How Americans became poor

There is no doubt that majority of Americans have gotten poorer over the last few decades even while the top 10% or so have done extremely well. In a world of slogans and minuscule attention span, the media and the pundits either completely deny this fact or justify it by focusing on advancements in technology or turn it into a partisan blame game. The reality is that multiple developments contributed to this decline of prosperity, much of it due to deliberate but gradual social and financial engineering. Without assigning ranking or weight, here is a look at twelve major reasons why Americans became poor.

Demise of Labor Unions and Reduction of Wages/Benefits

The 20th century saw the biggest gains as well as the most painful losses for the American worker. On one hand, workers earned the right for collective bargaining – which meant good wages and job security – and myriads of benefits such as 2-day weekends, paid vacations, paid sick days, pensions, healthcare etc. The golden era for the American worker was from 1945-1980 and it really peaked in 1974 (this was the time when the U.S. completely got off the Gold Standard — more on that later).

In the mid-1940s, more than 1/3rd of the U.S. labor force belonged to private labor unions. It went on a steady decline and is about 6% now. Another 6% of the labor force now belongs to the public sector labor unions – teachers, government employees etc. – which started to grow in the 1960s.

This decline did not happen by chance. Dismantling labor unions and cutting wages/benefits were done deliberately and slowly by corporate elites. (Privatization is another tool to attack public labor unions now). Pensions were replaced with false promises of programs such as 401-K which was basically letting the fox (Wall Street banksters) into the henhouse (pension plan). Making it easier to layoff people meant scared employees worked harder and corporations could easily replace a worker with someone willing to work for less. Corporate lobbyists also fought hard against raising the minimum wage, which became even harder after the 1990s when NAFTA, WTO and illegal immigration put a tremendous downward pressure on wages.

Inflation & Cost of Living

There are other ways to rob the average person without their knowledge, and that involves inflation and cost of living. Although these two terms are sometimes used interchangeably, there is a difference. Inflation is the term for devaluing the currency, which then makes things more expensive. This happens when the government creates money out of thin air – physically or digitally. Under the Bretton-Woods system or the gold standard, the U.S. was supposed to print dollars only based on the amount of gold it had. Thus every dollar was backed by and could be redeemed for actual gold. However, the U.S. cheated during the 1960s to fund the Vietnam war and the welfare system, and by the early 1970s, the U.S. was forced to switch to fiat currency – money that’s backed by nothing but faith in the government. This was why inflation rate went from 4% in 1972 to 14% by 1980. By the way, there are different ways to measure the inflation rate and the official government number is constantly tweaked every few years to make inflation look less than it actually is.

The cost of living can go up regardless of and above the inflation rate. Over the last 75 years, Americans have come to spend more real money – adjusted for inflation – on housing (100% more), transportation (200% more), healthcare (200% more) and education (400% more). The two items which cost less are food and clothes, thanks to harmful processed food and cheap labor in poor countries to make our clothes. On a side note, most people don’t realize that cheap food leads to much more expensive healthcare.

Thus the three main culprits so far have been slashing of wages/benefits, inflation due to fiat currency, and rise in cost of living. Onto the rest.


Since the 1970s, the financial sector – should really be known as Casino Capitalism – has grown tremendously. Wall Street profits rose from less than 10% in 1980 to 40% of all corporate profits by 2003. People who create nothing managed to become the masters of the economy. Manipulating the price of stocks and commodities while sitting in front of a computer became a lucrative way to make billions. Derivatives and other exotic tools were given exemptions from full disclosure, which enabled blatant rigging and insider trading. Financialization also meant that corporations were now controlled by large shareholders and financial corporations that made decisions solely to influence stock price and dividends. This vulture capitalism involved slash-and-burn activities such as buying companies to raid their pension funds, forcing a company to use debt to buy back their own shares (to boost the stock price), wantonly laying off employees to spur short-term profits and so on. End result? Fewer corporations, less creativity, fewer innovations, fewer workers and decreasing wages.

Federal Reserve Bank

Although many people are waking up to the biggest financial scam, most people still don’t understand that the Federal Reserve Bank is controlled by private banks and behind-the-scene plutocrats. The power to create money out of thin air cannot be overstated. The Fed can create and burst economic bubbles, start wars between nations, and control every aspect of the nation – media, politicians, corporations and the distribution of wealth. The Fed distorts capitalism and free market by determining the winners and losers in an economy, and the American worker has not been the winner. The effect of gold-based currency versus fiat currency (since 1971) is clearly reflected in the chart below:

In the 1950s, the top income tax bracket for an individual was more than 90%. This was slowly chipped away every few years and brought down to 28% by the time Ronald Reagan left the office in 1988. To compensate for the loss of revenue, payroll tax and other taxes were quietly and steadily increased, which negatively impacted the middle class. Meanwhile, complex loopholes were introduced in the tax system that allowed global corporations and billionaires to minimize their tax burden and squirrel away trillions in offshore accounts.


Although there are undeniable benefits to trading with other countries, U.S. corporations used globalization to ship many American jobs abroad in order to leverage cheaper labor. High-paying jobs in the U.S. were replaced with low-paying service jobs. Thus globalization translated to equalization of wages and living standards. America got poorer and countries such as China and Mexico got richer. The chart below shows how the GDP of U.S. and China performed over the last 35 years.


In the 1950s and ‘60s, Americans were told that automation and computers were so awesome that within a few decades, Americans will be working less than 20 hours a week and the biggest challenge in life will be figuring out what to do with the leisure time! Ha ha, ha ha. You were punked! It was probably deliberate propaganda to ensure there was no resistance to technology and automation. Millions of jobs become obsolete every year and this trend is going to become only more acute as robots become smarter and more skilled. There are now robotic kitchens, self-driving cars, robotic nurses in hospitals and even robots that do farming! Automation is a double-edged sword, for sure.

Immigration & Women in Workforce

If you put aside politics and social considerations, women in workforce and immigration simply increased the supply of workers and thus decreased wages. It’s simple economics. In 1950, only 10% of mothers worked, while more than 65% of American mothers work now. Essentially this influx of women into labor force cut the wages in half, and thus many families now need two incomes to survive. Same applies to immigration which brings in people who are willing to work harder for less money – a fact that applied to low-skilled jobs before but now is increasingly true for many high-paying jobs.

Single-Parent Families

Again, without being moralistic, the objective fact is that nuclear families are financially better off than single-parent families. The extraordinary rise in divorce and single-parent households over the decades have also contributed to the decline in wealth of the average American family.


Starting with Edward Bernays in the 1920s, America’s elites deliberately cultivated consumerism – your worth as a human being is based on what you own/buy. Of course, this meant Americans typically save far less than Europeans or Asians. This was fine during the boom years, from 1945-1975. Then, even as the economy changed, the habit of consumption remained. As Americans started to become poorer since the 1970s, debt became the tool to obscure that fact. Credit cards, easier auto loans and smaller mortgage down payments, for example, hid the negative wealth effects. The ever-decreasing interest rates – artificially done so by the Fed – over the last 30 years kept up the fake growth, but this has created terrifying dangers for the economy.

Endless Wars

The military-industrial complex that Eisenhower warned us about has been unstoppable since World War II. Empire-building and wars are simply too lucrative and profitable. Destroy-Build-Destroy is a good business model for the elites. Trillions of dollars have been wasted in meaningless wars that have left us with fewer allies, more debt and a less safe country.


Finally, it really boils down to education and attitude. If people wield critical thinking and take the time to research issues on their own, they will elect the right leaders, demand the right policies and create the ideal communities. Of course, this is exactly what the elites don’t want to happen. As Rockefeller once said, “I want a nation of workers, not thinkers.” Hence we have schools that excel in dumbing down our students, and corporate mainstream media that triumph in spreading fake news. Hollywood and the entertainment complex distract and confuse people – especially the young ones – with trivial, vulgar, violent and nihilistic beliefs. If we want to create a vibrant middle class, we have to abandon slogans and simplistic solutions, understand the bigger picture, tackle multiple and complex issues simultaneously, and work together as Americans in a non-partisan way.

— source By Chris Kanthan

India, From the Destabilization of Agriculture to Demonetization, “Made in America”

A version of the following piece was originally published in June 2016. However, since then, India’s PM Narendra Modi has embarked on a ‘demonetisation’ policy, which saw around 85 percent of India’s bank notes becoming invalid overnight.

Emerging evidence indicates that demonetisation was not done to curb corruption, ‘black money’ or terrorism, the reasons originally given. That was a smokescreen. Modi was acting on behalf of powerful Wall Street financial interests. Demonetisation hascaused massive hardship, inconvenience and chaos. It has affected everyone and has impacted the poor and those who reside in rural areas (i.e. most of the population) significantly.

Who does Modi (along with other strategically placed figures) serve primarily: ordinary people and the ‘national interest’ or the interests of the US?

Convenient bedfellows

We don’t have to dig too deep to see where Modi feels at home. Describing itself as a major ‘global communications, stakeholder engagement and business strategy’ company, APCO Worldwide is a lobby agency with firm links to (part of) the Wall Street/US establishment and functions to serve its global agenda. Modi turned to APCO to help transform his image and turn him into electable pro-corporate PM material. It also helped Modi get the message out that what he achieved in Gujarat as Chief Minister was a miracle of economic neoliberalism, although the actual reality is really quite different.

In APCO’s India brochure, there is the claim that India’s resilience in weathering the global downturn and financial crisis has made governments, policy-makers, economists, corporate houses and fund managers believe that the country can play a significant role in the recovery of the global economy. APCO’s publicity blurb about itself claims that it stands “tall as the giant of the lobbying industry.”

The firm, in its own words, offers “professional and rare expertise” to governments, politicians and corporations, and is always ready to help clients to sail through troubled waters in the complex world of both international and domestic affairs.

Mark Halton, former head of Global Marketing and Communications for Monsanto, seemed to agree whenhe praisedAPCO for helping the GMO giant to:

… understand how Monsanto could better engage with societal stakeholders surrounding our business and how best to communicate the social value our company brings to the table.

If your name isseverely tarnishedand you need to get your dubious products on the market in countries that you haven’t managedto infiltratejust yet, why not bring in the “giant of the lobbying industry.”

As a former client of APCO, Modi now seems to be the go-to man for Washington. His government is doing the bidding of global biotech companies and is trying to push through herbicide-tolerant GM mustard based on fraudulent tests and ‘regulatory delinquency‘, which will not only open the door to further GM crops but will possibly eventually boost the sales of Monsanto-Bayer’s glufinosate herbicide. In addition, plans have been announced to introduce 100% foreign direct investment in certain sectors of the economy, including food processing.

Neoliberal dogma

This opening up of India to foreign capital is supported by rhetoric about increasing agricultural efficiency, creating jobs and boosting GDP growth. Such rhetoric mirrors that of the pro-business, neoliberal dogma we see in APCO’s brochure for India. From Greece to Spain and from the US to the UK, we are able to see this rhetoric for what it really is: record profits and massive increases in wealth (ie ‘growth) for elite interests and, for the rest, disempowerment, surveillance, austerity, job losses, the erosion of rights, weak unions, cuts to public services, bankrupt governments and opaque, corrupt trade deals.

APCO describes India as a trillion-dollar market. Note that the emphasis is not on redistributing the country’s wealth among its citizens but on exploiting markets. While hundreds of millions live in poverty and hundreds of millions of others hover above it, the combined wealth of India’s richest 296 individuals is $478 billion, some 22% of India’s GDP. According to the ‘World Wealth Report 2015’, there were 198,000 ‘high net worth’ individuals in India in 2014, while in 2013 the figure stood at 156,000.

APCO likes to talk about positioning international funds and facilitating corporations’ ability to exploit markets, sell products and secure profit. In other words, colonising key sectors, regions and nations to serve the needs of US-dominated international capital.

Paving the way for plunder

Modi recently stated that India is now one of the most business friendly countries in the world. The code for this being lowering labour, environmental, health and consumer protection standards, while reducing taxes and tariffs and facilitating the acquisition of public assets via privatisation and instituting policy frameworks that work to the advantage of foreign (US/Western) corporations.

When the World Bank rates countries on their level of ‘Ease of Doing Business’, it means nation states facilitating policies that force working people to take part in a race to the bottom based on free market fundamentalism. The more ‘compliant’ national governments make their populations and regulations, the more attractive foreign capital is tempted to invest.

The World Bank’s ‘Enabling the Business of Agriculture’ – supported by the Bill and Melinda Gates Foundation and USAID – entails opening up markets to Western agribusiness and their fertilisers, pesticides, weedicides and patented seeds.

Anyone who is aware of the Knowledge Initiative on Agriculture and the links with the Indo-US Nuclear Treaty will know who will be aware that those two projects form part of an overall plan to subjugate Indian agriculture to the needs of foreign corporations (see this article from 1999). As thebiggest recipientof loans from the World Bank in the history of that institution, India is proving to be very compliant.

The destruction of livelihoods under the guise of ‘job creation’

According to the neoliberal ideologues, foreign investment is good for jobs and good for business. Just how many actually get created is another matter. What is overlooked, however, are the jobs that were lost in the first place to ‘open up’ sectors to foreign capital. For example, Cargill may set up a food or seed processing plant that employs a few hundred people, but what about the agricultural jobs that were deliberately eradicated in the first place or the village-level processors who were cynically put out of business so Cargill could gain a financially lucrative foothold?

The Indian economy is being opened-up through the concurrent displacement of a pre-existing (highly) productive system for the benefit of foreign corporations.For farmers, the majority are not to be empowered but displaced from the land. Farming is being made financially non-viable for small farmers, seeds are to be privatised as intellectual property rights are redefined, land is to be acquired and an industrialised, foreign corporate-controlled food production, processing and retail system is to be implemented.

The long-term plan is tocontinue to starve agricultureof investment and have an urbanised India with a fraction of the population left in farming working on contracts for large suppliers and Wal-Mart-type supermarkets that offer highly processed, denutrified, genetically altered food contaminated with chemicals and grown in increasingly degraded soils according to an unsustainable model of agriculture that is less climate/drought resistant, less diverse and unable to achieve food security. This would be disastrous for farmers, public health and local livelihoods.

Low input, sustainable models of food production and notions of independence and local or regional self-reliance do not provide opportunities to global agribusiness or international funds to exploit markets, sell their products and cash in on APCO’s vision of a trillion-dollar corporate hijack; moreover, they have little in common with Bill Gates/USAID’s vision for an Africa dominated by global agribusiness.

And, finally, to demonetisation

Modi rode to power on a nationalist platform and talks about various ‘nation-building’ initiatives, not least the ‘make in India’ campaign. But he is not the only key figure in the story of India’s capitulation to Washington’s agenda for India. There is, for instance,Avrind Subramanian, the chief economic advisor to the government, and Raghuram Rajan who was until recently Governor of the Reserve Bank of India.He was chief economist at theInternational Monetary Fundfrom 2003 to 2007 and was a Distinguished Service Professor of Financeat theUniversity of Chicago Booth School of Businessfrom 1991 to 2013. He is now back at the University of Chicago.

Aside from Rajan acting asa mouthpiecefor Washington’s strategy to recast agriculture in a corporate image and get people out of agriculture in India, in arecent article, economist Norbert Haring implicates Rajan in the demonestisation policy. He indicates that the policy was carried out on behalf of USAID, MasterCard, Visa and the people behind eBay and Citi, among others, with support from the Gates Foundation and the Ford Foundation.

Haring calls Rajan the Reserve Bank of India’s “IMF-Chicago boy” and based on his employment record, memberships (not least of the eliteGroup of Thirty which includes heads of central, investment and commercial banksand links, place him squarely at the centre of Washington’s financial cabal.

Haring says that Raghuram Rajan has good reason to expect to climb further to the highest rungs in international finance and thus play bow to Washington’s game plan:

He already wasa President of the American Finance Association and inaugural recipient of its Fisher-Black-Prize in financial research. He won the handsomely endowed prizes of Infosys for economic research and of Deutsche Bank for financial economics as well as the Financial Times/Goldman Sachs Prize for best economics book. He was declared Indian of the year by NASSCOM and Central Banker of the year by Euromoneyand by The Banker. He is considered a possible successor of Christine Lagard at the helm of the IMF, but can certainly also expect to be considered for other top jobs in international finance.”

The move towards a cashless society would secure a further degree of control over India by the institutions who are pushing for it. Securing payments that accrue from each digital transaction would of course be very financially lucrative for them. These institutions are therefore pursuing a global ‘war on cash’.

Small, wealthy countries like Denmark and Sweden can bear the impact of a transition to a cashless economy, but for a country such as India, which runs on cash, the outcomes so far have been catastrophic for hundreds of millions of people, especially those who don’t have a bank account (almost half the population) or do not even have easy access to a bank.

But, regardless of the large-scale human suffering imposed as a result of demonetisation, it could kill two birds with one stone: 1) securing the interests of international capital, including the eventual displacement of the informal (i.e. self-organised) economy; and 2) acting as anotherdeliberate nail in the coffinof Indian farmers, driving even more of them out of the sector. The US’s game plan remains well and truly on course.

Not really a case of ‘make in India’. Some 50 years after independence, as a state India remains compromised, weak and hobbled. More a case of made in Washington.

— source By Colin Todhunter

Traditional banking model is dying

The truth about the traditional banking model: it is dead. Ok, to be temporally current, it is dying. Six reasons why:

1) Banks can’t price risk in lending – we know as much since the revelations of 2007-2008. If they cannot do so, banks-based funding model for investment is a metronome ticking off a crisis-to-boom cyclicality. That policymakers (and thus regulators) cannot comprehend this is not the proposition we should care to worry about. Instead, the real concern should be why are equity and direct lending – the other forms of funding – not taking over. The answer is complex. Informational asymmetries abound, making it virtually impossible to develop retail (broad) markets for both (excluding listed equity). Tax preferences for debt is another part of the fallacious equation. Habits / status quo biases in allocating funds is the third. Inertia in the markets, with legacy lenders being at scale, while challengers being below the scale. Protectionism (regulatory and policy) favours banks over other forms of lending and finance. And more. But these factors are only insurmountable today. As they are being eroded, direct financing will gain at the expense of banks.

The side question is why the banks are no longer able to price risks in lending, having been relatively decent about doing so in previous centuries? The answer is complex. Firstly, banks are legacy institutions that have knowledge, models, memory and intellectual infrastructure that traces back to the industrial age. Time moved on, but banks did not move on as rapidly. Hence, today’s firms are distinct from Coasean transaction cost minimisers. Instead, today’s firms are much more complex entities, dealing with radically faster pace of innovation and disruption, with higher markets volatility and, crucially, trading in the environment that is more about uncertainty than risk (Knightian world). Here, risk pricing and risk management are not as closely aligned with risk modeling as in the age of industrial enterprises. Guess what: if firms are existing in a different world from the one inhabited by the banks, so are people working for these firms (aka banks’ retail customers). Secondly, banks’ own funding and operations models have become extremely complex (see on this below), which means that even simple loan transaction, such as a mortgage, is now interwoven into a web of risky contracts, e.g. securitisation, and involves multiple risky counterparties. Thirdly, demographic changes have meant changes in risk regulation environment (increased emphasis on consumer protection, bankruptcy reforms, data security, transparency, etc) all of which compound the uncertainty mentioned above. And so on…

2) Banks can’t provide security for depositors – we know, courtesy of pari passu clauses that treat depositors equivalently with risk investors. The deposits guarantee schemes are fig leaf decorations. For two reasons. One: they are exogenous to banks, and as such should not be used to give banks a market advantage. Of course, they are being used as such. Two: they are only as good as the sovereign guarantors’ willingness / ability to cover them. Does anyone, looking at the advancement of the cashless society in which the state is about to renew on its own promissory fiat at least across anonymity and extreme risk hedging functions of cash, really thinks the guarantees are irrevocable? That they cannot be diluted? If the answer is no, then that’s the beginning of an end for the traditional deposits-gathering, but bonds-funded banking hybrids.

More fundamentally, consider corporate governance structure of a traditional bank. Board and executives preside (more often, executives preside over the board due to information asymmetries and agency problems). Shareholders are given asymmetric voting rights (activist institutional shareholders are treated above ordinary retail shareholders). Bondholders have direct access to C-suite and even Board members that no other player gets. And the funders of the bank, the depositors? Why, they have no say in the bank. Not even a pro forma one. This asymmetry of power is not accidental. It is an outrun of the centuries of corporate evolution, driven by pursuit of higher returns on equity. But, roots aside, it certainly means that depositors are not the key client of the bank’s executive. If they were, they would be put to the top of the corporate governance pyramid.

Still think that the bank is here to protect your deposits?

3) Banks can’t provide efficient platforms for transactions – we know, courtesy of #FinTech solutions. Banks charge excessive fees for simple transactions, such as currency exchanges, cross border payments, debt cards, some forms of regular utility payments, etc. They charge to issue you access to your money and to renew access when it deteriorates or is lost. They charge for all the things that many FinTech platforms do not charge for. And they provide highly restricted (i.e. costly) platform migration options (switching banks, for example). Some FinTech platforms now offer seamless, low cost migration options, e.g. aggregators and some new tech-enabled banks, e.g. KNAB. Anecdotal evidence to bear: two of my banks on two sides of the Atlantic can’t compete on fees and time-to-execute lags with a small firm doing my forex conversions that is literally 10 times cheaper than the lower cost bank and 5 days faster in delivering the service.

If you want an analogy: banking sector today is what music industry was just at the moment of iTunes launch.

4) Banks can’t escape maturity mismatch and other systemic risks – we know, courtesy of banks’ reliance on interbank lending and securitisation. The core model of deposits being transformed into loans is hard enough to manage from the maturity mismatch perspective. But when one augments it with leveraged interbank funding and securitisation, we end up with 2007-2008 crisis. This is not an accident, but a logical corollary of the banking business model that requires increasing degrees of leverage to achieve higher returns on equity. Risks inherent in lending out of deposits are compounded by risks relating to lending out of borrowed funds, and both are correlated with risks arising from securitising payments on loans. The system is inherently unstable because second order effects (shutdown of securitised paper markets) on core business funding dominate the risk of an outright bank run by the punters. Worse, competitive re-positioning of the financial institutions is now running into the dense swamp of new risks, e.g. cybercrime and ICT-related systems risks (see more on this here: No amount of macro- or micro-prudential risk management can address these effects. Most certainly not from the crowd of regulators and supervisors who are themselves lagging behind the already laggardly traditional banking curve.

As an aside, consider current demographic trends. As older generations draw down their deposits, younger generation is not accumulating the same amounts of cash as their predecessors were. The deposits base is shrinking, just at the time as transactions volumes are rising, just as weak income growth induces greater attention to transactions fees. Worse, as more and more younger workers find themselves in the contingent workforce or in entrepreneurship or part time work, their incomes become more volatile. This means they hold greater proportion of their overall shrinking savings in precuationary accounts (mental accounting applies). These savings are not termed deposits, but on-demand deposits, enhancing maturity mismatch risks.

5) Banks can’t provide advice to their clients worth paying for – we know this, thanks to the glut of alternative advice providers, and passive and active management venues. And thanks to the fact that banks have been aggressively ‘repairing margins’ by cutting back on customer services, which apparently does not damage their performance. Has anyone ever heard of cutting a value-adding line of business without adversely impacting value-added or margin? Nope, me neither. So banks doing away with advice-focused branches is just that – a self-acknowledgement that their advice is not worth paying for.

Worse, think of what has been happening in asset management sector. Fee-based advice is down. Fee-based investment funds (e.g. hedge funds) are shrinking violets. But all of these players bundle fees with performance-based metrics. And here we have a bunch of useless advice providers (banks) who supposed to charge fees for providing no performance-linked anchors?

6) Banks can’t keep up with the pace of innovation. How do we know that? Banks are already attempting to converge to FinTech platforms (automatisation of front and back office services, online banking, e-payments, etc,). Except they neither have technical capabilities to do so, nor integration room to achieve it without destroying own legacy systems and business, nor can their investors-required ROE sustain such a conversion. Beyond this, banking sector has one of the lowest employee mobility rates this side of civil service. Can you get innovation-driven talent into an institution where corporate culture is based on being a ‘lifer’? Using Nassim Taleb’s term, bankers are the ‘IBM men’ of today. Innovation-driven companies have none of these. For a good reason, not worth discussing here.

So WHAT function can banks carry out? Other than use private money to sustain superficial demand for overpriced Government debt and fuel bubbles in assets?

It is a rhetorical question. Banks, of course, are not going to disappear overnight. Like the combustion engine is not going to. But banks’ Tesla moment is already upon us. Today, banks, like the car companies pursuing Tesla, are throwing scarce resources at replicating FinTech. Most of the time they fail, put their tails between their legs and go shopping for FinTech start ups. Next, they will fail to integrate the start ups they bought into. After that, we will see banks consolidation moment, as the bigger ones start squeezing the smaller ones in pursuing shrinking market for their fees-laden services. And they will be running into other financial sector players, with deeper pockets and more sustainable (in the medium term) business models moving into their space – insurance companies and pension funds will start offering utility banking services to vertically integrate their customers. Along this path, banks’ equity capital will be shrinking, which means their non-equity capital (costly CoCos and PE etc) will have to rise. Which means their ROEs will shrink some more.

Banking, as we know it, is dying. Banks, as we know them, will either vanish or mutate. If you are investing in banking stocks, make sure you are positioned for an efficient exit, make certain the bank you are investing in has the firepower to survive that mutation, and be confident in your valuation of that bank post-mutation. Otherwise, enjoy mindless gambling.

— source By Constantin Gurdgiev

Capitalism Is the Problem

Over the last century, capitalism has repeatedly revealed its worst tendencies: instability and inequality. Instances of instability include the Great Depression (1929-1941) and the Great Recession since 2008, plus eleven “downturns” in the US between those two global collapses. Each time, millions lost jobs, misery soared, poverty worsened and massive resources were wasted. Leaders promised that their “reforms” would prevent such instability from recurring. Those promises were not kept. Reforms did not work or did not endure. The system was, and remains, the problem.

Inequality likewise proved to be an inherent trend of capitalism. Only occasionally and temporarily did opposition from its victims stop or reverse it. Income and wealth inequalities have worsened in almost every capitalist country since at least the 1970s. Today we have returned to the huge 19th-century-sized gaps between the richest 1 percent and everyone else. Rescuing the “disappearing middle class” has become every aspiring politician’s slogan. Extreme inequality infects all of society as corporations and the rich, to protect their positions, buy the politicians, mass media and other cultural forms that are for sale.

Recent Crises in the History of Capitalism

Capitalism in Western Europe, North America and Japan — its original centers — has boosted profits in four basic ways since the 1970s. First, it computerized and robotized, not to lessen everyone’s work time, but instead to raise profits by reducing payrolls. Second, it exploited low-wage immigrant labor to offset wage increases won by years of labor struggles. Third, it moved production to lower-wage countries such as China, India, Brazil and others. Fourth, it divided and weakened the labor unions, political party groups and other organizations that pursued labor’s interests. As a result, inside nearly every country of the global capitalist system, the rich-poor divide deepened.

The Great Depression provoked economic “reforms,” such as FDR’s New Deal. These included regulations restricting risky bank and other market practices. Reforming governments also established public pensions, unemployment insurance, public employment systems, minimum wages, monetary and fiscal policies, and so on. Advocates believed that such reforms would end the 1930s depression and prevent future depressions. They dismissed critics who diagnosed depressions as systemic and prescribed system change (or “revolution”) as the necessary solution. “Reform versus revolution” was then a hot debate.

In the US, the reformers defeated the revolutionaries as preparation for war — and then war itself — finally ended the Great Depression. As capitalism rebounded after 1945, capitalists increasingly evaded the Depression-era reforms, using their growing wealth to buy the political influence needed to gut many reforms. Later, Reagan led the frontal assault, repackaged as “globalization” and “neoliberalism” to undo the New Deal. When that rollback of reforms culminated in the 2008 crash, it exposed capitalism’s instability and inequality yet again.

The continuing post-2008 economic crisis has reproduced both the kinds of suffering that happened after 1929 and the reform-versus-revolution debates. The difference this time is that we know what happened last time. While the reformers then defeated the revolutionaries, their reforms failed to prevent the continuation of capitalism’s instability and inequality, and their harmful social effects. Reformism today advocates the same (or a slightly varied) set of reforms as last time. It thus represents a refusal to learn from our history. The revolutionary alternative now makes more sense. “Revolutionary,” however, need not evoke romantic notions of storming barricades: Today, revolutionary refers to the recognition that system change, not another reform, is our primary task.

What System Change Requires

What differentiates system change from reforms? Reforms refer to government interventions that still leave employers in the exclusive position to make the basic enterprise decisions: what, how and where to produce and what to do with profits. Reforms include minimum wage laws, redistributive tax structures, and enterprises owned and operated by the government. They range from the mildly Keynesian (the New Deal) to the democratic socialist (what we see in Scandinavian countries) to the state socialist (the model of the USSR and People’s Republic of China). All such reforms retain the core relationship inside enterprises as that of employer-employee, with private or public directors controlling the mass of workers and making the basic enterprise decisions.

In contrast, system change means reorganizing the core human relationship inside the factories, offices and stores of an economy. That relationship connects all who participate in production and distribution of goods and services. It shapes (1) who produces what, how and where; (2) how much surplus or profits are available; and (3) the disposition of the surplus or profits.

Truly moving beyond capitalism means breaking from the employer-employee core relationship. It means no longer assigning a relatively tiny number of people inside each enterprise to the employer position of exclusively making the sorts of decisions outlined above. In private corporations the employers are the boards of directors selected by the major shareholders. In state or public enterprises of the traditional socialist economies, the employers are state officials. Instead of either kind of employer-employee relationship, system change installs a different core relationship inside enterprises. A different group of people — all workers in the factory, office or store — democratically makes those same decisions. The rule is “one worker, one vote,” and in general, the majority decides. The difference between employer and employee dissolves.

Such system change beyond capitalism means something quite different from shifting to public directors from private directors, which is a reform. System change entails the democratization of the workplace. The logic governing the economic system, then, would no longer be capital-centric (making decisions (1) through (3) in such a particular way that the capitalist employer-employee relationship in production is reproduced). The particular connecting relationship at the core of capitalism will have been superseded: rather like what happened earlier to the slave-centric core relationship (master-slave) and the feudal-centric core relationship (lord-serf). Instead, the post-capitalist core relationship will be democratically worker-centric, with the central type of workplace being the worker cooperative.

Among the goals driving an economy based on democratic worker coops, job security, quality of workers’ lives and reproduction of the worker coop core relationship in production will weigh more heavily than enterprise profits. Because different people will be making the key enterprise decisions and because those people will be driven by different goals, the post-capitalist society will develop very differently from the capitalist. Democratic worker coops will likely (1) not relocate themselves overseas, (2) distribute incomes far less unequally than capitalist enterprise, (3) not install ecologically damaging technologies near where their families and neighbors reside, and so on.

Responding to reductions in demands for their outputs, worker coops will more likely stress sharing any reduced work hours among all workers rather than forcing a few into unemployment. The needless social irrationality of capitalist downturns — when unemployed workers coexist with unutilized means of production to leave social needs unmet — will be much more apparent and thus widely unacceptable.

In an economy built on worker coops, children, retired people, people living with disabilities or illness and others outside the labor force would be sustained from the worker coops’ “surplus.” The latter comprises what the coop labor force produces above and beyond what it consumes and requires to replace used-up means of production. Adults in and out of the coop labor force would together and democratically determine the sizes and recipients of all the distributions of the surplus. They would decide how much of the surplus would go to expanding production, to provisions for future contingencies, to providing for children, for those in other social institutions, and so on. In place of capitalists (a social minority) distributing the surpluses produced by and appropriated from their employees, a genuine democracy would govern that distribution, much as it governs other worker coop decisions.

Worker coops mark a qualitative and quantitative advance beyond capitalism. They represent a system change adequate to key problems capitalism has shown it cannot overcome, even after centuries of failed efforts to do so.

— source

A Game Changer for Indian Farmers? A Speculator’s Playground

In a major push to widen the scope of commodity derivatives market in India, Securities and Exchange Board of India (SEBI) has recently allowed options trading on commodity exchanges. On September 28, 2016, SEBI issued an official notification allowing exchanges to launch options contracts in commodity derivatives market. Currently, trading in commodity futures contracts is only allowed in exchanges such as Multi Commodity Exchange of India (MCX) and National Commodities and Derivatives Exchange (NCDEX).

It is expected that trading in options contracts will be introduced in the current fiscal year as the Finance Minister in his Union Budget Speech (2016-17) had announced that “new derivative products will be developed by SEBI in the commodity derivatives market.” In addition, Commodity Derivatives Advisory Committee, constituted by SEBI in January 2016 to advice on policy and regulatory issues, had also recommended the introduction of new products in the commodity derivatives market.

Like futures, commodity options contracts are traded on major commodity exchanges across the world. The majority of commodity exchanges (including CME and ICE) offer commodity options on underlying commodity futures. Eurex Exchange offers options contracts on underlying commodity spot (physical gold and crude oil). While Taiwan Futures Exchange allows market participants with open positions to seek delivery of physical gold in the case of gold options contracts.

Although options trading in equity segment was introduced in 2001, India’s National Stock Exchange (NSE) occupies the top position in global index options trading. According to World Federation of Exchanges, 1765 million Nifty options contracts were traded at NSE in 2015.

As the SEBI has granted permission for options trading in commodities, market analysts predict that commodity derivatives trading may grow 10-fold over the next five years.

The government may soon allow foreign banks, mutual funds, institutional investors and other financial players to trade in Indian commodity derivatives market which will further boost trading volumes in both options and futures contracts.

At the time of writing, it is unclear how many commodities would be permitted for options trade in the Indian market. It is also not yet known whether the SEBI will allow European options (exercisable on expiration date only) or American options (exercisable any time on or before expiration date).

Currently, the modalities are being worked out and the options trading is expected to begin in early 2017.

Meanwhile commodity market experts have asked SEBI to develop eligibility criteria for option writers (based on financial soundness) given the high degree of risk involved in selling options contracts.

What are commodity options?

An option is a financial contract between two parties (the buyer and seller) granting the right, but not the obligation, to buy or sell a futures contract at a predetermined price on or before a certain date.

Futures and options are both derivatives products but the key difference between them is that the options give the holder the right to buy or sell the underlying asset at expiration while the holder of a futures contract is obligated to buy or sell the underlying asset on a future date.

In the case of commodity derivatives market, options provide an opportunity or the right (not the obligation) to investors to buy or sell a commodity futures contract at a specified price. It needs to be emphasized here that the “underlying commodity” for the commodity options is a futures contract, not the physical commodity itself. Whereas futures contracts are derivatives of the physical commodity.

There are two kinds of options: call options and put options.

A call option gives the holder the right, not the obligation, to buy futures contract at a specific price on or before a certain date. Call options are most commonly used to protect against rising prices.

A put option is an option contract giving the holder the right, not the obligation, to sell futures contract at a specific price on or before a certain date. Put options are most commonly used to protect against falling prices.

The date on which the actual trade takes place in called Expiration Date.

The predetermined (fixed) price of the contract is called Strike Price.

Premium is the amount one pays to enter into an options contract. In other words, the cost of the option. The buyer loses the premium irrespective of the fact whether s/he has exercised the options contract or not.

In many ways, options act like insurance policies. For instance, put option buyers insure themselves against falling price of a commodity while the seller of a put option acts like an insurer by offering a price guarantee to buyers. Just like an insurance company, the seller of put option charges a premium whether the contract is exercised or not.

To understand the workings of commodity derivatives markets, read A Beginner’s Guide to Indian Commodity Futures Markets.

Risky options

Since options are more complex instruments than stocks and bonds, they are not suitable for every trader, leave aside an average Indian farmer. Due to volatility factor, options require a higher degree of sophistication on the part of the trader.

Sophisticated traders can use options to benefit from any up and down market movements. Options enable traders to make money even in those situation when is no market movement either way. Most options traders do not simply buy call and put options. They use complex trading strategies by combining many options and futures contracts or use dual directional strategies to make speculative profits from price movements in either direction.

Therefore, commodity options are more suitable for sophisticated traders and investors who have in-depth understanding of commodity derivatives markets and strong financial base. Options contracts can be very risky if used purely for speculative purposes because of the high degree of leverage involved. Leverage magnifies both potential profits and potential losses.

There are plenty of instances where improper use of options by traders have led to huge financial losses and bankruptcy. For instance, Aracruz Celulose, a Brazilian firm and world’s biggest producer of bleached eucalyptus-pulp, lost $2.5 billion after its forex option bets to hedge against the US dollar went the wrong way in 2008.

It is important to note that the buyers of option contracts have a different risk than sellers. Unlike futures contract which can potentially expose a trader to unlimited losses, the risk in options to buyers is limited to the premium paid upfront plus commissions to brokers and exchange fees. Besides, there are no margin calls for options buyers so they know the amount of payment and the maximum risk involved in buying options at the outset.

But in the case of call options, the potential losses are theoretically limitless for sellers as the prices of underlying futures contracts can rise indefinitely and, therefore, the value of an options contract can also rise indefinitely. In the case of put options, the potential downside for sellers is limited to the value of the underlying futures contract. An option seller has to meet margin requirements (cash or securities deposited with brokerage firm as collateral) until the contract is exercised or expires.

What about positive spillovers? The arguments supportive of positive spillovers of options trading are highly overstated and backed by very little hard evidence, particularly in the context of commodity markets. The benefits in terms of greater information transmission, higher market liquidity and improved market stability are yet to be demonstrated empirically in commodity markets across the world.

A game changer for farmers?

The commodity exchanges and brokerage houses have welcomed the decision to introduce options trading on the expectation that higher trading volumes would boost their fees and commissions. This is understandable considering the nature of their business model. What is really perplexing is that the hard selling of options trading on the grounds that this move is essentially meant to help the Indian farming community.

In a press statement, Samir Shah, Managing Director of NCDEX said, “This is a historic step which will go a long way in significantly deepening the commodities market. We are extremely excited and welcome this decision which will help expand the product basket and make it attractive for new participants. For the farmers, it will be a game changer. It would help them sell their produce in the derivatives market and thereby get the benefit of price protection in case the prices fall below their cost of production and also derive the benefit of any rise in the price. Options are also a much better hedging instrument as compared to futures for hedgers.”

Not surprisingly, similar arguments were made in the 1990s to introduce commodity futures trading. At that time, tall claims were made that commodity futures trading would facilitate efficient price risk management and price discovery in a fair, transparent and orderly manner. It was claimed that futures market will help Indian farmers to hedge against potential risks arising out of price movements in spot markets so that they can get guaranteed price for their produce in the future. Besides, trading in futures would provide reliable price signals to farmers about the likely prices of their crops in the months ahead.

However, both these economic objectives have not yet been realized across agricultural commodities (and for some metals and minerals), even though commodity futures markets have been in operation in India since 2003. It is unfortunate that futures markets continue to be dominated by speculators and non-commercial players who frequently indulge in price rigging and other market abusive practices with impunity. The frequent trading scandals (from guar to pepper) have further eroded the trust and confidence of Indian farming community in the commodity futures markets which are popularly perceived as “Satta Bazaar” (gambling market).

Against the backdrop of a massive trading scandal at NSEL, the Forward Markets Commission (FMC) – the then regulatory body for commodity futures – was merged with SEBI last year.

In India, the participation of farmers in commodity futures markets is negligible. According to market estimates, not even 2000 farmers in India are directly trading on commodity futures exchanges. Even the participation of farmers marketing cooperative bodies (such as NAFED and HAFED) is very limited due to lack of adequate knowledge of the functioning of futures market. Such bodies can act as aggregators and hedge positions in futures exchanges on the behalf of their farmers.

While futures have failed to achieve their avowed objectives of price discovery and price risk management, it remains to be seen how options alone, or in combination with futures contracts would serve the interests of Indian farmers, especially small and marginal ones (owning less than 2 hectares of land) which constitute 78 percent of the country’s farming community.

The introduction of options trading in sensitive food security commodities calls for a cautious approach as price instability has been a major concern for producers and consumers in India.

An average Indian farmer lacks a basic understanding of what is involved in futures trading. The options trading is even more difficult to comprehend as it adds yet another layer of complexity on what is already a very complex trading instrument. Therefore, options contracts are not ideal for Indian farming community. In the same vein, small enterprises lack the resources and capacities to trade actively in derivatives contracts for hedging purposes. Even experienced traders struggle to understand the risks involved in trading both futures and options contracts.

Nowadays commodity exchanges are conducting short duration training workshops for small stakeholders but such workshops are inadequate to impart information and insights on the nuances of derivatives trading.

Instead of launching highly sophisticated derivatives instruments such as commodity options to help farmers, the Indian authorities should first focus on removing the bottlenecks such as fragmented nature of spot markets; over-politicization of state agricultural produces marketing committees (APMCs) and state agricultural produces marketing boards (APMBs); inadequate warehouses, storage and grading facilities; and poor condition of roads and other infrastructure in the rural India.

A speculator’s playground

The proponents argue that options contracts would complement the existing futures contracts and thereby would make Indian commodity derivatives more attractive to farmers and SMEs for hedging purposes.

Hedgers are market players (consisting of producers, processors and consumers) with an exposure to the underlying commodity and they use derivatives markets primarily for hedging purposes. The hedgers simultaneously operate in the spot market and the futures market. They try to reduce or eliminate their risk by taking an opposite position in the futures market on what they are trying to hedge in the spot market so that both positions cancel one another.

In the absence of strictly enforced guidelines classifying different categories of market participants, it is difficult to differentiate between speculators and hedgers in commodity derivatives markets. As a result, no one knows the true proportion of derivatives contracts used for purely hedging purposes in the Indian market. It is also difficult to determine whether a trader is buying or selling commodity derivatives contracts for purely speculative or hedging purposes.

Not long ago, the FMC had acknowledged that the bulk of trading in the Indian commodity futures market is carried out by speculators and non-commercial traders who attempt to profit from buying and selling futures contracts by anticipating future price movements but have no intention of actually owning the physical commodity, while the participation of hedgers is almost negligible. Most market analysts feel that the participation of hedgers in the futures market is relatively small. The frequent price manipulation scandals have further eroded their confidence and trust in the commodity derivatives market.

It should be noted that in the Indian equity markets where options contracts are traded, these contracts are mostly used as a speculative tool to profit from market movement, rather than to hedge existing portfolios.

In all likelihood, the introduction of commodity options trading will attract more speculative investments from big traders and speculators. These market players will now have a new instrument to add to their trading arsenal.

With the expected entry of foreign banks, institutional investors and other financial players, the Indian commodity derivatives markets would move further away from fulfilling the twin objectives of hedging and price discovery. The policy makers should take steps to avoid turning the entire commodity derivatives markets into an arena for pure speculative activities.

What is good for financial investors and commodity speculators is not necessarily good for Indian farmers and small entrepreneurs. This policy move will have significant implications for inclusive growth and development and therefore requires a major rethink.

Kavaljit Singh works with Madhyam, a policy research institute, based in New Delhi.

— source

Class Struggle in Vermont

THE GRANAI CLAN was like many Italian immigrant families settling in Barre at the end of the 19th century. By 1912 Cornelius, one of 18 children, was working as a stone cutter for the Jones Brother Company. His parents were ex-followers of Guiseppe Garibaldi, peasant leader and soldier in the wars of Italian unification.

Decades later, in an interview with a friend, oral historian Roby Colodny, for Vermont’s Untold History, Granai recalled hearing stories about more than a dozen members of one Garibaldi expeditionary force that settled in Barre. Other immigrants called themselves Republicani, followers of Mazzini, elder statesman of the Italian Republic. Whatever their previous affiliations, most considered themselves socialists. And many joined the two main unions for those who cut stone, the Quarry Workers and the Granite Cutters International Association.

Eugene Debs, three-time Socialist candidate for president, visited Barre, as did his successor Norman Thomas in the early 1930s. Fred Suitor, secretary-treasurer of the local Quarry Workers from 1911 to 1930, ran for governor as the Socialist Party candidate in 1912, and was later elected mayor of Barre on the Citizens ticket. According to Granai, everyone knew he was a Socialist.

So much has changed. Barre was Vermont’s third largest city by 1900, right behind Burlington and Rutland. Although a single industry had fueled its growth, no one family or company dominated the local economy or culture. And its population represented a diverse ethnic mix, from French Canadians to immigrants from Italy, Spain and Scotland.

During the historic 1912 strike of textile workers in Lawrence, Massachusetts, organized by the Industrial Workers of the World, at least 200 children of the strikers were sent to the central Vermont city. On February 17, musical bands from Barre, Bethel and Waterbury greeted the kids as they arrived at the train station. They were “divied out” at a crowded Socialist Hall on Granite Street as people sang “son qui” (here I am), the famous duet from Tosca, Puccini’s opera about Italy’s struggle for independence.

Even Yankee farmers from the countryside took children in.

In the 1920s the case of Nicola Sacco and Bartolomeo Vanzetti captured broad local sympathy, especially in the immigrant neighborhoods. The two self-professed anarchists had been convicted of murder and armed robbery after a controversial trial in which the judge consistently denied defense motions. As new evidence emerged, more people decided that it was a frame-up, part of the red scare that began during the war. Sacco and Vanzetti became a cause célèbre, and attracted worldwide attention and support.

“Barre was never so stirred up,” Granai recalled. “They were seen as victims of their beliefs…victimized by circumstances.” When a play about the two immigrant martyrs was performed at the old Barre Opera House, a thousand tickets were sold for 300 seats. But unlike the Lawrence Strike a decade earlier, there was no victory this time. Sacco and Vanzetti were electrocuted shortly after midnight on August 23, 1927.

The ideas and sympathies of the newcomers sounded “radical” to many of their Yankee neighbors. But their agenda was a campaign for bread and butter, a decent home and education for their children. Like many urban areas in the U.S., Barre witnessed frequent agitation for shorter hours, higher wages and improved working conditions, from “squat sheds” and provocations to lockouts and strikes. Silicosis-producing dust sent many granite workers to the sanitarium on Blakely Hill. Accidents due to drilling and dynamite blasting were common.

A 40-hour workweek, with Saturday afternoon off, was instituted in 1914. Two years later Robert Gordon became Barre’s first Socialist Mayor, winning by 100 votes over the editor of the Barre Daily Times. But the political dynamics were fragile. After war was declared against Germany in 1917 it quickly became a battle against militant labor as well, especially the IWW. Most of its top leadership was rounded up and put on trial. As the Red Scare and deportation of suspected foreign radicals began the city’s socialist movement faded.

A teenager during the war years, John Lawson attended local socialist meetings with his dad. He and his family had reached Barre from Scotland in 1911, and Lawson took it upon himself to revive the Party after the war. It was a lonely task. Most IWW members – called Wobblies – were either in jail or struggling to hold onto union support. Many businesses were tired of dealing with labor demands.

By the early 1920s, although the unions were still strong, the socialist movement was in decline and a new slogan was creeping into use – The American Plan. Cloaked in patriotism, the Plan was a business strategy designed to deny recognition, even to well-established unions, and tar almost any demand for better wages or working conditions as “bolshevism.”
“The owners were represented by the Quarry Owners Association and the Barre Granite Association,” Lawson recalled. “Both were backed up by a common Board of Control which sat in Boston.” Through the intransigence of its President James Boutwell, the Board strove to preserve a “united front,” especially during a lockout that ran for months in 1922 and 1923. The Quarry Workers and Granite Cutters held out and some of the smaller companies eventually signed union contracts.
But the “united front” strategy was a partial success. Four months after the strike began scabs were brought in from sheds and quarries in Canada and Massachusetts. Some companies even promised them higher wages than the union was demanding. Once they arrived, however, the wages dropped.
By the time the strike ended, open shop working conditions had taken hold. The Rock of Ages Company was launched soon afterward, a rebranding of the older Boutwell, Milne and Varnum Granite Company, and actively promoted the American Plan. By purchasing other smaller companies – a strategy known as growth-by-acquisition – it became the best-known name in the granite industry. Rock of Ages wasn’t unionized until 1941.

Organizing in Hard Times

IN THE YEARS after World War I, migration to larger Vermont communities accelerated, prompting a building boom in regional centers like Burlington. Milk production was on the rise, although the number of farms was dropping rapidly. Fruit production was also high, at least for a few years, but less butter, hay and other grains were being produced. Both manufacturing and agricultural diversity declined as tourism took a firmer hold on the economy.

At its peak, a trolley system carried over 16 million passengers around Southern Vermont – until the flood of November 1927. But that historic disaster, which hurt rail travel and reduced trolley passengers to less than 2 million, ended up helping the summer home and winter sports sectors of the recreation industry by spurring highway spending and the building of airports. In the early 1930s half of the state’s $12 million annual budget was devoted annually to highway construction. During the same period only $1 million was spent yearly on education and health.

Increased specialization of labor, along with the growth of services industries and transportation systems, drew Vermont more deeply into the national money and credit network. In 1929 that structure collapsed. Unemployment skyrocketed as the standard of living dropped.

In Barre, a two-month strike by granite workers became a “straight out union fight for survival,” recalled Lawson. The strike officially began on April 1, 1933, shutting down six major companies within a week. The only exception was E. L. Smith, which paid above union scale and used workers from Canada. Lawson was president of the Graniteville local, while Granai consulted closely with the strike committee as a lawyer.

The union asked the sheriff and his deputies to let the strikers police themselves. “A police force was established by the wearing of white arm bands,” according to Granai. But at that point agent provocateurs rode in and workers fought back. In some cases the latter brandished shotguns for self-defense. Some strikers were jailed by anti-union judges. The protest was losing ground.

Shortly after the strike began, the sheriff had assisted in the use of 150 strikebreakers. But local residents backed the union, tradesmen and farmers distributed free food, and a federal arbitration board sought a compromise. On April 29, the Quarry Workers union rejected extension of the old contract for a second time. But the Granite Cutters accepted binding arbitration and the strike was almost settled by May 5.

Interpretations of why the National Guard was called in vary. As Granai remembered it, Governor Stanley C. Wilson didn’t issue the order. Rather, people connected with the Granite Cutters made the request “to get rid of agent provocateurs.” Lawson and others recall the situation differently. “Protests against the Guard were lodged by farmers, churchmen, the ACLU, the Vermont federation of labor, and a committee of Barre businessmen,” he insisted.

Whatever the reason, the Guard’s arrival created easier access for strikebreakers. Soon most quarries were back to business as usual. The workers had been demanding union recognition in the open shop quarries, but the presence of the Guard, combined with the action of the Granite Cutters union, left many people high and dry.

Members of both unions returned to work on June 1 and agreed to 1932 wages. But the hearings dragged on until August and many lost their jobs. Two of the three quarries now had open shops. One of the only compensations was that the federal government began to clean up the sheds. Suction machines designed to remove silica dust were in use before the end of the decade.

French Canadian workers played a role in this and other strikes, often as scab labor. They had been coming to the state for mill jobs since the Canadian rebellion of 1837, when reformers rejected the political repression of Britain’s parliament. Vermont also provided better farming prospects, and a chance to work in lumbering or on railroad crews. Often called the “Chinese of the Eastern States,” these immigrants worked cheap and asked few questions. But their exploitation as strikebreakers hurt their relations with the Irish.

When mills began to close in the 1930s, many Canadians turned to farming in Franklin, Orleans and Essex Counties at the state’s northern end. Others stayed in the Burlington area but avoided union work. By then the church in Quebec had declared unions atheistic.

History’s long march rarely moves in a straight line.

Epilog: My Socialist Family Ties

THE ROMANS MAY have been the first rulers to exploit southern Italy, their behavior so brutal that it eventually sparked the revolt of Spartacus. But some believe the darkest period may be the 200-year rule of the Spanish dynasty, which subjected the Mezzogiorno to a long series of predatory feudal barons and viceroys. Officially, feudalism ended in 1806, but its passing also meant that peasants could no longer turn to a wealthy overlord for aid. They were on their own.

Over the next decades, absentee landlords gained in influence, allowing gross inequities and draconian contracts that exploited most peasants. Some became outlaws and thieves. As a result, when southerners resisted landlord abuse or complained to the government, they were called barbarians and savages. But artisans and storekeepers were often respected across class lines. Each trade had its own mastri and apprentices. They were more likely to take advantage of educational opportunities, and also among the earliest to join the exodus to America.

Born on April 17, 1891 in the small Calabrian mountain town of Parenti, Bruno Lupia was the oldest of three brothers and, in 1902, the first of my family to emigrate to the United States. His parents, Michelina Cardamone and Joseph Lupia, had three other children: Lorenzo, Luciano, and Rosa. Lorenzo came to the US a decade later as a teenager, possibly to apprentice with his brother. Luciano followed in 1921. Both of them returned to Italy, however. According to my mother, the former “got into trouble” for his politics and the latter failed in a restaurant business.

There was obviously much more to this story. After all, grandpa Bruno became a clothing manufacturer and philanthropist, influential enough to merit an audience with President Truman. And Lorenzo ultimately became mayor of his hometown. Not bad for a troublemaker.

Whatever the reasons, evidence suggests that Lorenzo had returned to Calabria by 1919, early enough to fight for Italy in World War I. After the war, he became (or remained) a hard-line Socialist, a “maximalist” who wanted a full-throated social revolution. By 1923, he was criticizing political faddism and the rise of fascism.

“People wake up anarchist in the morning, have a stroll, and become socialist,” he wrote in an article, “at noon comes De Cardona (a political priest), and we all are Popular; in the afternoon, after some drinks, from populist to ’Democratic-Liberal,’ then’fighters’; at night we all dress in black shirts and we are fascist. Without ceremonies!”

Three years later, after a summary trial in November 1926, Lorenzo was “confined” to internal exile. His crime: As secretary of a “dissolved” section of the Socialist Party, he had conducted “active propaganda” throughout the district of Rogliano, defending peasants and challenging fascists. In other words, he was an organizer. But he was also part of the early anti-fascist resistance, and a new decree on public safety, following several attempts to assassinate Mussolini, had increased surveillance, clamped down on dissent, and established a system of “forced residence” (confino).

Once his appeal was dismissed, Lorenzo was sent to Lipari, an island where pigs still cleaned up rubbish in the streets and locals viewed the political prisoners sent there as a pampered “species of nabob.” On the other hand, he also met Carlo Rosselli and Emilio Lussu, democratic organizers and returned soldiers, and Francesco Fausto Nitti, nephew of the deposed prime minister.

When he returned from exile, rather than being intimidated by the time he had spent in prison, Lorenzo continued the struggle for social justice and freedom that characterized his life. As head of the local peasants and laborers organization, he helped to liberate land from the remmaining baronies and fought “agrarian reform” that was being used against peasants and in favor of landowners. He “actively fought fascism with all his might and with the means at his disposal,” one local history noted.

In the first free elections after the fall of the fascist regime, uncle Lorenzo was elected Mayor in 1945, a position he held for the next thirty years, supervising community affairs with rigor, prudence and democratic principles. Unfortunately, due to a political split in the family, we never had the opportunity to meet.

— source