slowly than hourly productivity from 1993 to late 1997, the years of Reich's tenure as labor secretary. Corporate profit rose until 1997 before declining, meaning what should have gone to workers from productivity improvements went instead to corporate profits. And corporate profit declined after 1997 because of the Asian financial crisis, which reduced offshore income for all transnational companies, while domestic purchasing power remained weak because of sub-par worker income growth.

The break in trends in wages occurred when the unemployment rate sank to 5%, below the 6% threshold of NAIRU (non-accelerating inflation rate of unemployment) as job creation was robust from 1993 onwards. The "reserve army of labor" in the war against inflation disappeared after the 1997 Asian crisis when the Federal Reserve injected liquidity into the US banking system to launch the debt bubble. According to NAIRU, when more than 94% of the labor force is employed, the war on wage-pushed inflation will be on the defensive. Yet while US inflation was held down by low-price imports from low-wage economies, US domestic wages fell behind productivity growth from 1993 onward. US wages could have risen without inflationary effects but did not because of the threat of further outsourcing of US jobs overseas. This caused corporate profit to rise at the expense of labor income during the low-inflation debt bubble years.

Income inequality in the US today has reached extremes not seen since the 1920s, but the trend started three decades earlier. More than $1 trillion a year in relative income is now being shifted annually from roughly 90,000,000 middle and working class families to the wealthiest households and corporations via corporate profits earned from low-wage workers overseas. This is why nearly 60% of Republicans polled support more taxes on the rich.

Carter the granddaddy of deregulation
The policies and practices responsible for today's widening income gap date back to the 1977-1981 period of the Carter administration which is justly known as the administration of deregulation. Carter's deregulation was done in the name of populism but the results were largely anti-populist. Starting with Carter, policies and practices by both corporations and government underwent a fundamental shift to restructure the US economy with an overhaul of job markets. This was achieved through widespread de-unionization, breakup of industry-wide collective bargaining which enabled management to exploit a new international division of labor at the expense of domestic workers.

The frontal assault on worker collective bargaining power was accompanied by a realigning of the progressive federal tax structure to cut taxes on the rich, a brutal neo-liberal global free-trade offensive by transnational corporations and anti-labor government trade policies. The cost shifting of health care and pension plans from corporations to workers was condoned by government policy. A wave of government-assisted compression of wages and overtime pay narrowed the wage gap between the lowest and highest paid workers (which will occur when lower-paid workers receive a relatively larger wage increase than the higher-paid workers with all workers receiving lower pay increases than managers). There was a recurring diversion of inflation-driven social security fund surpluses to the US fiscal budget to offset recurring inflation-adjusted federal deficits. This was accompanied by wholesale anti-trust deregulation and privatization of public sectors; and most egregious of all, financial market deregulation.

Carter deregulated the US oil industry four years after the 1973 oil crisis in the name of national security. His Democratic challenger, Senator Ted Kennedy, advocated outright nationalization. The Carter administration also deregulated the airlines, favoring profitable hub traffic at the expense of traffic to smaller cities. Air fares fell but service fell further. Delays became routine, frequently tripling door-to-door travel time. What consumers save in airfare, they pay dearly in time lost in delay and in in-flight discomfort. The Carter administration also deregulated trucking, which caused the Teamsters Union to support Ronald Reagan in exchange for a promise to delay trucking deregulation.

Railroads were also deregulated by Railroad Revitalization and Regulatory Reform Act of 1976 which eased regulations on rates, line abandonment, and mergers to allow the industry to compete with truck and barge transportation that had caused a financial and physical deterioration of the national rail network railroads. Four years later, Congress followed up with the Staggers Rail Act of 1980 which provided the railroads with greater pricing freedom, streamlined merger timetables, expedited the line abandonment process, and allowed confidential contracts with shippers. Although railroads, like other modes of transportation, must purchase and maintain their own rolling stock and locomotives, they must also, unlike competing modes, construct and maintain their own roadbed, tracks, terminals, and related facilities. Highway construction and maintenance are paid for by gasoline taxes. In the regulated environment, recovering these fixed costs hindered profitability for the rail industry.

After deregulation, the railroads sought to enhance their financial situation and improve their operational efficiency with a mix of strategies to reduce cost and maximize profit, rather than providing needed service to passengers around the nation. These strategies included network rationalization by shedding unprofitable capacity, raising equipment and operational efficiencies by new work rules that reduced safety margins and union power, using differential pricing to favor big shippers, and pursuing consolidation, reducing the number of rail companies from 65 to 5 today. The consequence was a significant increase of market power for the merged rail companies, decreasing transportation options for consumers and increasing rates for remote, less dense areas.

In the agricultural sector, rail network rationalization has forced shippers to truck their bulk commodity products greater distances to mainline elevators, resulting in greater pressure on and damage to rural road systems. For inter-modal shippers, profit-based network rationalization has meant reduced access - physically and economically - to Container on Flat Car (COFC) and Trailer on Flat Car (TOFC) facilities and services. Rail deregulation, as is true with most transportation and communication deregulation, produces sector sub-optimization with dubious benefits for the national economy by distorting distributional balance, causing congestion and inefficient use of land, network and lines.

Carter's Federal Communications Commission's (FCC) approach to radio and television regulation began in the mid-1970s as a search for relatively minor "regulatory underbrush" that could be cleared away for more efficient and cost-effective administration of the important rules that would remain. Congress largely went along with this updating trend, and initiated a few deregulatory moves of its own to make regulation more effective and responsive to contemporary conditions.

Reagan's anti-government fixation
The Reagan administration under Federal Communications Commission (FCC) chairman Mark Fowler in 1981 shifted deregulation to a fundamental and ideologically-driven reappraisal of regulations away from long-held principles central to national broadcasting policy appropriate for a democratic society. The result was removal of many longstanding rules to permit an overall reduction in FCC oversight of station ownership concentration and network operations. Congress grew increasingly wary of the pace of deregulation, however, and began to slow the pace of FCC deregulation by the late 1980s.

Specific deregulatory moves included (a) extending television licenses to five years from three in 1981; (b) expanding the number of television stations any single entity could own from seven in 1981 to 12 in 1985, with further changes in 1995; (c) abolishing guidelines for minimal amounts of non-entertainment programming in 1985; (d) elimination of the Fairness Doctrine in 1987; (e) dropping, in 1985, FCC license guidelines for how much advertising could be carried; (f) leaving technical standards increasingly in the hands of licensees rather than FCC mandates; and (g) deregulation of television's competition, especially cable which went through several regulatory changes in the decade after 1983.

The 1996 Telecommunications Act eliminated the 40-station ownership cap on radio stations. Since then, the radio industry has experienced unprecedented consolidation. In June 2003, the FCC voted to overhaul limits on media ownership. Despite having held only one hearing on the complex issue of media consolidation over a 20-month review period, the FCC, in a party-line vote, voted 3-2 to overhaul limits on media concentration. The rule would (1) increase the aggregate television ownership cap to enable one company to own stations reaching 45% of our nation's homes (from 35%), (2) lift the ban on newspaper-television cross-ownership, and (3) allow a single company to own three television stations in large media markets and two in medium ones. In the largest markets, the rule would allow a single company to own up to three television stations, eight radio stations, the cable television system, cable television stations, and a daily newspaper. A wide range of public-interest groups filed an appeal with the Third Circuit, which stayed the effective date of the new rules.

According to a BIA Financial Network report released in July 2006, a total of 88 television stations had been sold in the first six months of 2006, generating a transaction value of $15.7 billion. In 2005, the same period saw the sale of just 21 stations at a value of $244 million, with total year transactions of $2.86 billion.

Congress passed a law in 2004 that forbids any network to own a group of stations that reaches more than 39% of the national television audience. That is lower than the 45% limit set in 2003, but more than the original cap of 35% set in 1996 under the Clinton administration - leading public interest groups to argue that the proposed limits lead to a stifling of local voices.

Newspaper-television cross-ownership remains a contentious issue. Currently prohibited, it refers to the "common ownership of a full-service broadcast station and a daily newspaper when the broadcast station's area of coverage (or "contour") encompasses the newspaper's city of publication".

Capping of local radio and television ownership is another issue. While the original rule prohibited it, currently a company can own at least one television and one radio station in a market. In larger markets, "a single entity may own additional radio stations depending on the number of other independently owned media outlets in the market".

Most broadcasters and newspaper publishers are lobbying to ease or end restrictions on cross-ownership; they say it has to be the future of the news business. It allows newsgathering costs to be spread across platforms, and delivers multiple revenue streams in turn. Their argument is also tied to a rapidly changing media consumption market, and to the diversity of opinions available to the consumer with the rise of the Internet and other digital platforms.

The arguments against relaxing media ownership regulations are put forth by consumer unions and other interest groups on the ground that consolidation in any form inevitably leads to a lack of diversity of opinion. Cross-ownership limits the choices for consumers, inhibits localism and gives excessive media power to one entity.

Professional and workers' guilds of the communication industry (the Screen Actors Guild and American Federation of TV and Radio Artists among others) would like the FCC to keep in mind the independent voice, and want a quarter of all prime-time programming to come from independent producers. The Children's Media Policy Coalition suggested that the FCC limit local broadcasters to a single license per market, so that there is enough original programming for children. Other interest groups like the National Association of Black Owned Broadcasters are worried about what impact the rules might have on station ownership by minorities.

Deregulatory proponents see station licensees not as "public trustees" of the public airwaves requiring the provision of a wide variety of services to many different listening groups. Instead, broadcasting has been increasingly seen as just another business operating in a commercial marketplace which did not need its management decisions questioned by government overseers, even though they are granted permission to use public airways. Opponents argue that deregulation violates a key mandate of the Communications Act of 1934 which requires licensees to operate in the public interest. Deregulation allows broadcasters to seek profits with little public service programming.

Clinton and telecommunications deregulation
The Telecommunications Act of 1996 was the first major overhaul of US telecommunications law in nearly 62 years, amending the Communications Act of 1934, and leading to media consolidation. It was approved by Congress on January 3, 1996 and signed into law on February 8, 1996 by President Clinton, a Democrat whom some have labeled as the best president the Republicans ever had. The act claimed to foster competition, but instead it continued the historic industry consolidation begun by Reagan, whose actions reduced the number of major media companies from around 50 in 1983 to 10 in 1996 and 6 in 2005.

Regulation Q
The Carter administration increased the power of the Federal Reserve through the Depository Institutions and Monetary Control Act (DIDMCA) of 1980 which was a necessary first step in ending the New Deal restrictions placed upon financial institutions, such as Regulation Q put in place by the Glass-Steagall Act of 1933 and other restrictions on banks and financial institutions. The populist Regulation Q imposed limits and ceilings on bank and savings-and-loan (S&L) interest rates to provide funds for low-risk home mortgages. But with financial market deregulation, Regulation Q created incentives for US banks to do business outside the reach of US law, launching finance globalization. London came to dominate this offshore dollar business.

The populist Regulation Q, which regulated for several decades limits and ceilings on bank and S&L interest to serve the home mortgage sector, was phased out completely in March 1986. Banks were allowed to pay interest on checking account - the NOW accounts - to lure depositors back from the money markets. The traditional interest-rate advantage of the S&Ls was removed, to provide a "level playing field", forcing them to take the same risks as commercial banks to survive. Congress also lifted restrictions on S&Ls' commercial lending, which promptly got the whole industry into trouble that would soon required an unprecedented government bailout of depositors, with tax money. But the developers who made billions from easy credit were allowed to keep their profits. State usury laws were unilaterally suspended by an act of Congress in a flagrant intrusion on state rights. Carter, the well-intentioned populist, left a legacy of anti-populist policies. To this day, Greenspan continues to argue disingenuously that subprime mortgages helped the poor toward home ownership, instead of generating obscene profit for the debt securitization industry.

The party of Lincoln taken over by corporate interests
During the Reagan administration, corporate lobbying and electoral strategies allowed the corporate elite to wrest control of the Republican Party, the party of Lincoln, from conservative populists. In the late 1980s, supply-side economics was promoted to allow corporate interests to dominate US politics at the expense of labor by arguing that the only way labor can prosper is to let capital achieve high returns, notwithstanding the contradiction that high returns on capital must come from low wages.

New legislation and laws, executive orders, federal government rule-making, federal agency decisions, and think-tank propaganda, etc, subsequently followed the new political landscape, assisting the implementation of new corporate policies and practices emerging from corporate headquarters rather than from the shop floor. Economists and analysts who challenged this voodoo theory were largely shut out of the media. Workers by the million were persuaded to abandon their institutional collective defender to fend for themselves individually in the name of freedom. It was a freedom to see their job security eroded and wages and benefits fall with no recourse.

Note
1. Das Kapital, Volume One, Part I: Commodities and Money, Chapter One: Commodities, Section I.

Original article posted here.

The Transition Begins: China to dump shrivelling dollars by purchasing companies

China's Lenovo in talks to buy Netherlands-based PC maker Packard Bell

SHANGHAI (AFP) -- China's Lenovo Group, the world's third-largest personal computer maker, said Wednesday it was in discussions to buy Packard Bell, one of the biggest players in the European computer industry.

In what could become another bold Chinese foray overseas, Lenovo said it had signed a memorandum of understanding ""with an independent third party in relation to a proposed acquisition"" of the Netherlands-based company.

""The proposed combination of Lenovo and Packard Bell fits squarely within Lenovo's strategic growth priorities,"" said Angela Lee, a Lenovo spokeswoman based in Hong Kong.

""We believe the proposed acquisition would create a winning combination that could deliver strong marketplace presence and competitive advantages, particularly in the Western Europe consumer market.""

Lenono identified the third party only as the ""owner and seller"" of the company. A Chinese-American businessman, John Hui, bought Packard Bell from Japan's NEC last year.

The deal would come as the latest in a series of high-profile Chinese acquisitions abroad, highlighting the Asian giant's growing economic muscle.

Most recently, a new investment agency charged with managing part of China's 1.3-trillion-dollar forex reserve spent three billion dollars in June on a share in U.S.-based private equity firm Blackstone.

""Lenovo will need to do a lot of PR work with EU government officials,"" said Zhang Tao, a research director with CCID Consulting, a firm that specializes in the computer industry.

But the economic rationality of the deal was not in doubt, he added, pointing out that Lenovo is under pressure in American and European markets, where Packard Bell has a good presence.

""It would also give Lenovo a stronger foothold in Europe, which is its rival Acer's largest market,"" he said.

Lenovo and Acer, the giant Taiwan computer maker, are currently competing for the third spot in the global computer industry, although both are well behind the industry's top duo, Dell and Hewlett-Packard.

Lenovo bought IBM's personal computer unit in 2005 and it is still working towards unifying the acquisition with its established operations.

It announced in April plans to cut 1,400 jobs, or five percent of its global workforce. This is expected to result in about 100 million dollars cost savings in the year to March 2008.

Recent financial results suggested that Lenovo's struggle to integrate the IBM unit might have turned a corner.

The Chinese company reported a net profit of US$66.84 million for the first quarter to June, a near 13-fold increase from a year earlier amid strong growth in PC shipments with a 30 percent increase in China.

Lenovo will likely value the lessons it learned taking over IBM's PC unit, said Simon Ye, a Beijing-based analyst with Gartner Research, which focuses on the computer industry.

""With its experience in acquiring IBM's PC unit, integrating Packard would not be a big problem...Lenovo did a good job by promising to stick to the quality standards and retain the teams,"" he said.

""Job cutting will certainly happen as it has to unify Peck Bell with its current EU operations, which partially overlap. It could be a challenge to pass the transitional period smoothly with job cutting and prevent customer drain.

Original article posted here.

Not so "Free Markets". Global capitalists beware: the gravy train is ending

Foreign Investment: Is the Policy Pendulum Swinging Back? by Kavaljit Singh

In the last five decades, there have been dramatic swings in the policy pendulum governing foreign investments at various levels in response to changing global political context. In the 1960s and 70s, the dominant thinking was foreign investments should be restricted as it interferes in the domestic economic policy making besides posing a threat to national sovereignty. The 1980s and 90s witnessed major swings in the investment policy pendulum towards greater liberalization of the regulatory framework at the national level. The swing was more pronounced in developing countries, particularly in Asia, Latin America, and Central and Eastern Europe . Countries unilaterally (sometimes voluntarily) undertook liberalization measures such as lifting their controls on foreign ownership, removing performance requirements, and liberalizing their capital account. An increasing trend towards privatizing public sector companies in developing and transition countries added momentum to investment liberalization processes. Several countries also offered various guarantees and subsidies to foreign investors. The extent of these swings in policy can be measured in several ways. For instance, expropriations had increased in the 1960s and early 1970s, but almost disappeared in the 1990s. According to UNCTAD, a total of 1,393 regulatory changes were introduced in national investment regimes during 1991-2001, out of which 1,315 (almost 95 per cent) were meant to create a favorable investment environment. In 2001 alone, as many as 208 regulatory changes were made by 71 countries, of which only 16 changes were less favorable for foreign investors. The 1990s witnessed a surge in the number of bilateral investment treaties (BITs) as more and more countries started adopting liberalized investment policies. The highest number of BITs were negotiated and concluded during this decade. Regional initiatives on investment liberalization also emerged in the 1990s. In 1991, negotiations took place between the US , Canada , and Mexico to launch the North American Free Trade Agreement (NAFTA) in 1994. In many aspects, NAFTA was simply an extension to Mexico of the existing Canada-US Free Trade Agreement. Is the Pendulum Swinging Back? Despite the dominant trend towards greater liberalization of investment flows, nowadays certain kinds of investments have come under closer scrutiny by policy makers. In several countries (both developed and developing), there are moves to tighten existing investment rules or to enact new rules to regulate foreign investments and protect “strategic sectors” from foreign investors. Unlike the 1990s, nowadays the costs and benefits of foreign investments are being evaluated in a much more balanced manner, keeping in mind not only economic factors but also social, political, and strategic factors. It is increasingly becoming clear that the benefits of foreign investment have been fewer than anticipated while the costs have been much bigger. In some host countries (such as Bolivia and Malaysia ), there is a greater realization of costs involved with foreign investment. The initial euphoria associated with the benefits of foreign investments seems to be subsided. To a large extent, disappointment with certain kinds of foreign investment has put a big question mark on the benefits of investment liberalization. The growing unease with foreign investments could be grasped from several recent developments, some of which are summarized below: * Several Latin American countries (such as Bolivia , Ecuador , Argentina , Ecuador , and Venezuela ) are renegotiating contracts with TNCs to bring economic equilibrium between the foreign company and the host country. In Bolivia , for instance, the government successfully renegotiated contracts with ten foreign energy companies (mostly from the region) in October 2006. Under the new contracts, majority ownership of gas fields has been transferred to the state and government’s energy tax revenues are expected to increase by four times. The renegotiation of contracts was the outcome of the nationalization policy announced by President, Mr. Evo Morales, on May 1, 2006, under which foreign companies were asked to sign new contracts giving the government majority control or leave the country. In March 2006, Ecuador passed a new law that gives the government 60 per cent tax on oil profit of foreign companies if the oil prices exceed certain benchmarks. * Cross-border M&As deals have become the bone of contention in recent years. As discussed elsewhere, several important M&As deals have been blocked by policy makers in both the developing and the developed world. In many countries, attempts are being made to screen foreign investments from a security perspective. * In 2006, India ’s National Security Council suggested a new law, National Security Exception Act, which would empower the government “to suspend or prohibit any foreign acquisition, merger or takeover of an Indian company that is considered prejudicial to national interest.” * Russia is considering new rules to protect its strategic resources, particularly oil and gas. Despite strong pressure from the EU (the main consumer of Russian energy resources), Russia has refused to ratify the Energy Charter Treaty which covers the key areas of trade, investment protection, environmental issues, and dispute resolution. Though Russia signed the charter in the early 1990s, it has refused to ratify it. Russia has refused to provide non-discriminating access to foreign companies to the country’s pipelines, primarily the gas transportation network controlled by state-owned gas company, Gazprom. * Although China ’s foreign investment regime is significantly open but acquisitions of Chinese firms by foreign investors are increasingly being questioned amidst a growing mood of “economic patriotism.” The National Development and Reform Commission of China has emphasized the need to shift to a “quality, not quantity” approach towards attracting foreign investments. The Commission asked the government to encourage foreign investments in higher-value-added sectors and discourage low-value export-processing and assembly-type manufacturing. In its policy document for the 11th Five-Year Plan released in November 2006, the Commission suggested closer scrutiny of future mergers in sensitive sectors and called for new legislations on foreign takeovers. Since 2005, the rapid entry of foreign banks in the Chinese financial sector has raised serious concerns in the policy circles about the benefits of a liberalized financial regime. * There has been a phenomenal increase in the disputes between TNCs and host governments in recent years. More than 200 international arbitration cases concerning investment projects have been initiated in the past few years. The disputes are expected to increase further given the rethinking on the benefits of foreign investments by some host governments. * Of late, the growing engagement of private equity funds (such as Kohlberg Kravis Roberts & Company, Blackstone, and Carlyle Group) in the cross-border mergers and acquisitions has generated considerable public criticism in some developed countries. In 2005, Mr. Franz Müntefering, the then chairman of the Social Democratic Party (SPD), described private equity funds and hedge funds as “swarms of locusts that fall on companies, stripping them bare before moving on.” In the case of South Korea , the activities of private equity funds came under scrutiny following reports of non-payment of taxes. Private equity funds earned billions of dollars by taking over sick banks in the post-crisis period and later re-floated them in the Korean financial markets. After the strong public outcry, the regulatory authorities in Korea undertook stern actions against such funds. In the US, there are growing calls for strict regulation of private equity funds following the failed $50 billion takeover bid of Vivendi Universal of France by Kohlberg Kravis Roberts & Company in 2006. In the UK , the Financial Services Authority (FSA) reviewed the operations of private equity funds and found several areas of potential risk to the financial system because of their market abuse and anti-trust practices. The FSA called for closer regulation and supervision of private equity funds. Similarly, the phenomenal rise of hedge funds, known for their short-term investment strategies and lack of transparency and accountability, has come under considerable criticism in many developed countries. The UK ’s FSA has taken a tough stand against hedge fund industry. In a discussion paper, the FSA warned that “some hedge funds are testing the boundaries of acceptable practice concerning insider trading and market manipulation.” The FSA also announced the establishment of a dedicated new unit which would monitor and supervise the trading behavior of hedge fund industry. This is a significant development given the fact that the bulk of European hedge funds are located in the UK and they account for at least 30 per cent of trading at the London Stock Exchange, which is the biggest stock market within the Europe . Even in the US , the Securities and Exchange Commission is examining new measures to increase its surveillance on hedge funds. * The corporate scandals (from Enron to Worldcom to Parmalat) have further dented the benign image of TNCs worldwide. The scandals have exposed systemic flaws in the corporate governance model based on self-regulation. Despite much-touted claims of corporate transparency and disclosures, the basic norms of governance were completely flouted by these corporations. Regulations related to accounting and reporting were either circumvented or followed in letter rather than in spirit. What is even more disturbing is the fact that most of these corporations had their own codes of conduct, illustrating that voluntary codes of conduct are clearly insufficient to ensure that TNCs conduct their business operations responsibly. Such codes therefore should not be considered as a substitute for state regulations. * Outsourcing has become a contentious political issue in many developed countries (for instance, US) because of the fear of white-collar job losses in the service sector. How far these developments could lead to a major backlash against foreign investment remain to be seen. Nevertheless, there is an increased onus on the foreign investors and their advocates to prove (both theoretically and empirically) that foreign investments are always beneficial to the host country. Nowadays there are now very few supporters of the earlier market-friendly approaches that focused exclusively on investors’ rights and nations’ obligations. Even within the corporate world, questions related to investors’ obligations in both home and host countries are being raised. Thus, any attempt to launch multilateral investment agreement that intends to serve the interests of foreign investors exclusively at the expense of weakening the regulatory framework is unlikely to succeed in the present geo-political context. No wonder, the policy focus has shifted away from multilateral to bilateral and regional investment agreements. Kavaljit Singh is Director, Public Interest Research Centre, New Delhi . He can be reached at kaval@vsnl.com. The above article is based on his latest report, Why Investment Matters: The Political Economy of International Investments (FERN, The Corner House, CRBM and Madhyam Books, 2007). The full report could be downloaded from: http://www.thecornerhouse.org.uk/pdf/document/Investment.pdf

Original article posted here.

Our changing world and our challenging future

A 21st century catastrophe

By Michael McCarthy, Environment Editor

Flood-ravaged Britain is suffering from a wholly new type of civil emergency, it is clear today: a disaster caused by 21st-century weather.

This weather is different from anything that has gone before. The floods it has caused, which have left more than a third of a million people without drinking water, nearly 50,000 people without power, thousands more people homeless and caused more than £2bn worth of damage - and are still not over - have no precedent in modern British history.

Nothing in the past hundred years, in terms of flooding caused by rainfall, has been as bad. According to the Environment Agency, even the previous worst case, the extensive floods of spring 1947, which were aggravated by the vast snow melt that followed an exceptionally hard winter, has been surpassed.

"We have not seen flooding of this magnitude before," said the agency yesterday. "The benchmark was 1947, and this has already exceeded it." And the 1947 floods were said to have been the worst for 200 years.

Most remarkable of all is the fact that the astonishing picture the nation is now witnessing - whole towns cut off, gigantic areas underwater, mass evacuations, infrastructure paralysed and grotesquely swollen rivers, from the Severn and the Thames downwards not even at their peaks yet - has all been caused by a single day's rainfall. A month's worth and more in an hour. It is obvious that the Government and the civil powers, from Gordon Brown down to the emergency services, are struggling to cope, not only with the sheer physical scale of the disaster itself, but with the very concept of it. It is entirely unfamiliar. It is new. Yet it is exactly what has been forecast for the past decade and more.

No one can yet attribute the flood events of the past week, or indeed, those of June, when Yorkshire suffered what Gloucestershire and Worcestershire are suffering now - again from one single day's rainfall - directly to global warming. All climates have a natural variability which includes exceptional occurrences.

But the catastrophic "extreme rainfall events" of the summer of 2007, on 24 June and 20 July, are entirely consistent with repeated predictions of what climate change will bring.

It is nearly 10 years since the scientists of the UK Climate Impacts Programme first gave their detailed forecast of what global warming had in store for Britain in the 21st century - and high up on the list was rainfall, increasing both in frequency and intensity.

This was thought most likely to happen in winter, with summers predicted to be hotter and dryer. But yesterday Peter Stott of the Met Office's Hadley Centre for Climate Prediction and Research, an author of a new scientific paper linking increases in rainfall to climate change, commented: "It is possible under climate change that there could be an increase of extreme rainfall even under general drying."

The paper by Dr Stott and other authors, reported in The Independent yesterday, detects for the first time a "human fingerprint" in rainfall increases in recent decades in the mid-latitudes of the Northern Hemisphere - that is, it finds they were partly caused by global warming, itself caused by emissions of greenhouse gases.

The public as a whole appears not to have taken the extreme rainfall predictions on board, thinking of climate change in terms of hotter weather. But the science community has been fully aware of it, and has steadily reinforced the warnings.

One of the most important came from a group of experts commissioned to look at the risks by the Chief Scientific Adviser, Sir David King, under the Government's Foresight Programme, in 2004. Their report, Future Flooding, said that unless precautions were taken, more severe floods brought about by climate change could massively increase the number of people and the amount of property at risk. Yet once again, this hardly penetrated the public consciousness.

Amidst all the news of communities being overwhelmed by water yesterday, one very significant announcement, from Gordon Brown and the Secretary of State for the Environment, Hilary Benn, was that the Government is setting up an independent inquiry to look at the flood events of June and July.

Its report will be immensely important and may prove a milestone in terms of the British public's appreciation of the reality of climate change. It will doubtless focus on the key problem in terms of flood response - there is no one minister, or other person, in overall charge - but it may also take a view of the disaster in terms of global warming, and may well come to the conclusion that we are already witnessing the future. The floods of 2007 may eventually be regarded as a wake-up call to the warming climate's rapidly approaching effects.

Nobody saw them coming. But that appears to be the way of a changing climate. In April 1989 Margaret Thatcher, then Prime Minister, gave her Cabinet a seminar on global warming at No 10 and one of the speakers was the scientist and green guru James Lovelock. A reporter asked him afterwards what would be the first signs of global warming. He replied: "Surprises." Asked to explain, he said: "The hurricane of October 1987 was a surprise, wasn't it? There'll be more."

The floods of 2007 were a surprise as well, and if Dr Lovelock is right, there'll be more of them too. Welcome to the weather of the 21st century.

The flood of 1947

The Great Flood of 1947, the previous worst inundation caused by rainfall in Britain, swamped almost all of the rivers in the South, Midlands and the North-east, submerged 700,000 acres of land and caused an estimated £4bn worth of damage (in today's money).

The deluge was predominantly caused by the rapid thaw of snow and ice that had covered much of England after a particularly long and cold winter. The weather patterns that caused the thaw also caused a number of torrential downpours, exacerbating the flooding.

The timing could not have been worse; Britain was still recovering from the war. Rationing was harsh, deprivation widespread and the economy was teetering. What made the catastrophe even more unfortunate was that it occurred before the era of flood insurance.

The flooding started across the South, from Somerset to Kent, as many rivers broke their banks. By 14 March, parts of west and north-east London had been submerged. The next day, the river Thames overflowed its banks at Caversham, near Reading, and around the Lea Valley to the east of London.

By the end of the month, an estimated 100 000 homes had been flooded, hundreds of thousands of people displaced and the year's crops largely wiped out.

Original article posted here.