Dodd-Frank Turns Four and Nothing Fundamental has Changed

This is an abridged version of my remarks on the 1933 Glass-Steagall Act and impotence of the 2010 Dodd-Frank Act at the Schiller Institute’s 30th Anniversary Conference in New York City. June 15 2014. Full text and video are here. July 21, 2014 marks four years since the Dodd-Frank Act was signed.

Thank you. I want to address a few things today, one of which is the Glass-Steagall Act, and what it meant to our country’s history, why it was passed, how it helped, and how the repeal of that Act in 1999 has created a tremendously unstable environment for individuals at the hands of private banking institutions and political-financial alliances with governments and central banks.

I also want to talk about how some of the remedies that have been proposed in the wake of the 2008 subprime crisis, including the Dodd-Frank Act, and its allegedly most important component, the Volcker Rule, are ineffective at combatting this risk; and that what we really need to do is go back to a time, and go back to a policy, and to use the strength and intent of the original Glass-Steagall Act to [attain] a new Glass-Steagall Act, in order for us to be safe going forward. When I say “us,” I mean everybody in this room. I mean the population of the United States. I mean the populations throughout the globe.

Because what we have today, and what we’ve had in the wake of the repeal of the Glass-Steagall Act, is [a condition] where the largest banking institutions have been able to increase the concentration of their capital, of their influence, and of their power. This has been subsidized and substantiated by [bi-partisan] political forces within the White House, the Treasury Department, the Federal Reserve, and governments throughout the world—in particular, throughout Europe and through the ECB—and it’s something that must change to achieve more [financial and] economic stability for the greater citizenry.

How the Glass-Steagall Act Came To Be

Let’s go back in time, to [consider] how the Glass-Steagall Act came about. We had a major crash in 1929. It was the result of a tremendous amount of speculation, and also rigging of markets by the larger financial institutions, as well as things called trusts, which were small components of these institutions, that were set up in order to bet on various industries, and collections of companies within those industries, and so forth, as well as to make special bets on foreign bonds in foreign lands; as well as to make bets on the housing market, which is something we’ve seen and are familiar with quite recently.

A lot of this activity was done, in particular, by the Big Six banks at the time—which included National City Bank and First National Bank, which today we know as Citigroup; the Morgan Bank and the Chase Bank, which today we know as JPMorgan Chase; as well as two other Big Six bank. [The men running these banks] got together in the wake of the crash in 1929, which they had helped to [perpetrate], and decided that they needed to save the markets, as they were deteriorating very quickly.

The reason they wanted to save the markets was not because they wanted to protect the population; it was because they wanted to protect themselves. The way they chose to do that, was to put in $25 million each, after only a 20-minute meeting that occurred at the Morgan Bank on No. 23 Wall Street, catty-corner from the New York Stock Exchange. After this 20-minute meeting, which was called together by a man named Thomas Lamont, who was a major banker at the time, and the acting chairman of the Morgan Bank, these six bankers broke and went out into the streets. The press heralded them as heroes who [had] saved the day, and in particular, heralded the Morgan Bank as an institution that [had] yet again save the economy from virtual catastrophe.

It [the press] compared the decision that was made after that 20-minute meeting to what had happened after the Panic of 1907, when J.P. Morgan, the patriarch of the Morgan Bank, had been called upon by President Teddy Roosevelt, to save what was then a situation of deteriorating markets, and of deposits being crushed, and of citizens losing their money because of the rigging of markets.

At the meeting, the decision was to buy up stocks. The stocks that were bought were the ones in which the Big Six banks had the most interest. The market rose for a day, which is why the newspapers were so happy. It was why President Herbert Hoover, at the time, decided he might actually get re-elected, as opposed to facing not just “un-election”, but also, a bad historical legacy. And everybody was quite pleased with the results.

Unfortunately, as we know, after the market rose, after that day, after they put in the money to buy those stocks, it crashed by 90% over the next few years. The country was thrown into a Great Depression. Twenty-five percent of the individuals in the country were unemployed. There was a global depression that was ignited because of [global speculation and debt gone awry]. Foreclosures skyrocketed, businesses closed, thousands of smaller banks [collapsed], and the country plunged into dire straits, [as did the world].

FDR’s Bankers

Into that, came President FDR, and something that’s very interesting historically, that I did not even know before I [researched] my latest book, All the Presidents’ Bankers. FDR had friends – and they were bankers. Two of [his banker] friends were James Perkins, who ran the National City Bank after the Crash of 1929, and Winthrop Aldrich, who was the son of Nelson Aldrich, who happened to have been [the] Senator that [spawned] the Federal Reserve Act, or its precursor, as created at Jekyll Island in 1910 with four big bankers [See Chap. 1 in All the Presidents’ Bankers for more detail on this.]

These were men of pedigree. These were men of power. These were men of wealth. Even before the Glass-Steagall [or Banking] Act was passed in [June] of 1933, and signed into law, these men worked with FDR, because they believed that if they separated the institutions they were running – their banks, the biggest banks in the country – into keeping deposits of individuals safe and divided from speculative activities and the creation [and distribution] of securities that could sour very quickly – then not only their banks, but the general economy [would be sounder.]

That was the theory behind the Glass-Steagall Act: if you separate risky endeavors and practices, and the concentration of that risk, from individual deposits and loans, then you create a more stable banking system, a more stable financial market, a more stable population, and a more stable economy. FDR believed that, and the bankers believed that.

Even before the Act was passed, Aldrich and Perkins [met] with FDR in the first 10 days of his administration, and promised FDR they would separate their banks. And that’s why [Glass-Steagall] was more than just legislation. It was the [result] of a [positive] political-financial alliance and policy to stabilize the system, so that everybody could benefit.

Those [bankers] also did benefit. Their legacies benefitted. The National City Bank that was run by Perkins, the Chase Bank that was run by Aldrich—those banks exist today. But the Glass-Steagall Act enabled them to grow in a more stable manner. Aldrich and Perkins chose to keep the deposit-taking and lending arms of their banks. They promoted the Act [publicly] alongside FDR. Congress, in a bipartisan fashion and enthusiastically, passed the Glass-Steagall Act. So, it was a [sound] national platform on every level.

That’s something we don’t have today.

The Take-Down

What we’ve had since—and it started to a large extent in the late ’70s, and accelerated throughout the Reagan Administration, the Bush Administration, the Clinton Administration, and then ramifications through the second Bush Administration and the Obama Administration, is a disintegration of the idea of that Act. The idea that risky endeavors and deposits should be kept separate in order for stability to exist throughout.

In the ’80s, banks were allowed to merge across [more product lines]. In the ’90s, banks were allowed to [merge across state lines] and increase their share of financial services by re-introducing insurance companies, brokerages, the ability to create securities that we now know today can be quite toxic, as well as trade in derivatives and other types of more technologically complex, even more risky, securities, all under one roof.

[Because] in 1999, under President Bill Clinton, an act was passed, the Gramm-Leach-Bliley Act that summarily repealed all the intent of the Glass-Steagall Act. What it created in its wake, was a free-for-all, a merging and concentration and consolidation of the largest banks into ever-more powerful and influential entities: influential over our capital; over our economy; and with respect to the White House.

This is not something that the bankers ‘pushed’ upon the White House. We should realize this. It is something that [also stemmed from] Washington, under several administrations, under bipartisan leaderships, under different types of Treasury secretaries that came from the very same banking system that they were supposedly going to watch over from public office—they all collaborated to repeal this Act.

In 2002, 2003, 2004, when rates were low, and subprime loans started to be offered in bulk, these banks, that now had much more concentration over deposits, over insurance products, over brokerages, and over asset management arms, were able to create [toxic] securities out of a very small amount of loans. Out of a half a trillion dollars worth of subprime loans, extended to individuals, they were able to create a $14 trillion mountain of toxic assets. They were able to leverage that mountain, $14 trillion, to $140 trillion of risk, by virtue of the co-dependencies of the Big Six banks, by virtue of the derivatives involved in the securities [administered through other financial entities], that were laced with these mortgages, and by all sorts of complex different types of financial engineering.

As we know, that practice concluded [badly] in 2008. [But] this time, the result of that implosion was not to chop off the arms of these banks. It was not having men running these banks, like Winthrop Aldrich, say, “You know, this was a bad idea. We screwed up our banks, we screwed up the markets, we screwed up people, we screwed up the economy—let’s separate. Let’s go back to a time that was simpler, that was saner.”

That decision wasn’t made. What occurred instead was a decision at the highest levels of Washington, the Treasury Department, the Federal Reserve, the New York Federal Reserve, to coddle this very banking system, and to subsidize it, to sustain it, and all its flaws, and with all the risks that permeated [from it] around the entire population in the United States, and throughout the world, with trillions of dollars of loans, of debt, [of purchases], of cheap money, of a zero-interest-rate policy approaching its sixth year, which means these banks can continue to be liquid, even though they are very unhealthy, and promoting their interests over the interests of the wider population [or customer-base].

Dodd-Frank: The Banks Are Bigger Than Ever

The Dodd-Frank Act was passed and signed into law by President Obama on July 21, 2010. President Obama, then-Treasury Secretary Timothy Geithner, then-Federal Reserve Chairman Ben Bernanke, as well as many pundits in the media, said it would dial back this immense risk and [act as] sweeping regulation [just] like in the Great Depression.

But it has done absolutely nothing of the kind. In the wake of the 2008 crisis, the big banks are bigger. JPMorgan Chase was able very cheaply [to acquire] Bear Stearns and Washington Mutual, to become the largest bank in the United States again. This ties back to the legacy of J.P. Morgan in the 1907 Panic, throughout the decisions that were made at its request before 1929, in the wake of the 1929 Crash, and so forth.

Citigroup has managed to survive. Goldman Sachs, Morgan Stanley, Wells Fargo, [Bank of America]—all of these banks, the Big Six today, which are largely variations of the Big Six banks, historically, 100 years ago, with a couple of additions and many mergers along the way—have been able to sustain themselves due to a government policy that has enabled them to grow and promote risky practices that are dangerous to all of us.

The Dodd-Frank Act doesn’t separate these banks. It doesn’t make them smaller. It doesn’t diffuse their derivatives concentration [and co-dependencies]. The Big Six banks today in the United States, control 96% of all the derivatives trading in the United States. They control 45% of all the derivatives trading throughout the globe. They control 84% of the FDIC-assured deposits throughout all of the banks in the United States, and 85% of the assets throughout all of the banks in the United States. So their concentration, their power, is immense in the wake of the 2008 crisis, and in the wake of this alleged remedy to the crisis, which is the Dodd-Frank Act.

And the final component of that Act, which is supposed to at least reduce their riskiest trading practices, or proprietary trading: The Volcker Rule is an 892 page [piece of legislation], that [contains] 55 pages of definitions and rule, and the rest is exemptions to that rule. The banks can continue to make markets, to hedge, to provide hedge funds and private equity funds, just under different language, to keep their insurance arms, to keep their brokerages, to create complex securities that are so interlocked that if one fails, the rest of them fail. And if the bank that has the most of them fails or falters, the other banks in this entire system will fail or falter as well. So, nothing in the Volcker Rule of the Dodd-Frank Act materially changes anything.

Resurrect Glass-Steagall!

What we need is a resurrection of the Glass-Steagall Act. And We need to realize it wasn’t just a law; it was a policy of stability. It was a political and financial alliance between the White House and the biggest bankers of the time, and the population.

That’s what we must press, and that’s the only thing—a complete separation of risky endeavors from our money, from normal lending practices, [from government subsidies]—that can even start to foster a more stable financial system, banking system, and economic environment for all the rest of us.

That’s the take-away from today. There’s more information about the lead-up to the Glass-Steagall Act, the swipes at it over time, the particular alignment and relationships of Presidents and bankers that actually cared more about the population’s economic stability as well, as the ones that didn’t care at all. This can be found in my book All the Presidents’ Bankers, which I urge you to check out, to gain [further] knowledge about the reasons for why we had that Act, and why it’s more necessary than ever, today.

— source nomiprins.com

Which side you’re on, Tom

After much anticipation, the chair of the Federal Communications Commission has unveiled what he calls “the strongest open internet protections ever proposed by the [agency].” Tom Wheeler backed the regulation of Internet service like a public utility in order to uphold net neutrality, the principle of a free and open Internet. The new rules would prevent Internet service providers like Comcast from blocking access to websites, slowing down content, or providing paid fast lanes for Internet service. It would also extend such protections to Internet service on cell phones and tablets. The proposal comes after the FCC received a record-setting number of public comments — nearly four million, almost all in support of strong protections. President Obama also released public statements in support of Internet protections. The FCC will vote on the plan February 26, ahead of an influx of lobbying by the telecom industry, which has also threatened to sue if the measure passes. We are joined by Tim Karr, senior director of strategy for Free Press, one of the main organizers of the Internet Countdown campaign leading up to the FCC’s net neutrality vote.

Tom Wheeler, a former lobbyist for the cellphone and cable industries, was not initially expected to take such a strong stand on net neutrality. His proposal comes after the FCC received a record-setting number of comments—nearly four million, almost all in support of strong protections. By comparison, Janet Jackson’s accidental exposure of her breast during the 2004 Super Bowl triggered 1.4 million comments to the FCC.

The FCC will vote on Wheeler’s proposal February 26, ahead of an influx of lobbying by the telecom industry, which has also threatened to sue if the measure passes.

Tim Karr talking:

This is a remarkable victory. It is a true David-and-Goliath story, except in this instance there are four million Davids who contacted the FCC. There are hundred thousands more who have been calling members of Congress. And we’ve turned conventional wisdom on its ear. And everybody thought at the beginning of the year that the phone and cable lobby would simply write this rule and be done with it. That has changed completely.

What Chairman Wheeler has done is proposed Title II protections, which are not public utility protections in the sense. Where he’s focused is on the issue of discrimination. And the reason that they call this “new media” is it’s not like old media: It’s not like television, it’s not like radio, it’s not like newspapers. Those are one-way medias. This is a two-way communications media. And the rule that he proposes protects two-way communications. It will make sure that the provider, the carrier of that information, cannot discriminate in any way.

the irony about Verizon is that this whole process began when Verizon sued the FCC on an earlier rule that was insufficient—it didn’t use the Title II authority. The FCC lost that lawsuit and is now proposing Title II, which is the proper solution. Now Verizon is claiming that they want to go back to the old system, the one that they sued for. So, Verizon has put forth all sorts of arguments. They’ve said that it will cripple investment, and then their CFO went before investors and said, “Title II won’t in fact affect investment in any way.” So, you will be hearing this sort of noise from the phone and cable lobby as February 26 approaches. That is the day of the vote. What Wheeler has done is simply announced his intentions via Wired, PBS and some other outlets. But we don’t really know the fine details of the order.

Numerous major battles occur over the question of media policy and communications policy in the country, usually not covered by the commercial press. 2002 with the whole major media mergers under Chairman Powell during the Bush administration; two million people commented to the FCC, opposed to it. Now we’ve had this four million people on the issue of net neutrality. So you’re seeing this enormous public movement, despite the fact that it’s not being—the commercial media are not paying attention to these major policy battles.

Oftentimes the commercial media has a stake in the outcomes of these policy fights, so oftentimes you will find them undercovered. But the public does understand what’s at stake here. And what’s at stake is their ability to connect and communicate without interference from these providers. And it’s really—this movement for media reform has really picked up steam in the last five years. We saw millions of people protesting PIPA and SOPA legislation in 2011. They managed to kill a bill that had very draconian copyright legislation written in—rules written into the legislation. And now we’re fighting for net neutrality. So what is really happening is that the Internet—the Internet public is truly a constituency. We are a group of millions of peoples, who come from all different backgrounds, who must be dealt with before Congress writes any laws that threaten our rights to connect and communicate.

the creativity of the grassroots has been really remarkable. There have been events around the country. There have been marches. There was a cat parade recently, where you had numerous cats, or representations of cats, stake out the lawn of the FCC. Cats, of course, are considered the mascot of the open Internet. So, there has been a sort of million points of pressure against the agency, that goes all the way up to the White House.

The president in November, of course, sided with net neutrality advocates and said Title II is the way that you solve this problem, is the way that you protect Internet users. So, this has been a very momentous occasion. We still have three weeks left before the vote occurs. After that, Congress will likely get engaged with this. And so, while we’re very happy today, there’s still a lot of work to be done.

the amazing change in Wheeler’s position on this, because, you know, he’s, the only person ever elected to both the cable industry hall of fame and the telecom industry hall of fame. He was a lobbyist for the industry for many years. And yet he has gradually shifted, even perhaps now promulgating a stronger policy than even President Obama was talking about. And can you talk about that shift? And also, in his statement, he said that his own experience as an initial entrepreneur, when he was starting a small—a company back several decades ago, showed him the dangers of the cable industry being gatekeepers to the Internet.

he could certainly draw from that experience. It’s interesting with Chairman Wheeler, because what usually happens at the FCC is that you’re a public servant first, and there’s this thing called the revolving door which then spins you out into jobs in industry. The person who’s the top lobbyist for the National Cable & Telecommunications Association is a former chairman, Michael Powell, who you probably remember from those fights in 2003.

And Wheeler is at the end of his career. He’s a very dedicated Obama supporter, who was appointed by the president. He raised money for President Obama’s elections, or his campaigns. And so, he feels, I think, an allegiance both to Obama—he’s received a lot of pressure from the public. We’ve kind of narrowed his options for him, and he’s finally come to a point of realization that Title II is actually the best solution.

four million responses on the FCC website, that’s more than any response to any government agency in history. this has been a remarkable mobilization. And it’s not just groups like Free Press, but there are groups—Demand Progress, Fight for the Future, Color of Change—that really cover the political spectrum, that have gone out to their constituents and engaged them in this process. And they’re still very engaged. People should really—do really have reason to celebrate today.

— source democracynow.org

Tim Karr, senior director of strategy for Free Press, one of the main organizers of the Internet Countdown campaign leading up to the FCC’s net neutrality vote on February 26.

Capitalism as We Know It Has Got to Go

Please, mister foreman, slow down that assembly line
I don’t mind working but I do mind dying.
—JOE L. CARTER, “Please, Mister Foreman,” blues song, 1965

THESE ARE PERILOUS TIMES for capitalism, the reigning political economic system of the United States and the world. The economy is stagnating, and Mother Earth is gravely ill. In the second decade of the twenty-first century, we face widening economic inequality, plutocratic governance, endless militarism and mounting planetary ecological degradation.

Not many years ago, this would have sounded hyperbolic to many people. But today, it is not just radicals who are sounding alarm bells. Nobel Prize–winning economist and New York Times columnist Paul Krugman has been writing about secular stagnation in the past year in remarkably alarmist terms, arguing that the rich economies may be caught in decades of slow growth. No less an establishment figure than former World Bank Chief Economist and U.S. Treasury Secretary Lawrence Summers warned the International Monetary Fund in 2013 that the United States and the advanced economies may be facing a generation of stagnation.(1)

Moreover, some of our leading social and natural scientists have recently established the magnitude of the difficulties we face with cutting-edge research. There is now wide agreement on what the influential French economist Thomas Piketty has demonstrated, which is that growing economic inequality is built into the core logic of the capitalist system.(2) His research also suggests that a new oligarchy of inherited wealth has come to dominate society and the state, and the process is accelerated by stagnation. According to Krugman, writing on Piketty’s discoveries, “We’re going to look back nostalgically on the early 21st century when you could still at least have the pretense that the wealthy actually earned their wealth. And, you know, by the year 2030, it’ll all be inherited.” Indeed, “we are seeing not only great disparities in income and wealth, but we’re seeing them get entrenched. We’re seeing them become inequalities that will be transferred across generations. We are becoming very much the kind of society we imagine we’re nothing like.”(3)

In other acclaimed new empirical research, Martin Gilens and Benjamin Page examined 1,800 policy decisions made by the U.S. government between 1981 and 2002:

The central point that emerges from our research is that economic elites and organized groups representing business interests have substantial independent impacts on U.S. government policy, while mass-based interest groups and average citizens have little or no independent influence. . . . Ordinary citizens might often be observed to “win” (that is, to get their preferred policy outcomes) even if they had no independent effect whatsoever on policy making, if elites (with whom they often agree) actually prevail.(4)

In short, when organized wealth wants one thing and the mass of the people wants another, money wins—always. “Democracy” has been reduced to powerless people rooting for their favored billionaire or corporate lobby to advance their values and interests, and hoping such a billionaire exists and that they get lucky. Doesn’t that sound like the oligarchy that was explicitly rejected in this nation’s founding in Philadelphia in 1776, and reaffirmed in Lincoln’s speech at the bloodstained earth of Gettysburg some four score and seven years later?

Matters are, if anything, worse when it comes to our environment. The scientists on the United Nations Intergovernmental Panel on Climate Change released a report in 2014 that ought to terrify any sentient being. Its conclusion: continuing on the present economic path of “business as usual” will lead to certain catastrophe for human society.(5) The failure of governments to enact effective climate policies, due in large part to corporate lobbying, is pointing us toward the worst outcomes. In the United States, for example, no law on the environment has been passed by Congress without the Business Roundtable’s approval since 1975. The Business Roundtable is a pro-business lobbying group composed of CEOs from the very largest corporations, including the handful of energy giants.(6) With growing inequality and unlimited billionaire spending on politics, the already grave present moment may be remembered fondly decades down the road, if anyone is around to remember it.

In the coming decades we are almost certainly going to see a society the likes of which has never existed and can scarcely be imagined. I argue in this book that if that new society is going to be one in which we want to live, it will require fundamental change in the political economy. Capitalism as we know it has got to go.

Although this is a radical idea, it is not necessarily a marginal one. Criticism of capitalism is no longer verboten in the United States, especially among young people, and there is good reason to believe this critical stance may grow by leaps and bounds. Capitalism today does not appear to offer youth much hope, and as a result, they are far more open to alternatives to it than their peers were a generation ago. In 2011 there were massive, almost spontaneous, demonstrations, beginning in Madison, Wisconsin, in February and then spreading in the fall to the various Occupy encampments nationwide. Such uprisings had not been seen in the United States for decades, maybe generations. A sleeping giant, it seemed, had been awakened and aroused, its power harnessed by young people. Since 2010, I have given around two hundred public talks across the United States on these themes, roughly half of which were on college campuses, and I couldn’t help but notice the heightened awareness.

Yet, especially after 2011, the optimism generated by these movements had dissipated, and the most arresting sentiment I encountered as I traveled the nation was one of tremendous pessimism about the possibility of progressive social change. While I found support for my critique everywhere I went, in a manner I had never experienced before, I also found people had concluded that there were no alternatives to the status quo. Or, if there were alternatives, there was no way to bring them into being. The fix was in, and political activity could not yield positive results. It was hopeless, and only deluded fools would bother to think otherwise. The ironic lesson of the Wisconsin uprising and Occupy was not that there was a vast underground ocean of untapped and inchoate support for progressive and radical politics in the United States, but rather that we had been there and done that and it had failed. Game over.

One is reminded of the title of one of William Faulkner’s novels, As I Lay Dying—a sad reality for an individual, but an unthinkable tragedy for an entire society or civilization.
By the fall of 2013, when I was on a 60-event speaking tour for Dollarocracy with my co-author John Nichols, the pessimism was so predictable and palpable that we altered our talks and became ersatz motivational speakers. We said that it was too early to harshly judge the impacts of the Madison uprising or Occupy. Effective social change requires more than showing up at a demonstration and holding a sign, as valuable as that may be. John discussed the extraordinary growth of grassroots activism on a number of progressive issues, including a campaign to amend the Constitution to get money out of politics—a beat he covers for The Nation. Because there was almost no mainstream news media coverage of these grassroots developments, people assumed they did not exist.

In my talks I emphasized that it was human nature to assume something entrenched at the moment will remain so into the future. People rarely accurately predict social change; it is almost always a surprise, so we have to keep our minds open to the possibility. No one saw the Madison uprising coming, or Occupy. Howard Zinn used to talk about how no one saw the civil rights movement coming, either. The immediacy of the present weighs like a 300-pound barbell across our chests as we attempt to look ahead. The shift from hopelessness to hope can be very sudden. Occupy showed us that. One can’t judge from current sentiment.

I told the story about how one of my professors in graduate school was a white South African who had moved to the United States in the 1960s and was strongly supportive of the anti-apartheid movement. He had family in South Africa and followed political developments there voraciously. I went to say goodbye to him just before I moved to Madison in May 1988 and found him unusually glum. I asked him what was wrong. He said that the political situation in South Africa was the worst he had ever seen and the chances of abolishing apartheid were more remote than ever. He said that the only way blacks would get justice would be through extraordinary, almost unimaginable, violence that would make the country uninhabitable for anyone. He depressed me, too, because he knew more about South Africa than anyone I knew by a wide margin.

So what happened? Two years later, Nelson Mandela was released from prison. Four years after that, he was the first elected president of a post-apartheid democratic South Africa. And in those intervening six years, there was less violence than one might find in a New Jersey bar fight on a Saturday night. My friend, the most knowledgeable person I knew about South African politics, at the precise moment before this revolution occurred, had it exactly wrong—180 degrees wrong. (I learned subsequently that his pessimistic view was not uncommon at the time among anti-apartheid activists.)

From that I learned humility. And I also learned that the future is impossible to predict. There was only one Nostradamus. So we should not allow predictions about the likely course of future events to limit how we proceed with our lives. As Noam Chomsky put it, if you act like social change for the better is impossible, you guarantee it will be impossible. That is the choice we all have to make when we look into the mirror. Pessimism is self-fulfilling; it is no way to live.

Then what is a person to do in times like these, when the prospect for change seems dim, yet the conditions of society are unraveling and untenable? Our job is to understand the present and put it in historical perspective. It is to grasp the dynamics, the tensions, and the contradictions. It is to be prepared so that as crisis points emerge or explode onto the scene, as they inevitably do, people will be in a position to generate humane and sustainable solutions. We know the roof is going to get blown off the status quo. What we don’t know is if it will be change for the better . . . or not. That will depend upon what we do now and in the coming years.

THIS IS WHY I decided to do this book. I wanted to respond to the sense that we are entering perilous times and provide a sense of how we might imagine and achieve a brighter future. I had written a handful of essays that addressed the politics of this period and provided a diagnosis of the crises of the U.S. political economy. I had also written related pieces on media politics and the burgeoning media reform movement, of which I am a part. These essays form the core of this book, and I have added several chapters written with this book in mind, to give the volume coherence and to formally make my case.

The basis for my argument is that the United States and the world experienced a sea change with the economic collapse of 2008. The crisis was not a fluke or an accident; it was the result of core problems built into the modern capitalist system that give it a pronounced tendency toward economic stagnation. The massive growth of the financial sector and the mountain of consumer debt that preceded the Great Recession did not create stagnation; these were, in fact, the antidote to stagnationist tendencies dating back to the 1970s. But the spur that financialization gave to capitalist growth produced a bloated debt structure that was unsustainable. In the book I wrote with John Bellamy Foster, The Endless Crisis (Monthly Review Press, 2012), we explained the stagnationist tendency in modern U.S. capitalism, and why mainstream policy prescriptions can offer no solution to it, except austerity, which brings only more stagnation, not to mention unnecessary misery and hardship for the vast majority of the population.

Stagnation aggravates all the great historic problems associated with capitalism. Economic inequality mushrooms, poverty increases, public services are slashed, there is tremendous downward pressure on wages. And at the same time, corporations and wealthy investors successfully demand ever greater concessions from governments and communities as the quid pro quo for their investment. Capital generally struggles to find profitable investment outlets, but today the problem is particularly acute. In 2014 there is by some accounts as much as $2 trillion in capital sitting on the sidelines while there are tens of millions of workers unemployed or only partially employed. It has been this way for years. By any objective measure, this is socially absurd.

The current pattern for capital is to zero in on public services like a heat-seeking missile and to take over those government operations and convert them into profit-centers for corporations. Many government activities have been, or are in the process of being, privatized or outsourced, from the military to surveillance to prisons to education. The evidence demonstrates these privatizations and outsourcings basically benefit the investors, who often reap monopoly profits, but degrade the quality and cost efficiency of the services otherwise. They are corrosive to effective democratic governance.(7) Likewise, government regulations to protect workers, consumers, and the environment have to be jettisoned to encourage the “job creators” to get off their butts and swing into action. These have proven to be palliative measures for ravenous investors, but a disaster for everyone else. To stay alive today, capitalism is eating our future.

My recent research has tracked dimensions of this broad crisis. In The Death and Life of American Journalism (Nation Books, 2010), John Nichols and I chronicled the historic tension between commercialism and democratic journalism. This is what led to the creation of professional journalism a century ago, a system that improved upon the blatant corruption and owner propaganda of what immediately preceded it but also had deep flaws. In the past decade, especially since 2008, the corporate sector has abandoned the hope of making a profit from doing journalism, and the news media are in freefall collapse. There is dramatically less reporting and coverage of politics and the affairs of state than a generation ago, and the situation is getting worse every year. This is unacceptable for an ostensibly self-governing society.

In my 2013 book Digital Disconnect (New Press), I examined how the Internet has been converted from a “militantly egalitarian” space, as Netscape founder Marc Andreessen put it, and an anti-commercial zone as recently as the early 1990s, to the center of capitalism that is extending the market into every aspect of our lives. The Internet, rather than being an engine of economic competition, has spawned the greatest monopolies ever known to capitalism in the course of less than two decades. This has seriously undermined its potential to be a force for democracy.

This point bears elaboration. In their 2014 book, The Second Machine Age, M.I.T. business professors Erik Brynjolffsson and Andrew McAfee describe the mind-boggling digital technologies that may be on the verge of revolutionizing manufacturing and overall economic productivity in a manner comparable or superior to the first great Industrial Revolution. This digital bounty, they suggest optimistically, provides the basis for eliminating poverty worldwide, cleaning up the environment, and generally taking civilization to staggeringly unimaginable heights. But as even these unvarnished champions of capitalism concede, the way capitalism works means that this almost certainly will not take place because there is no place in digital capitalism for the preponderance of the population to gainfully participate. Brynjolsson and McAfee conclude that strong policy measures are mandatory to aggressively counteract inequality.(8) Or, to put it in my language, the digital revolution will have the ironic effect of aggravating all the core problems of contemporary capitalism that are highlighted at the top of this chapter.

And what are the chances that the U.S. government will institute policies to radically decrease economic inequality and see that the economy works for all? In Dollarocracy, John Nichols and I provided a detailed look at the “money and media election complex” that has decimated the caliber of the American election system and has made the governing process evermore the domain of wealthy interests. In the book we present the developments as part of a broader campaign, begun in the 1970s, by corporate America to crush the democratic gains established from 1900 to 1970 and return control over the government to the wealthy, as in the Gilded Age.

These books—which addressed capitalism, communication, and democracy—do more than provide a diagnosis of a problem; they provide a battery of tangible proposals that, if enacted, would go a long way toward asserting the primacy of democratic values. Because journalism is a public good, the proposals center on the creation of independent, uncensored, nonprofit, and noncommercial news media, that would have sufficient public funding but whose content the government could not control. As for the Internet, the key is to eliminate corporate monopoly bottlenecks, eliminate commercial and government surveillance, and make access ubiquitous and free. With regard to elections, we proposed a number of measures to get money out of the game, democratize the governing process, and reassert the primacy of one-person, one-vote.

Implicit in all these books was the notion that there could only be successful change in any of these areas if there was a broad movement that created sufficient pressure for change in all of them. And such a movement would, by definition, be premised on the conviction that the current really existing capitalist system is deeply flawed, if not rotten to the core. That is the topic I address here, and in the rest of the book. It is time to start thinking about and talking about the need for a post-capitalist democracy.

WHAT DO I MEAN by post-capitalist democracy? I mean a society expressly committed to democratic practices first and foremost, and one that directly addresses the ways that really existing capitalism is inimical to democracy, human freedom, and ecological sustainability. I use the term “really existing capitalism” for a reason. I refer to the capitalism of massive corporations, commercial propaganda, political corruption, obscene inequality, poverty, stagnation, militarism, and endless greed. That capitalism, the one people actually experience, is the main impediment to democracy in the United States today.

I am not therefore referring to the classroom fantasy of capitalism as a bunch of heroic little-guy entrepreneurs competing for the betterment of consumers, and creating jobs in the communities they inhabit. This is the “free market” system of public relations missives and politicians’ blarney. It has about as much to do with the American economy and society today as the official rhetoric of “workers’ democracy” did to Soviet communism in much of the twentieth century. I have no particular problem with small business. I started two successful concerns in my life, one a commercial rock music magazine and the other a nonprofit public interest group. In both cases the success of the organization was due in large part to me and my partners working our butts off, i.e. exploiting our own labor. If someone wants to start an enterprise, more power to you. In this sense, I am as much a product of Lincoln—who saw small business as an extension of labor, not a part of big business—as I am of Marx.(9)

That is one of the reasons, when I deal with immediate political struggles, I prefer the term post-capitalist democracy to the term socialism, though for me they point in essentially the same direction. I have considered myself a socialist since I was eighteen or nineteen years old, and I still do. The term has always signified to me the creation of genuine political democracy, its extension into the economic realm, and having the wealth created by society directed to social needs. To me a socialist outlook recognizes that a capitalist society can never be more than superficially democratic, and whatever democratic victories are won will always be in jeopardy. This is in the spirit of the person whose words inspired the American Revolution, Thomas Paine, as well as the great socialists of our more recent history: Eugene Debs, Upton Sinclair, Jack London, Helen Keller, W. E. B. Du Bois, Albert Einstein, and Martin Luther King Jr. It is post-capitalist, egalitarian, and democratic; it has never been more pertinent to the human condition than it is today.

But the term socialism, it needs to be said, means wildly different things to different people. To some it is the social-democratic welfare state of Scandinavia; to others, it is any form of government spending on matters aside from police work, prisons, and the military. For some, predominantly on the right, socialism of any kind leads inexorably to Soviet one-party dictatorships. To others, suspicious of grounding socialism in the state, it is primarily a society of democratic workers’ cooperatives. Many on the left see it as a basic set of values and practices more than a single, coherent model.

In this sense, the term socialism begs as many questions as it answers, and carries a lot of baggage. We can spend so much time discussing arcane theoretical issues that we lose sight of the pressing immediate issues that drive us to ponder a post-capitalist political economy. Instead of addressing real problems and discussing real solutions, we float toward an abstract discussion in order to reach consensus on how to structure some futuristic world that doesn’t have a chance of existing until we start doing the hard work of creating a more democratic society right here and now.

Hence my use of the term post-capitalist democracy in this book. The emphasis is on democracy, flowing from the recognition of democracy’s incompatibility with capitalism in crucial areas. The term explains itself, I hope, and leads discussion in a more productive direction. The economics follow the politics and not vice versa. Framed this way, the discussion can be more inclusive, without any sort of political litmus test as the ante to admission. It is imperative that this discussion attract people of all stripes, and that we not use a term that permits a sizable part of the population to dismiss the debate out of hand. I know from personal experience in media reform activism that there are some important issues in which people on the right or center can find common ground with those on the left.(10) They believe the reforms will encourage the idyllic type of capitalism they prefer; I believe they will lead to a post-capitalist democracy, and possibly socialism. We can thrash that out down the road. In the meantime, where we have common interests, we have to exploit them if we are to have success.

In short, I propose post-capitalist democracy as a big tent to cover everyone who wants democracy and leaves out only those who put their blind faith in the wealthy, giant corporations, and the profit motive regardless of the evidence or social costs. There are a lot more people in group A than group B, fortunately.

The importance and value of being inclusive will become apparent, I hope, in the pages that follow. In addition to those on the left whose names appear throughout the book, I have learned from, and been influenced by, an eclectic group of writers. I demonstrate how the writings on journalism by Walter Lippmann, no leftist after a dalliance with socialism as a youth, provide keen insights into our current situation and turn the discussion toward radical solutions. Some readers may be surprised to see that I have found value when drafting policy proposals in aspects of the work of conservative “free market” economists like Henry Simons and Milton Friedman. This tradition was especially fruitful when it stood outside of power and delivered intellectually consistent criticism. In the past fifty years, as it has become the official dogma of global capitalism, “free market” conservatism has accommodated itself to the powers-that-be. So it is that once formidable criticism of monopoly power, political corruption, and advertising, for example, has been marginalized or replaced with non sequiturs and apologetics.

Many of the writers who have influenced me are political liberals, Keynesian in economics, largely unsympathetic to socialism, and convinced that capitalism is the best possible system, and its problems can be reformed away so that it has a human face. I am deeply skeptical about that project, but in all honesty I cannot rule that possibility out. In the meantime, I think there is tremendous common ground between those on the left and liberals when the discussion turns to specific real world issues. The point is to identify those specific areas where the evidence is strong that capitalism is truly damaging to democratic values and governance, and struggle for radical changes there.

SO WHAT, PRECISELY, ARE some of the immediate areas to pursue to establish a post-capitalist democracy? For starters, end military profiteering. While many of the founders of this nation were certainly expansionists who envisioned the United States becoming a powerful country, they were simultaneously concerned with limiting the role of the military, which they regarded as a singularly anti-democratic force. The Constitution was written to “impede” warmaking, as George Mason put it, and there was considerable skepticism about the idea of a standing army. Through much of American history, the military was small, except for the occasional major war, and even much of the production of battleships and armaments was kept under public control. It was considered scandalous that a business might enrich itself through militarism. In the 1930s, U.S. Senator Gerald Nye of North Dakota famously denounced the munitions industry as “an unadulterated, unblushing racket.”(11) As recently as the U.S. entry into the Second World War, President Franklin Roosevelt stated, to popular acclaim, “I don’t want to see a single war millionaire created in the United States as a result of this world disaster.”(12)

That seems so very, very long ago. Today military spending is hardwired into really existing capitalism, and in the past generation many of those elements of Pentagon spending that were once controlled by the military have been outsourced to corporate interests. The military/national security budget is a trillion-dollar grab bag of risk-free monopoly profits for a handful of gigantic corporations. These firms employ a lobbying armada in Washington filled with retired military officers and congressmen who promote ever-expanding militarism regardless of the social consequences. This is simply inimical to constitutional rule, and possibly poisonous for human survival. As much as possible, we need to take the profit out of warmaking and political surveillance; otherwise they will only grow. How to do that is where the discussion needs to go, and the sooner the better. Traditionally this has been a conservative issue as well as one for liberals and the left. It should be so again.

The same post-capitalist democracy reasoning applies to other public services (or public goods) that are in the process of being privatized and outsourced. Consider the stunning growth of the prison-industrial complex; here too we now have commercial interests with an immense stake in seeing that the United States remain the world leader in incarcerating the highest percentage of its citizenry of any nation, not just in the world today but in human history!(13) Along similar lines, one of the defining issues of these times is the effort to privatize public education and turn the massive public school budgets over to corporate interests. Diane Ravitch has heroically demolished the baseless claims of the privatization movement and demonstrated the dire consequences for society if the plans proceed.(14)

Then there are those industries that are highly concentrated, closely associated with the government, and whose pursuit of profits leads to enormous “externalities” or costs that the firms can avoid but that society must either pay for or suffer unacceptable consequences. The handful of banks that dominate the economy are more dangerous than beneficial for society. We need to take the crucial function of allocating society’s savings out of the hands of billionaire speculators who have tremendous incentive (and capacity) to rig the system. Or consider the small number of energy behemoths that have a decided stake in an industry that enhances global warming and the climate crisis. Can we really afford to let a few firms rake in tens of billions of dollars in profits annually while the planet roasts like a marshmallow over a summer campfire? And similarly, we have the parasitic health insurance industry, which is indefensible economically and does not even exist in most democratic nations, which have superior and more cost-effective health care systems.

Finally, this post-capitalist democracy logic applies in spades to journalism and communication. There are solutions to the vexing problems of Internet surveillance and the collapse of journalism, but they require confronting and eliminating corporate power and profit-making in specific industries. Sometimes it can be done through regulation, but generally it requires the conversion of the sector into public enterprise. The policy debate should then be about how to structure those public enterprises to maximize the benefits and minimize the dangers—and create institutions that are democratic and accountable.
As radical as the above ideas may seem, as completely outside the range of legitimate debate as they presently are, even if all of them were implemented this would still be a capitalist economy. Profit-making would drive most economic activity. One could even make an argument that markets would actually thrive in this environment. But it would be a different type of capitalism, and point the way toward a possible post-capitalist future—what I call socialism—if the people of the nation elected to move in that direction.

YOU CAN’T GET THERE from here, is the standard refrain. Hence my concern for the nitty-gritty of political strategy and tactics as well as programmatic issues. The task of social transformation is daunting, if only because much of the institutional power that the labor movement and the left used to have has been dismantled. When you compare the resources of progressives to the resources of the largest corporations and their allies, you feel like you are lining up for the Indianapolis 500 on a tricycle. But harder battles—ending slavery, anyone?—have been won by humanity.

Building a popular movement is the primary task. Using such a popular movement to generate effective institutions to challenge political power grows from that. The issues that logically draw people together are demands for the right to full-time employment at a living wage, something considered entirely appropriate in the mid-twentieth century in the United States but that subsequently was dispatched in mainstream discourse to the outer limits of kooky ideas. It is not a kooky idea; it is the most important demand to organize around. It requires that the state put people to work if need be, and it shifts power to the working class so that the threat of unemployment, debt, poverty, and destitution cannot loom over a person’s head like a guillotine. From this increased power a cascade of core progressive demands flows, including the need for a truly accessible and democratic media system.

Many liberals who wish to reform and humanize capitalism are uncomfortable with seemingly radical movements, and often work to distance themselves from them, lest respectable people in power cast a withering eye at them. “Shhh,” they say to people like me. “If we antagonize or scare those in power we will lose our seat at the table and not be able to win any reforms.” Yet these same liberal reformers often are dismayed at how they are politically ineffectual. Therein lies a great irony, because to enact significant reforms requires a mass movement (or the credible prospect of a mass movement) that does indeed threaten the powerful. The influence of mild reformers rises greatly when people in power look out the window and see a million people demonstrating. If there is an iron law of politics, this is it.

People in power certainly know this. Nothing frightens them like popular uprisings they do not and cannot control. For that reason, cynicism and political apathy are generally encouraged in the United States. It is not a fluke that voter turnout in the United States is well below that of nearly every other nation in the world. In the 1970s, on the heels of the popular uprisings of that era, people in power spoke candidly (to each other) about the need to have young people and the dispossessed return to apathy. Much of their work since then has been to achieve that goal. When we tune out politics, when we abandon hope, we aren’t being cool or hip or ironic or even realistic—we are being played.

This elite fear of genuine democracy should encourage all those dedicated to building a more humane and sustainable post-capitalist democracy. Those atop the system know we have the numbers on our side. They know the system is rigged for them, and they want to keep it that way. They know they cannot win a fair fight. Hence billionaires’ energy goes to matters like wholesale voter suppression and flooding election campaigns with unlimited secretive spending. They must feed the machinery of pessimism and despair because they know they cannot defeat an aroused citizenry. That tells me that if we do effective organizing it will be like planting a seed in rich Iowa topsoil. Put this way, I like our chances. I like them a lot.

— source truth-out.org By Robert W. McChesney

Bankers Go to War

“The war should be a tremendous opportunity for America.”

—Jack Morgan, personal letter to President Woodrow Wilson, September 4, 1914

On June 28, 1914, a Slavic nationalist in Sarajevo murdered Archduke Franz Ferdinand, heir to the Austrian throne. The battle lines were drawn. Austria positioned itself against Serbia. Russia announced support of Serbia against Austria, Germany backed Austria, and France backed Russia. Military mobilization orders traversed Europe. The national and private finances that had helped build up shipping and weapons arsenals in the last years of the nineteenth century and the early years of the twentieth would spill into deadly battle.

Wilson knew exactly whose help he needed. He invited Jack Morgan to a luncheon at the White House. The media erupted with rumors about the encounter. Was this a sign of tighter ties to the money trust titans? Was Wilson closer to the bankers than he had appeared? With whispers of such queries hanging in the hot summer air, at 12:30 in the afternoon of July 2, 1914, Morgan emerged from the meeting to face a flock of buzzing reporters. Genetically predisposed to shun attention, he merely explained that the meeting was “cordial” and suggested that further questions be directed to the president.

At the follow-up press conference, Wilson was equally coy. “I have known Mr. Morgan for a good many years; and his visit was lengthened out chiefly by my provocation, I imagine. Just a general talk about things that were transpiring.”Though Wilson explained this did not signify the start of a series of talks with “men high in the world of finance,” rumors of a closer alliance between the president and Wall Street financiers persisted.

Wilson’s needs and Morgan’s intentions would soon become clear. For on July 28, Austria formally declared war against Serbia. The Central Powers (Germany, the Austro-Hungarian Empire, the Ottoman Empire, and Bulgaria) were at war with the Triple Entente (France, Britain, and Russia). While Wilson tried to juggle conveying America’s position of neutrality with the tragic death of his wife, domestic and foreign exchange markets were gripped by fear and paralysis. Another panic seemed a distinct possibility so soon after the Federal Reserve was established to prevent such outcomes in the midst of Wilson’s first term. The president had to assuage the markets and prepare the country’s finances for any outcome of the European battles.

Not wanting to leave war financing to chance, Wilson and Morgan kicked their power alliance into gear. At the request of high-ranking State Department officials, Morgan immediately immersed himself in war financing issues. On August 10, 1914, Secretary of State William Jennings Bryan wrote Wilson that Morgan had asked whether there would be any objection if his bank made loans to the French government and the Rothschilds’ Bank (also intended for the French government). Bryan was concerned that approving such an extension of capital might detract from the neutrality position that Wilson had adopted and, worse, invite other requests for loans from nations less allied with the United States than France, such as Germany or Austria. The Morgan Bank was only interested in assisting the Allies.

Bryan was due to speak with Morgan senior partner Henry Davison later that day. Though Morgan had made it clear that any money his firm lent would be spent in the United States, Bryan worried that “if foreign loans absorb our loanable money it might affect our getting government loans if we need.” Thus, private banks’ lending decisions could affect not just the course of international governments’ participation in the war but also that of the US government’s financial health during the war. Not much had changed since the turn of the century, when government functions depended on the availability of private bank loans.

Wilson wasn’t going to deny Morgan’s request. He approved the $100 million loan to finance the French Republic’s war needs. The decision reflected the past, but it also had implications for the future of political-financial alliances and their applications to wars. During the Franco-German war of 1870, Jack’s grandfather, J. S. Morgan, had raised $50 million of French bonds through his London office after the French government failed to sell its securities to London bankers to raise funds. Not only was the transaction profitable; it also endeared Morgan and his firm to the French government.

Private banking notwithstanding, on August 19, 1914, President Wilson urged Americans to remain neutral regarding the combat. But Morgan and his partners never embraced the policy of impartiality. As Morgan partner Thomas Lamont wrote later, “From the very start, we did everything we could to contribute to the cause of the Allies.”

Aside from Jack Morgan’s personal views against Germany and the legacy of his grandfather’s decisions, the Morgan Bank enjoyed close relations with the British and French governments by virtue of its sister firms—Morgan, Grenfell & Company, the prestigious merchant bank in London; and Morgan, Harjes & Company in Paris. The bank, like a country, followed the war along the lines of its past financial alliances, even to the point of antagonizing firms that desired to participate in French loans during periods of bitter fighting.

Two weeks after Wilson’s August 19 speech, armed with more leverage because of the war, Jack Morgan took it upon himself to approach Wilson about his domestic concerns. “This war . . . has thrown a tremendous and sudden strain on American money markets,” Morgan wrote. “It has increased the already pronounced tendency of European holders of American securities to sell them for whatever prices they could obtain for them, and the American investor has got to relieve the European investors of these securities by degrees and as he can.” Market tensions were exacerbated by the fact that European investors were selling securities to raise money. That was a problem whose only solution required the provision of more loans. But there was something else, with more lasting domestic repercussions echoing the trustbusting of the Morgan interest in US Steel.

Morgan argued that rather than encouraging investors to feel safe, the government’s Interstate Commerce Commission, formed to regulate national industry in 1887, was doing the opposite by restricting eastern railroad freight rates and investigating railroad companies. In Morgan’s mind, war was definitely not a time for enhanced regulations against business. And if railroad securities fell in value relative to the loans secured by them, banks would not be able to lend enough to make up the difference. The whole credit system could freeze.

As Morgan further warned, “Great depreciation in the value of these securities” would “throw back to the bank loans secured by them” and lead to a “great tieing up of bank funds, which will interfere with the starting of the new Federal Reserve System, and produce panic conditions.” He concluded that the war “should be a tremendous opportunity for America,” but not “as long as the business of the country is under the impression of fear in which it now labors.” Levying such serious threats, Morgan became the first banker to reveal that credit, the Federal Reserve, the big banks, the US economy, and the war were inextricably linked. Wilson knew this too.

Morgan was especially concerned about the Clayton Antitrust Act, which Congress was considering to strengthen the restrictions against monopolies and anticompetitive practices laid out in the 1890 Sherman Antitrust Act. Having passed the Senate, the bill was headed to a conference committee. Should it pass in its current form, libertarian Morgan believed, it would demonstrate that “the United States Government does not propose to allow enterprises to conduct normal business without interference.”

Wilson took Morgan’s concerns seriously. He knew the last thing the United States needed was a credit meltdown. To avoid such a crisis and placate the bankers, he was already rewriting the Clayton Antitrust Act, but he didn’t admit it to Morgan. Wilson calculated that there had to remain some areas of negotiation to better one’s hand. Though the two argued over interpretation of the bill, a white flag flew between Wall Street and Washington for the time being. Such periods of strife called for allied, not adversarial, relationships between the president and the bankers, and friendly relations would also promote the global power positioning of both parties.

In general, the war meant that the goodwill extended to bankers and business from the president continued, lending protocols included. An October 15, 1914, news report proclaimed, “American Bankers May Make Loans to War Nations.” It was a government decision pushed by the banking contingent that would reverberate throughout the war and afterward, drawing clearer lines of competition among the various Wall Street powerhouses. Though the pro-Allies Morgan Bank sought cooperation with the British, for instance, National City Bank set up international branches around Europe and Russia to compete for future financial power, causing a rift between two of the three biggest New York banks that financed the war. Partly, that rift had to do with the change of leadership at these firms.

Jack Morgan’s friend James Stillman, head of National City Bank, had ideas about the war that closely reflected Morgan’s own: though the war presented numerous expansion opportunities, old ties to the British and French banks had to be respected in the process, their countries supported unequivocally. Stillman’s number-two man—midwestern-born Frank Vanderlip, who harbored a grudge against the eastern banking establishment and Wilson for cold-shouldering him during his presidential campaign—didn’t share the same loyalties. He was less concerned than his upper-crust boss and the Morgan partners about the war’s outcome and openly opposed American intervention until 1916, by which point German-American relations were more obviously battered. Nor did he support British demands that National City Bank terminate dealings with German banks, to which Stillman had responded that in victory the British would remember the banks that helped them.

Thus, at the end of 1914, it was National City Bank that opened a $5 million credit line for Russia in return for the designation of Russian purchasing agent for war supplies in the United States. The Morgan Bank remained true to its pro-Allies position and chose not to be involved in such dealings, while Vanderlip was more detached and sought to strengthen National City’s position for whatever the postwar world would bring.

Stillman was less interested in war-related financing than Vanderlip, who believed it would augment the bank’s position as well as America’s global status. To him, it was important to forge ahead in Latin America and other underdeveloped countries while the European financial powers were busy with their war. That Stillman took some of this advice to heart enabled National City Bank to cover much ground postwar, not just relative to the European banks but also to the Morgan Bank. As Vanderlip wrote Stillman in December 1915, “We are really becoming a world bank in a very broad sense, and I am perfectly confident that the way is open to us to become the most powerful, the most far-reaching world financial institution that there has ever been.” Vanderlip’s views ruffled Stillman’s feathers because of Stillman’s past collaboration agreements with the Morgan Bank. But they also ruffled the feathers of Morgan and Lamont in a way that would have huge repercussion for postwar peace.

— source nomiprins.com

Global Energy and Carbon Intensity Continue to Decline

Global energy intensity, defined as worldwide total energy consumption divided by gross world product, decreased 0.19 percent in 2013. Although this may not seem impressive, considering that energy intensity increased steeply between 2008 and 2010, this small decline continues a much-needed trend toward lower energy intensity, writes Haibing Ma, China Program Manager at the Worldwatch Institute (www.worldwatch.org).

Although a growing economy generally correlates with growing absolute energy use, energy intensity may well decline. In the 1990s, industrial economies started to turn to a new growth paradigm that relied heavily on service sectors. This “knowledge-based economy” is much less energy-intensive than the economic model that most nations adopted during industrialization. As a result, global energy intensity decreased 13.72 percent during the 1990s—the largest drop in the past 50 years.

The situation has been vastly different in the new millennium, however. While the first decade saw great volatility, with two upward surges during 2002–04 and 2008–10, the period between 2004 and 2008, saw a decrease in intensity of 3.50 percent. In the early years of the decade, large emerging economies like China started investing heavily in energy-intensive sectors, and after the onset of the global financial crisis in 2008, many countries implemented massive stimulus packages focused on energy-intensive sectors like manufacturing, construction, and infrastructure. But as the world economy began to recover after 2010, the previous pattern of global energy intensity reductions resumed.

Carbon intensity—defined as total emissions of carbon dioxide (CO2) divided by gross world product—is another important environmental indicator. Global carbon intensity has followed the same general pattern of energy intensity, dropping 36.62 percent overall between 1990 and 2013, but rising between 2002 and 2004. After 2008, probably because of the impact of the economic recession, the decline in global carbon intensity generally slowed, although 2013 brought a slightly more rapid pace than in previous years. Advanced economies show a steadier decline in carbon intensity than newly industrialized and transitional countries do.

In 2006, China surpassed the United States as the world’s largest CO2 emitter. Realizing the risk, the Chinese government has been taking aggressive efforts to slow its CO2 emissions. In its climate action annual report released in November 2014, China claims that its carbon intensity decreased 4.3 percent between 2012 and 2013 and dropped 28.56 percent from the 2005 level. World Bank data show lower drops of 3.61 percent and 24.97 percent, respectively.

At a meeting in Beijing in November 2014, President Obama and President Xi issued a joint announcement in which China proposed to peak its carbon emissions by 2030. The critical question is at what number this peak will be achieved. Further reducing the economy’s carbon intensity will help to achieve a lower peak than otherwise possible.

Global energy intensity and carbon intensity are essentially measuring the efficiency with which human economic activities interact with nature. To ensure a sustainable development path globally, these two indicators need to be watched closely.

— source worldwatch.org

Agartala to be first LED-illuminated city in northeastern India

Tripura government has approved a proposal to change the existing 30,000 street lights in Agartala to Light Emitting Diode (LED) lights. The proposal was put forward by Energy Efficiency Services Limited (EESL), an undertaking of the Union Ministry of Power. According to EESL’s assessment, Agartala Municipal Corporation (AMC) can save at least Rs 2 crore on its electricity bill after the installation.