Archive for May, 2009


Hidden and Sanitized

Looking at Torture

By DIANE CHRISTIAN

We torture modernly in secret—in prisons, covert locations, other countries. At the same time our movies and television are full of violent images of mangling bodies and brutal interrogations. But the film and tv images belie reality and permanent damage. When James Bond was beaten mercilessly in the testicles he survived to soon woo his betrayer. We think we know what torture is like, but in fact we don’t look at it. The infamous Abu Ghraib photos were sanitized and often posed. The documentary tapes of actual torture and interrogation were destroyed or censored.

Former Vice President Cheney rejects the word ‘torture’ but extols ‘enhanced interrogation techniques,’ and sneers at shrinking from them. To him the end of security justifies violent means. President Obama opposes torture as unlawful and immoral and not useful he but has ordered torture photos suppressed for national security reasons. He says he must protect our troops against the anger and violence the photos might incite. Though on opposite sides about the use of torture, both leaders cite war as a justifying reason. For Cheney war licenses torture; for Obama war requires concealment of torture.

This is logical as war is the usual and radical rationalization of torture. In war’s shadow torture even seems restrained. I do not destroy you because I think you a danger, I just hurt you until you submit to my superior right to live, until you give me what I want from you.

The ticking bomb scenario popularized in the tv series “24” and rationalized legally by Alan Dershowitz argues that to save many you can, even should, torture a few. Basically this is the economy and danger of war. We destroy the enemy who wants to destroy us. It’s us or them. Torture exists in a dangerous present tense. It is poised in pain. The images are not of dead bodies (as in the mass graves, heads, hair, fillings, and skin lamps of Nazi footage) but of breathing bodies on the edge of death or terrible mutilation or hurt. Bodily vulnerabilities have always fueled fantasy—branding, flaying, sexual harm. Literature and movies approach, evoke, explore, and give catharsis about our bodies’ frailties. They are part of our imaginative human repertoire and as familiar as our fears. Imaginatively torture is in our consciousness. It is explicit in religious images of hell, which like the movies are artistic, imagined. They are not real, involving specific living people.

Many people see the tortured Christ as an emblem of human suffering. He is whipped, beaten, mocked, degraded, punctured, speared and nailed to a cross. His torturers carry out orders as he remains noble and forgiving. His drama is called ‘the passion,’ meaning the suffering story he enacts, as in Mel Gibson’s The Passion of the Christ. What distinguishes that film from Braveheart is not the thorns, but the character of Christ who really survives the movie torment of torture and death for believers. Christians often divide over whether to emulate the non-violent submissive Christ who reveals the violence of others by suffering it, or a resurrected Christ who returns with punitive judgment. In Michelangelo’s Last Judgment Christ has his right arm raised as if to smite rather than beckon to the reward for kindness to fellow men.

Torture invokes not only the sense of bodily pain and danger of death but large tropes about power. From spanking to eternal smiting the infliction of pain for a purpose triggers human fear and caution and debate.

Against movie histrionics and hysteria many professional interrogators argue that torture doesn’t work and instead foments war fury. That is why Obama wants the photographs hidden. People say that the US used to be known as decent to its prisoners of war. Many world citizens see us now as guilty of war crimes, violators of the Geneva Conventions, callously inured to our right to rule and dominate. The photographs document that charge.

Rumsfeld called the Abu Ghraib photos “radioactive” and deplored their publication. His labeling spun them as the danger, not the story they told. That story, the administration said, was of a few depraved people doing despicable acts, not our story. Cheney repeats the chant. But it is harder to spin razored and mutilated bodies than stories or fear. We should look at torture. And we should confront the images that document its reality rather than hide the faces in fictions that they don’t exist. And we should expose as well the ugly sire of torture, war.

Diane Christian is SUNY Distinguished Teaching Professor at University at Buffalo and author of the new book Blood Sacrifice. She can be reached at: engdc@acsu.buffalo.edu

Two Funerals and a Wedding

By NIRANJAN RAMAKRISHNAN

There were three significant happenings this week up and down the vertical axis of the Indian Subcontinent.

Up in the North, Pakistani troops battled the Taliban in Swat. As the week closed they had just begun the battle for Mingora, the capital town of the picturesque vale.

Meanwhile down South on a coastal strip along the Indian Ocean, the Sri Lankan Army was concluding what is being called Eelam War IV, the final chapter ending in the elimination of the Liberation Tigers of Tamil Eelam (LTTE), and the killing of its legendary chief, Prabhakaran. It marked the end of a government military operation that matched the LTTE’s own ruthlessness and savagery.

In the middle was India, electing its 15th parliament, fifty seven years since its first. The Congress party, which governed the last five years in a tenuous coalition, was returned to power with increased numbers, while its opponents on the nominal right and left were both shorn of seats.

It was Winston Churchill who remarked that the United States could usually be relied upon to do the right thing… after having tried everything else. The same remark might apply to Pakistan with this alteration, “after having secured promises of billions in additional aid”. Following several months of dilly-dallying — even an accommodation with the Taliban — essentially letting the outlaws run the judicial system in Swat, Pakistan finally moved. Whether nudged by world outrage at the YouTube video of a young lady in Swat being publicly whipped by Taliban goons, or whether as a result of the latest administration of the ancient American patent medicine for Pakistan (one part threat, four parts blandishment) the army appeared to shake off its post-Waziristan funk and move with dispatch and determination against the insurgents. Like the military operations in Sri Lanka, this has resulted in large numbers of refugees (1.4 million per one report) fleeing their homes to escape the fighting. The devastation of the fight for Mingora is yet to come. And there is something unseemly against an army being used against one’s own population, a fact likely to stick in many craws in the months and years to come. But as with Indira Gandhi and Bhindranwale, sometimes the biggest punishment is simply having to eat one’s own cooking.

Widespread celebration all over Sri Lanka greeted the Sri Lankan president’s announcement that the LTTE had been crushed, and that peace had returned to the island paradise (incidentally, the word ‘serendipity’ comes from an old name for Sri Lanka). The civil war there has continued for nearly 30 years. Lincoln concluded his in four. But that is as far as the analogy may be pushed. Compared to the complexities of the Lankan problem, the American Civil war was a piffle. Tamils, though a minority, make up over 25% of the population. They were for long part of the establishment until they were purged by the Sinhalese. Unlike blacks in the US, Tamils have inhabited Sri Lanka for over a millennium, some say even longer than the Sinhalese. And unlike the overt crime of slavery, in the US, Tamils in Sri Lanka have for fifty years been subject to a below-the-radar apartheid, punctuated by pogroms connived at by the Sinhalese establishment. The LTTE was a reaction to this, in the end an overreaction. But if the Tamil’s status in Sri Lanka is at all recognized widely and on its way to being addressed, Prabhakaran for all his crimes and follies deserves a due measure of credit. It is trite to invoke Lincoln’s words about binding the wounds, but it is no less true for that.

Like Sherlock Holmes’ curious incident of the dog in the night, the Indian elections were remarkable for what did not happen.

But first a brief stop to take in the enormity of what did happen. According to Australian Broadcasting Corp., over 700 million people cast their ballots. Even if that figure is off by 50% that is still more than the entire population of any country other than India or China! The exercise took over a month, with few allegations of malpractice or fraud; the results were known the same day as counting began and generally accepted as valid. The biggest festival in the world of representative democracy took place once more, a resounding success.

Now to what did not happen. The Indian people refused to fall for the bogeyman of terrorism, scoffing at the vote for me and I’ll keep you safe meme. They had every opportunity to do so. The first national elections in the US after 9-11 took place over three years later; the elections in India were barely six months after the Bombay (Mumbai) massacres, with memories far more raw. While the twin tower collapses were a 10-second blip, the confrontation in Bombay was elaborate, shown in real time for over three days. Unlike the impersonal sight of planes crashing into buildings, here there were gun-toting terrorists systematically combing for victims, while being shown in photo and reel. And unlike the Kerry campaign which refused to challenge the Bush administration on its abject failure on 9-11, the opposition BJP in India made the Bombay carnage in particular and ‘security’ in general a central plank of its platform. It ran an openly communal campaign, including a prominent candidate implying he would slash the arms of muslims. The Congress Party paid to use the popular theme song from Slumdog Millionaire, Jai Ho (May we be Victorious). The BJP, the wags said, countered with the slogan Bhai Ho (Let there be Fear). For all its shrillness its position in Parliament slid from 138 in the previous assembly to 116 in the new one. Even in Bombay itself, where the Taj Mahal Hotel burned for days, the Congress swept the BJP, winning all six seats!

But let us not forget something else that did not happen. There was no let up from the neo-liberalism that has bewitched Indian political parties from the communists to the ultra-right for nearly two decades. Whether the Congress or the BJP is in power makes little difference in this department; indeed big business in India and abroad have found both parties quite adequate thank you, and ‘liberalization’ has proceeded apace under either.

The fate of the Left parties was perhaps the most pitiable. As some analysts have observed, it was they, during their earlier presence in the ruling coalition, who saved it from rushing to throw banking and insurance wide open to international finance. This ‘tardiness’ served to protect Indians from the full buffet (no pun intended) of the global financial meltdown. But by this time the Left had long left the treasury benches, having parted company with the Congress last summer on the issue of the Indo-US nuclear deal. Public memory being short, the Left was hard put to gain any mileage from its contribution in preventing a disaster that did not happen. So too was the case with an innovative rural unemployment program where a large investment was made directly to the village poor. The Congress thus gained from implementing the Left’s agenda, while the Left itself was left behind. There is a pithy Telugu saying which captures its predicament to perfection, but unfit to print, sadly.

The euphoria of the elections is over, and India’s problems loom as large as ever — a growing gap between rich and poor, an unceasing pageant of farmer suicides, poverty and malnutrition and slums, a simultaneous hardening of the urban heart. And oh, did we mention the Naxal Swat(h) — the tribal belt which spans the states of Jharkhand, Orissa, Chattisgarh and Andhra? Here, as the Newsweek correspondent Sudip Mazumdar wrote recently, the writ of the government is zero to non-existent, where kidnappings (Mazumdar’s own brother-in-law was seized) and mutilations are as prevalent as in Swat — only not in the name of religion but in the brisk business of extortion. Add that old reliable, Kashmir, throw in the North East, and recall the report that some 150 of the newly elected MP’s have some criminal connection and you can see why Indians have before them a full plate, of problems if not food.

Still, India’s well-wishers have something to cherish and celebrate in the wonder that is Indian democracy, even while intoning “there but for the grace of God…” as they look around the neighborhood. The grace of God? Perhaps… But that of Mahatma Gandhi and Jawaharlal Nehru? Without a doubt.

Niranjan Ramakrishnan is a writer living in the West Coast. He may be reached at njn_2003@yahoo.com.


By ALEXANDER COCKBURN

How long does it take a mild-mannered, antiwar, black professor of constitutional law, trained as a community organizer on the South Side of Chicago, to become an enthusiastic sponsor of targeted assassinations, “decapitation” strategies and remote-control bombing of mud houses the far end of the globe?

There’s nothing surprising here. As far back as President Woodrow Wilson in the early twentieth century, American liberalism has been swift to flex imperial muscle, to whistle up the Marines. High explosive has always been in the hormone shot.

The nearest parallel to Obama in eager deference to the bloodthirsty counsels of his counter-insurgency advisors is John F. Kennedy. It is not surprising that bright young presidents relish quick-fix, “outside the box” scenarios for victory.

Whether in Vietnam or Afghanistan the counsels of regular Army generals tends to be drear and unappetizing: vast, costly deployments of troops by the hundreds of thousand, mounting casualties, uncertain prospects for any long-term success – all adding up to dismaying political costs on the home front.

Amid Camelot’s dawn in 1961, Kennedy swiftly bent an ear to the counsels of men like Ed Lansdale, a special ops man who wore rakishly the halo of victory over the Communist guerillas in the Philippines and who promised results in Vietnam.

By the time he himself had become the victim of Lee Harvey Oswald’s “decapitation” strategy, brought to successful conclusion in Dealey Plaza, Dallas, on November 22, 1963, Kennedy had set in motion the counter-insurgency operations, complete with programs of assassination and torture, that turned South-East Asia and Latin America into charnel houses, some of them, like Colombia, to this day.

Another Democrat who strode into the White House with the word “peace” springing from his lips was Jimmy Carter. It was he who first decreed that “freedom” and the war of terror required a $3.5 billion investment in a secret CIA-led war in Afghanistan, plus the deployment of Argentinian torturers to advise US military teams in counter-insurgency ops in El Salvador and Nicaragua.

(Though no US president can spend more than a few moments in the Oval Office scanning his in-tray the morning after the inaugural ceremonies without okaying the spilling of blood somewhere on the planet, it has to be said that Bill Clinton did display some momentary distaste before settling comfortably into the killer’s role. “Do we have to do this?” he muttered, as his national security team said that imperial dignity required cruise missile bombardment of Baghdad in 1991 in retaliation for a foiled attack on former President G.H.W. Bush, during a visit to Kuwait. The misisiles landed in a suburb, one of them killing the artist Laila al-Attar.)

Obama campaigned on a pledge to “decapitate” al-Qaida, meaning the assassination of its leaders. It was his short-hand way of advertising that he had the right stuff. And, like Kennedy, he’s summoning the exponents of unconventional, short-cut paths to success in that mission. Lt. Gen. Stanley A. McChrystal now replaces General David McKiernan as Commander of US Forces in Afghanistan. McChrystal’s expertise is precisely in assassination and “decapitation”. As commander of the military’s Joint Special Operations Command (JSOC) for nearly five years starting in 2003, McChrystal was in charge of death squad ops, with its best advertised success being the killing of Abu Musab al-Zarqawi, head of al-Qaida in Iraq.

The phrase “sophisticated networks” tends to crop up in assessments of McChrystal’s Iraq years. Actually there’s nothing fresh or sophisticated in what he did. Programs of targeted assassination aren’t new in counter-insurgency. The most infamous and best known was the Phoenix Program in Vietnam, designed to identify and eliminate cadres of Vietnam’s “National Liberation Front”, informally known as the Viet Cong of whom, on some estimates, at least 40,000 were duly assassinated.

In such enterprises two outcomes are inevitable. Identification of the human targets requires either voluntary informants or captives. In the latter instance kidnapping (ie extrajudicial seizure of “enemy combatants”) and then torture are certain, whatever rhetorical pledges are proclaimed back home. There may be intelligence officers who will rely on patient, non-violent interrogation, as the US officer, Major Matthew Alexander, who elicited the whereabouts of al-Zarquawi told Patrick Cockburn on this site that he did. There will be others, US personnel who will either personally reach for the garden hose and the face towel, or delegate the task to the local talent. It has been thus, without remit, through the entire course of Empire. Not so long ago CounterPuncher Prof. Bruce Jackson of SUNY, Buffalo, sent us an illustration from the May 22, 1902 issue of the original (pre-Hearst) Life. The only military action the US had going at the time was in the Philippines, where Pershing was fighting the Moros — Muslims who wanted independence from US rule. A pipe-smoking GI pours water into a funnel held in the mouth of a barefoot prisoner by another GI, who sits on the prisoner’s genitals and points a pistol at his throat.

McChrystal, not coincidentally, was involved in the prisoner abuse scandal at Baghdad’s Camp Nama. (He also played a sordid role in the cover-up in the friendly-fire death of ex-NFL star and Army Ranger Pat Tillman.)

Whatever the technique, a second certainty is the killing of large numbers of civilians in the final “targeted assassination”. At one point in the first war on Saddam in the early 1990s, a huge component of US air sorties was devoted each day to bombing places where US intelligence had concluded Saddam might be hiding. Time after time, after the mangled bodies of men, women and children had been scrutinized, came the crestfallen tidings that Saddam was not among them.

Already in Afghanistan public opinion has been inflamed by the weekly bulletins of deadly bombardments either by drones or manned bombers. Still in the headlines is the US bombardment of Bola Boluk in Farah province, which yielded 140 dead villagers torn apart by high explosive including 93 children. Only 22 were male and over 18. Perhaps “sophisticated intelligence” had identified one of these as an al-Qaida man, or a Taliban captain, or maybe someone an Afghan informant to the US military just didn’t care for. Maybe electronic eavesdropping simply screwed up the coordinates. If we ever know, it won’t be for a very long time. Obama has managed a terse apology, even as he installs McChrystal, thus ensuring more of the same.

The logic of targeted assassinations was on display in Gaza even as Obama worked on the uplifting phrases of his Inaugural Address. The Israelis claimed they were targeting only Hamas even as the body counts of women and children methodically refuted these claims and finally extorted from Obama a terse phrase of regret.

He may soon weary of uttering them. His course is set and his presidency already permanently stained the ever-familiar blood-red tint. There’s no short-cut, no “nicer path” in counter-insurgency and the policing of Empire. A targeted bombing yields up Bola Boluk, and the incandescent enmity of most Afghans. The war on al Qaida mutates into war on the Taliban, and 850,000 refugees in the Swat Valley in Pakistan. The mild-mannered professor is bidding to be as sure-footed as Bush and Cheney in trampling on constitutional rights. He’s now backing into pledges to shut down the kangaroo courts (“military commissions”) by which means the US have held prisoners at Guantanamo who’ve never even been formally charged with a crime! He’s threatening to hold some prisoners indefinitely in the U.S. without trial. He’s been awarded a hearty editorial clap on the back from the Wall Street Journal:

“Mr. Obama deserves credit for accepting that civilians courts are largely unsuited for the realities of the war on terror. He has now decided to preserve a tribunal process that will be identical in every material way to the one favored by Dick Cheney.”

It didn’t take long. But it’s what we’ve got – for the rest of Obama-time.

The Landscapes Meat Made

From the fourteenth and fifteenth centuries—when reliable records began to be kept—to the mid nineteenth century, the European diet varied little. Grains took up about 90 per cent of a family’s food budget: rye, buckwheat, oats, barley, maize. From the moments that the victuallers and provisioners in the Napoleonic wars pioneered the organization of the mass-production line and also modern methods of food preservation, the stage was set for the annihilation of both time and space in matters of food consumption. The vast cattle herds that began to graze the pastures of the western United States, Australia and Argentina signalled the change.

David Hamilton Wright, a biologist at the University of Georgia, once wrote that ‘an alien ecologist observing. . .earth might conclude that cattle is the dominant species in our biosphere.’ The modern livestock economy and the passion for meat have radically altered the look of the planet. Today, across huge swaths of the globe, from Australia to the western plains of the United States, one sees the conquest landscapes of the European mass-meat producers and their herds of ungulates. Because of romantic ideas of ‘timeless landscapes’ it is hard to grasp the rapidity of this process, with spans as short as thirty-five years between the irruption of a herd onto virgin terrain, over-grazing, soil erosion, crash and eventual stabilization, with the plant communities finally levelling out, though reduced in richness and variety, and the land altered forever.

As Mexico reels from the swine flu panic, there’s angry talk of the disastrous impact on that country of North American methods of intensive livestock production. The initial swine flu deaths came near the huge pig factories in the state of Veracruz, owned by Granjas Carroll, a subsidiary of Smithfield Farms, centered in North Carolina and now expanding into Eastern Europe. Intensive pork production in North Carolina in the 1990s sponsored the emergence of the H1N1 swine flu virus in 1998, the year North Carolina’s pig population hit ten million, up from two million just six years earlier, achieved by cramming 25 times more pigs into each factory, each one a stinking nightmare to the people living nearby.

In our latest newsletter I visit the world that intensive livestock raising has made, from the Valle in Mexico destroyed by Spanish sheep ranching in the 16th century, to the trashed landscapes of Texas and California today. In the same brilliant issue Steven Higgs probes the safety of nanotechnologies. Moms, hold that nano-toy, and that nano make-up! And Senator Jim Abourezk looks back on the occupation of Wounded Knee, and the role he played.

The Latest in Junk Economics

The Toll Booth Economy

By MICHAEL HUDSON

It looks like bookstores are about to be swamped this summer and fall by advisories which publishers commissioned a year ago, as the economy was going off the rails. The preferred marketing strategy is to offer advice by celebrity insiders on how to restore the happy 1981-2007 era of debt-leveraged price gains for real estate, stocks and bonds. But the Bubble Economy was so debt-leveraged that it cannot reasonably be restored.

For the time being we are being fed Wall Street defenses of the Bush-Obama (that is, Paulson-Geithner) attempt to re-inflate the bubble by a bailout giveaway that has tripled America’s national debt in the hope of getting bank credit (that is, more debt) growing again. The problem is that debt leveraging is what caused our economic collapse. A third of U.S. real estate is now estimated to be in negative equity, with foreclosure rates still rising.

In the face of this stultifying financial trend, the book-buying public is being fed appetizers pretending that economic recovery simply requires more “incentives” (special tax breaks for the rich) to encourage more “saving,” as if savings automatically finance new capital investment and hiring rather than what really happens: money lent out to create yet more debt owed by the bottom 90 percent to the economy’s top 10 percent.

After blaming Alan Greenspan for playing the role of “useful idiot” by promoting deregulation and blocking prosecution of financial fraud, most writers trot out the approved panaceas: federal regulation of derivatives (or even banning them altogether), a Tobin tax on securities transactions, closure of offshore banking centers and ending their tax-avoidance stratagems. No one presumes to go to the root of the financial problem by removing the general tax deductibility of interest that has subsidized debt leveraging, by taxing “capital” gains at the same rate as wages and profits, or by closing the notorious tax loopholes for the finance, insurance and real estate (FIRE) sectors.

Right-wing publishers recycycle the usual panaceas such as giving more tax incentives to “savers” (another euphemism for more giveaways to high finance) and a re-balanced federal budget to avoid “crowding out” private finance. Wall Street’s dream is to privatize Social Security to create yet a new bubble. Fortunately, such proposals failed during the Republican-controlled Bush administration as a result of a reality check in the form of taxpayer outrage after the dot.com bubble burst in 2000.

There’s no call to finance Social Security and Medicare out of the general budget instead of keeping their funding as a special regressive tax on labor and its employers, available for plunder by Congress to finance tax cuts for the upper wealth brackets. Yet how can America achieve industrial competitiveness in global markets with this pre-saving retirement tax and privatized health insurance, debt-leveraged housing costs and related personal and corporate debt overhead? The rest of the world provides much lower-cost housing, health care and related costs of employee budgets – or simply keeps labor near subsistence levels. This is a major problem with today’s dreams of a renewed Bubble Economy. They leave out the international dimension.

And of course there are the familiar calls to rebuild America’s depleted infrastructure. Alas, Wall Street plans to do this Tony Blair-style, by public-private partnerships that incorporate enormous flows of interest payments into the price structure while providing underwriting and management fees to Wall Street. Falling employment and property prices have squeezed public finances so that new infrastructure investment will take the form of installing privatized tollbooths over the economy’s most critical access points such as roads and other hitherto public transportation, communications and clean water.

There are no calls to restore state and local property taxes to their Progressive Era levels so as to collect the “free lunch” of land rent and use its gains over time as the main fiscal base. This would hold down land prices (and hence, mortgage debt) by preventing rising location values from being capitalized and paid out as interest to the banks. It would have the additional advantage of shifting the fiscal burden off income and sales (a policy that raises the price of labor, goods and services). Instead, most reforms today call for further cutting property taxes to promote more “wealth creation” in the form of higher debt-leveraged property price inflation. The idea is to leave more rental income to be capitalized into yet larger mortgages and paid out as interest to the financial sector. Instead of housing prices falling and income and sales taxes being reduced, rising site values merely will be paid to the banks, not to the local tax authorities. The latter are forced to shift the fiscal burden onto consumers and business.

There are, in this current crop of books, the usual pro forma calls to re-industrialize America, but not to address the financial debt dynamic that has undercut industrial capitalism in this country and abroad. How will these timid “reforms” look in retrospect a decade from now? The Bush-Obama bailout pretends that banks “too-big-to-fail” only face a liquidity problem, not a bad debt problem in the face of the economy’s widening inability to pay. The reason why past bubbles cannot be restored is that they have reached their debt limit, not only domestically, but also the international political limit of global Dollar Hegemony.

What don’t these books address? Everything economics really is all about: the debt overhead; financial fraud and crime in general (one of the economy’s highest-paying sectors); military spending (a key to the U.S. balance-of-payments deficit and hence to the buildup of central bank dollar reserves throughout the world); the proliferation of unearned income and insider political dealing. These are the core phenomena that “free market” choristers have relegated to the “institutionalist” basement of the academic economics curriculum.

For example, the press keeps on parroting the Washington line that Asians “save” too much, causing them to lend their money to America. But the “Asians” saving these dollars are the central banks. Individuals and companies save in yuan and yen, not dollars. It is not these domestic savings that China and Japan have placed in U.S. Treasury securities to the tune of $3 trillion. It is America’s own spending – the trillions of dollars its payments deficit is pumping abroad, in excess of foreign demand for U.S. exports and purchases of U.S. companies, stocks and real estate. This payments deficit is not the result of U.S. consumers maxing out on their credit cards. What is being downplayed is the military spending that has underlain the U.S. balance-of-payments deficit ever since the Korean War. It is a trend that cannot continue much longer, now that foreign countries are starting to push back.

Inasmuch as China’s central bank is now the largest holder of U.S. government and other dollar securities, it has become the main subsidizer of the U.S. payments deficit – and also the domestic U.S. federal budget deficit. Half of the federal budget’s discretionary spending is military in character. This places China in the uncomfortable position of being the largest financier of U.S. military adventurism, including U.S. attempts to encircle China and Russia militarily to block their development as rivals over the past fifty years. That is not what China intended, but it is the effect of global dollar hegemony.

Another trend that cannot continue is “the miracle of compound interest.” It is called a “miracle” because it seems too good to be true, and it is – it cannot really go on for long. Heavily leveraged debts go bad in the end, because they accrue interest charges faster than the economy’s ability to pay. Basing national policy on dreams of paying the interest by borrowing money against steadily inflated asset prices has been a nightmare for homebuyers and consumers, as well as for companies targeted by financial raiders who use debt leverage to strip assets for themselves. This policy is now being applied to public infrastructure into the hands of absentee owners, who will build interest charges into the new service prices they charge, and be allowed to treat these charges as a tax-deductible expense. Banking lobbyists have shaped the tax system in a way that steers new absentee investment into debt rather than equity financing.

The cheerleaders applauding a bubble economy as “wealth creation” (to use one of Alan Greenspan’s favorite phrases) would like us, their audience, to believe that they knew that there was a problem all along, but simply could not restrain the economy’s “irrational exuberance” and “animal spirits.” The idea is to blame the victims – homeowners forced into debt to afford access to housing, pension-fund savers forced to consign their wage set-asides to money managers for the large Wall Street firms, and companies seeking to stave off corporate raiders by taking “poison pills” in the form of debts large enough to block their being taken over. One looks in vain for an honest acknowledgement of how the financial sector turned into a Mafia-style gang more akin to post-Soviet kleptocrat insiders than to Schumpeterian innovators.

The post-bubble tomes assumes that we have reached “the end of history” as far as big problems are concerned. What is missing is a critique of the big picture – how Wall Street has financialized the public domain to inaugurate a neo-feudal tollbooth economy while privatizing the government itself, headed by the Treasury and Federal Reserve. Left untouched is the story how industrial capitalism has succumbed to an insatiable and unsustainable finance capitalism, whose newest “final stage” seems to be a zero-sum game of casino capitalism based on derivative swaps and kindred hedge fund gambling innovations.

What have been lost are the Progressive Era’s two great reforms. First, minimizing the economy’s free lunch of unearned income (e.g., monopolistic privilege and privatization of the public domain in contrast to one’s own labor and enterprise) by taxing absentee property rent and asset-price (“capital”) gains, by keeping natural monopolies in the public domain, and by anti-trust regulation. The aim of progressive economic justice was to prevent exploitation – e.g., charging more than the technologically necessary costs of production and reasonable profits warranted. This aim had a fortuitous byproduct that made the Progressive Era reforms seem likely to conquer the world in a Darwinian evolutionary manner: Minimization of the free lunch of unearned income enabled economies such as the United States to out-compete others that didn’t enact progressive fiscal and financial policy.

A second Progressive Era aim was to steer the financial sector so as to fund capital formation. Industrial credit was best achieved in Germany and Central Europe in the decades prior to World War I. But the Allied victory led to the dominance of Anglo-American banking practice, based on loans against property or income streams already in place. Today’s bank credit has become decoupled from capital formation, taking the form mainly of mortgage credit (80 per cent), and loans secured by corporate stock (for mergers, acquisitions and corporate raids) as well as for speculation. The effect is to spur asset-price inflation on credit, in ways that benefit the few at the expense of the economy at large.

The problem of debt-leveraged asset-price inflation is clearest in the post-Soviet “Baltic syndrome,” to which Britain’s economy is now succumbing. Debts are run up in foreign currency (real estate mortgages in the Baltics, tax-avoidance funds and flight capital in Britain), without exports having any prospect of covering their carrying charges, as far as the eye can see. The result is a debt trap – chronic austerity for the domestic market, causing lower capital investment and living standards, without hope of recovery.

These problems illustrate the extent to which the world economy as a whole has pursued the wrong course since World War I. This long detour has been facilitated by the failure of socialism to provide a viable alternative. Although Russia’s bureaucratic Stalinism got rid of the post-feudal free lunch of land rent, monopoly rent, interest and financial or property-price gains, its bureaucratic overhead overpowered the economy in the end. Russia fell. The question is whether the Anglo-American brand of finance capitalism will follow suit from its own internal contradictions.

The flaws in the U.S. economy so intractable, embedded as they are in the very core of post-feudal Western economies. This is what Greek tragedy is about: a tragic flaw that dooms the hero. The main flaw embedded in our own economy is rising debt in excess of the ability to pay is part of a larger flaw: the financial free lunch that property and financial claims extract in excess of a corresponding cost as measured in labor effort or an equitably shared tax burden (the classical theory of economic rent). Like land seizure and insider privatization deals, such wealth increasingly can be inherited, stolen or obtained by political corruption. Wealth and revenue extracted via today’s finance capitalism avoids taxation, thereby receiving an actual fiscal subsidy as compared to tangible industrial investment and operating profit. Yet academics and the popular media treat these core flaws as “exogenous,” that is, outside the realm of economics analysis.

Unfortunately for us – and for reformers trying to rescue our post-bubble economy – the history of economic thought has been rewritten in infantile caricature, to give an impression that today’s stripped-down, largely trivialized junk economics is the apex of Western social history. One would not realize from the present discussion that for the past few centuries a different canon of logic existed. Classical economists distinguished between earned income (wages and profits) and unearned income (land rent, monopoly rent and interest). The effect was to distinguish between wealth earned through capital and enterprise that reflects labor effort, and unearned wealth stemming from appropriation of land and other natural resources, monopoly privileges (including banking and money management) and inflationary asset-price “capital” gains. But even the Progressive Era did not go much beyond seeking to purify industrial capitalism from the carry-overs of feudalism: land rent and monopoly rent stemming from military conquest, and financial exploitation by banks and (in America) Wall Street as the “mother of trusts.”

What makes the latest bubble different from previous ones is that instead of being organized by governments as a stratagem to dispose of their public debt by creating or privatizing monopolies to sell off for payment in government bonds, the United States and other nations today are going deeply into debt simply to pay bankers for bad loans. The economy is being sacrificed to reward finance, instead of finance subordinating and channeling finance to promote economic growth and lower the economy-wide cost structure to remain viable. Interest-bearing debt is weighing down the economy and causing debt deflation by diverting saving into debt payments instead of capital investment. Under this condition “saving” is not the solution to today’s economic shrinkage; it is part of the problem. In contrast to the personal hoarding of Keynes’s day, the problem is the financial sector’s extractive power as creditor instead of clearing the slate by wiping out the economy’s bad-debt overhang in the historically normal way, by a wave of bankruptcy.

Today, the financial sector is translating its affluence (at taxpayer expense), into the political power to pry yet more public infrastructure away from state and local communities and from the public domain at the national level, Thatcher- and Blair-style as it is sold off to absentee buyers-on-credit to pay off public debt (while cutting taxes on wealth yet further). No one remembers the cry for what Keynes called “euthanasia of the rentier.” We have entered the most oppressive rentier epoch since feudal European times. Instead of providing basic infrastructure services at cost or subsidized rates to lower the national cost structure and thus make it more affordable – and internationally competitive – the economy is being turned into a collection of tollbooths Small wonder that this year’s transitory wave of post-bubble books fail to place the financialization of the U.S. and global economies in this long-term context.

Michael Hudson is a former Wall Street economist. A Distinguished Research Professor at University of Missouri, Kansas City (UMKC), he is the author of many books, including Super Imperialism: The Economic Strategy of American Empire (new ed., Pluto Press, 2002) He can be reached via his website, mh@michael-hudson.com