Category: Finance


Western Peoples Are Being Re-Enserfed

By Paul Craig Roberts

Following the collapse of the Western Roman Empire, free farmers were defenceless in the face of Viking, Magyar, and Saracen raiders. The need for protection led to the enserfment of free people who accepted the suzerainty of those able to provide walled defenses and armed fighters to ward off attacks. As time passed, the attacks ceased but the feudal arrangements persisted, and the system became exploitative.

Today jobs offshoring and the financialization of the economy are again enserfing the people, but the cause is debt, not armed invaders. Today’s rentier class, unlike the one that emerged from feudalism, has never provided any service in exchange for the debt peonage that it has imposed.

Below is an excerpt from the Introduction to the German edition of Michael Hudson’s book, Killing the Host to be published in November by Klett-Cotta:

Today’s reversal of progressive values is a historical transition point much like what occurred from the Roman Republic to Empire during the century of Social War, 133-29 BC. Rome’s debtors and plebs lost in a wave of political violence. It was by murder that the oligarchic party prevented the reforms of Tiberius Gracchus in Rome after 133 BC. Julius Caesar suffered a similar fate in 44 BC after moving to take the demos into his camp. Other politicians urging debt cancellation also were killed.

Rome survived not by prosperity at home but by looting foreign regions. Arminius made a brave stand to resist Rome in 9 AD in the Teutoburg forest. But by that time the die was cast. Over the next few centuries the oligarchs imposed debt bondage on a quarter of the population, plunging the imperial economy into serfdom.

Are we going down a similar road today, leading to debt peonage and war against countries daring to resist? As the modern Rome, the United States is backing creditor-oriented rules throughout its economic sphere. This book describes the cruel creditor rulings imposed on Argentina as setting legal precedent for holdouts and vulture funds to block any government from reaching agreement with bondholders to bring its debts in line with the ability to pay. The world’s debtor economies are to be treated as Germany was in the 1920s, or face being broken as Greece has been.

Western civilization stands at a turning point between creditor and debtor interests similar to that of Rome two thousand years ago – a clash over what kind of economic society will emerge for the rest of this century. Samuel Huntington coined the term “clash of civilizations” in 1992. But he was not referring to the West’s own internal financial war by today’s oligarchy to reverse the Enlightenment’s program to free industrial capitalism from post-feudal rent seeking and financialization.

Neoliberals depict today’s neo-rentier Counter-Enlightenment as the end of history, as if the conflict has been settled and there can be no revival of the classical struggle to make economies more equitable. That was Francis Fukuyama’s message in The End of History and the Last Man. Like Huntington’s essay it was published in 1992, in the wake of dissolution of the Soviet Union and its replacement by privatizers using shock therapy to destroy that nation’s industrial base. But in a February 1, 2012 interview with Der Spiegel, Fukuyama acknowledged that his paean to neoliberalism had been premature: “Obama had a big opportunity right at the middle of the crisis. That was around the time Newsweek carried the title: ‘We Are All Socialists Now.’ Obama’s team could have nationalized the banks and then sold them off piecemeal. But their whole view of what is possible and desirable is still very much shaped by the needs of these big banks.”

Europe is being asked to endorse the ECB supplying more liquidity to the banks, as if bank loans will finance new capital investment and employment, not deeper debt deflation. Voters are being asked to trust the trickle-down promise that privatizing the public domain will deliver infrastructure services more efficiently and at lower cost. The reality is that predatory tollbooth rents and interest charges will be factored into the prices that new monopolists set.

Such asset stripping and debt deflation can spread throughout the world only if no better alternative is seen. My aim in this book has been to outline such an alternative, based on the classical analytic tools and policy reform developed from the 17th through early 20th centuries to free economies from unearned rentier income and predatory finance.

A dream that history will work out for the best because of some natural selection of the most fair, productive and peaceful societies leaves out of account the threat posed by vested interests, capped by today’s financial oligarchy. Today’s debt deflation and austerity is not a survival of the technologically fittest mode of economic organization. It is a regressive rentier policy by post-feudal vested interests fighting to retain their special privileges and prevent themselves from being taxed and regulated.

The question is whether voters will let neoliberal managers concentrate power in the hands of the One Percent and treat debtors like Allied creditors treated Germany a century ago. Even worse, will they follow their Roman predecessors and drive their empire into a Dark Age?

It is a sign of the possible future that as the world’s leading financial and military power, the United States suffers from one of the most extreme concentrations of income and wealth. The One Percent have monopolized the gains that are reported, and these gains are not really an addition to national prosperity. They are a transfer of economic rent and interest – and property – from the 99 Percent to the top of the economic pyramid.

Today’s national income statistics do not label economic rent as such. A misleading intellectual map is drawn to distract attention from the actual dynamics at work. This book describes how high finance has politicized its power grab by using junk economics to depict the financial sector and its rent-extracting clients as “job creators,” not job destroyers. Using a rhetoric of “personal responsibility” to blame the victims for their indebtedness, its moral philosophy is that all debts must be paid, without regard for how this tears society apart.

There is an alternative. Achieving it requires understanding the dynamics at work and distinguishing between earned and unearned income, between productive and unproductive means of gaining wealth. That is the antidote to the neo-rentier power grab.

Western “Mainstream Media” Extremism: Distortion, Fabrication and Falsification

Global Econonomic Crisis: Catastroïka and the New Imperial Police State

With the collapse of the Communist countries in the 1990’s and their conversion to capitalism, followed by the advent of neo-liberal regimes throughout most of Latin America, Asia, Europe and North America, the imperial regimes in the US and EU have established a new political spectrum, in which the standards of acceptability narrowed and the definition of adversaries expanded.

Over the past quarter century, the US and EU turned their focus from systemic adversaries (anti-capitalist and anti-imperial states and movements) to attacking capitalist regimes, which

(1) had adopted nationalist, re-distributive and Keynesian policies;

(2) had opposed military interventions, coups and bases;

(3) had aligned with non-Western capitalist powers;

(4) had opposed Zionist colonization of Palestine and Gulf State-financed Islamist terrorists;

(5) and had refuse to follow the financial agendas dictated by Wall Street and the City of London investment houses, speculators and vulture funds.

The Western imperial regimes (by which we mean the US, Canada and the EU) have exercised their political, military, economic and propaganda powers to

(1) eliminate or limit the variety of capitalist options;

(2) control the kinds of market-state relations; and

(3) secure compliance through punitive military invasions, occupations and economic sanctions against targeted adversaries.

The ‘Media Troika’: the Financial Press and Political Warfare

The major financial newspapers of record in the United States have played a key role in disseminating the post-communist political line regarding what are acceptable capitalist policies: The Wall Street Journal, (WSJ), the New York Times (NYT), and the Financial Times (FT) – the ‘Troika’ – have systematically engaged in political warfare acting as virtual propaganda arms of the US and EU imperialist governments in their attempts to impose and/or maintain vassal state status on countries and economies, ‘regulated’ according to the needs of Western financial institutions.

The propaganda Troika not only reflects the interests and policies of the ruling elites, but their editors, journalists and commentators shape policies through their reportage, analyses and editorials.

The Troika’s methods of political operation and the substance of their policies preclude any kind of balanced reportage.

Day in and day out, the Troika (1) fabricates ‘crises’ for adversaries and illusory promises of ‘recovery’ for vassals; (2) distorts and/or omits favorable information regarding adversaries, dismissing targeted regimes as ‘authoritarian’ and ‘corrupt’. In contrast, obedient and submissive rulers are described as ‘pragmatic’ and ‘realist’. The Troika attributes ‘military threats’ and ‘aggressive behavior’ to adversaries engaged in defensive policies, while labeling vassal state invasions or aggression as justified, retaliatory or defensive.

A close reading of the reportage by the stable of Troika scribes over the past 2 years reveals the repeated use of vitriolic and highly charged terms in describing adversarial leaders. This prepares the reader for the one-sided, negative assessment of past, present and future policies adopted by the targeted regime.

Once the imperial states and the Troika decide on targeting a government and its leaders, all the subsequent ‘news’ is designed to present the motives of these leaders as ‘perfidious’ and the economic and social impact of their policies as ‘catastrophic’.

And whenever the ‘Troika’s’ analyses or predictions or prognostications turned out to be blatantly wrong – there are never corrections. Brazen lies are glossed over with nary a ripple in their smooth fabric of propaganda.

Once a government is designated as ‘enemy’ (ripe for ‘regime change’), the Troika recycles the same hostile messages almost daily. The readers, upon viewing Troika headlines, already know at least three quarters of the content of the ‘article’. A small portion of a report may refer tangentially to some particular event or policy decision for which the diatribe launched.

Working hand-in-hand with Western imperial regimes, the Troika targets the same regimes, using the exact same terms dished out by imperial policy spokesmen and women.

In this essay, we will discuss the main regimes and policies targeted by the Troika and its Western imperial state partners. We will then proceed to evaluate Troika facts, interpretations and their track record from the beginning of the onslaught to the present. We will conclude by examining the conversion of the mainstream ‘serious’ financial press into a triumvirate of tub-thumping warmongers.

The Troika’s Targeted Regimes: Trumpeting Their Sins and Denying Their Successes

The Troika’s propaganda war not only converges with the imperial states’ destabilization policies (‘regime change’) but also is aimed at specific policies and agreements among supposed allies, partners and even vassal states.

The intensity of vitriol and the frequency of hostile articles vary according to the level of conflict between the imperial regime and its target for ‘regime change’. The greater the conflict the more violent the language.

We find intense Troika hostility, in the form of frequent, hysterical attacks, directed against Russia, China, Venezuela, Argentina and Palestine. Even any suspected ‘deviations’by vassals, like Chile or Brazil, in the form of popular domestic social legislations, are subjected to stern scolding and warnings of dire consequences.

The Troika Maligns Russia

The Troika’s attacks vary to some degree with each target. In the case of Russia, theTroika routinely denounces President Vladimir Putin as an authoritarian ruler who has undermined Russian democracy. They claim Russia’s economy is in crisis and facing imminent collapse. They vilify Russia’s military assistance to the Syrian government of Bashar Assad. They question the viability of Russia’s military treaties and economic agreements with China. In sum, the Troika portrays Russia as a once peaceful, democratic law-abiding country (during the kleptocratic years of Boris Yeltsin in the 1990’s), which has been taken over by former secret KGB officials who have embarked on reckless overseas military adventures, while repressing their own ethnic Muslim populations (in Chechnya and Dagestan) and which is being run into the ground because of mismanagement and Western economic sanctions. They never bother to explain why the ‘authoritarian’ Putin maintains a consistently high citizen approval despite the Troika’s litany of evils…

Troika-Backed Ukrainian Puppet Secures 1% Approval:

In December 2013, US Assistant Secretary of State for European and Eurasian Affairs Victoria Nuland, the foul mouth diplomat, puppet dominatrix and austerity zealot, bragged that Washington had poured $5 billion dollars into Ukraine in order to pursue ‘regime change‘and install a puppet regime headed by President Petro Poroshenko and Prime Minister (‘Our Man Yats’) Arseniy Yatsenyuk as Prime Minister. Obedient to his Western sponsors and theTroika, Yatsenyuk proceeded to sign off on an IMF bailout and austerity program slashing salaries and pensions of Ukrainian citizens by half, reducing GNP by 25%, ending fuel and food subsidies and tripling unemployment.  These policies brought windfall profits for his billionaire crony capitalists and intensified corruption. The Troika labelled the Nuland’s putsch a ‘democratic revolution’, applauding Yastenyuk for vigorously applying the IMF dictated program and predicted a prosperous future…

As discontent spread and anger mounted among Ukrainian citizens, Yatsenyuk continued to feed his own ego by reading the Troika’s puff-piece editorials lauding his courage for staying the course of austerity and ignoring his compatriots’ opinion polls, up until the October 25, 2015 elections.

As the elections neared, opinion polls revealed that 99% of the electorate (which excluded millions of restive citizens of the Donbas region) completely rejected Arseniy (now known as ‘Nuland’s arsehole’) Yatsenyuk. Faced with the universal rejection of his starvation policies and crony capitalism, he withdrew his party (the Popular (sic) Front) from the election, but not from the ‘democratic’ government…

For two years the Troika had praised the Kiev junta, fabricating ‘reports’ about Kiev’s positive economic ‘reforms’ ….which had benefited the 1% corrupt oligarchs while impoverishing the masses. The Western propaganda mills systematically distorted popular reaction among the Ukrainian citizens, citing imaginary ‘anonymous experts’ and phantom ‘men in the street’ in praise of the debacle. Never had the Troika engaged in such blatantly deceptive ‘journalism’ as its account of the two years of pillage and mass immiseration under Prime Minister Yatsenyuk. And when ‘Yats’ was faced with total repudiation, he blithely dismissed Ukrainian public opinion, claiming he was ‘not concerned by temporary (sic) political party ratings’. His indifference with an electoral repudiation of 99% is rooted in a delusion that he will remain Prime Minister because he is widely praised by the EU, the US, the IMF … and the media Troika.

The Troika and China: Here Comes the Crash . . .?

In its ‘journalistic pivot to Asia’, the Troika deprecates China’s high-growth economy by questioning its data and by repeatedly predicting the impending crisis, breakdown and mass disaffection.

The Troika describes China’s defense policy as a ‘military threat to its neighbors’ and labels its overseas trade and investment policies as ‘neo-colonial exploitation’.

China’s national campaign against corruption and its prosecution of corrupt officials is dismissed by the Troika as a ‘political purge by a power-hungry president’.

The Troika attributes Chinese advances in science and technology as mere ‘cyber-theft of Western innovations’.

The movement of Chinese workers (internal migration) to areas with better paying jobs and investments is called ‘colonization’.

The Chinese government’s response to terrorism and armed separatists from Tibet and the Western Uighur regions is denounced as “Beijing’s systematic violation of the human rights of minorities”.

The Troika Castigates Capitalist Argentina (for a Decade of Growth)

Argentina has been on the Troika’s radar for a decade, despite the fact that it has a center-left government, which rescued capitalism from a total collapse (the Crisis of 1998-2002) restoring the growth of profits. Multi-nationals, like Monsanto and Chevron, enjoy huge returns on their investments in Argentina.

The Troika denounces the government for running up budget deficits while ignoring the impact of a Manhattan court judgement to award a group of Wall Street ‘vulture fund’ speculators ‘interest payments’ of one-thousand percent on old pre-crisis debt.

The Troika claims the regime engages in populist excesses, which prevent large-scale inflows of investment capital.

The Troika describes the recent slowdown in the economy as a ‘deep crisis’, which requires ‘deep structural changes’ (namely the elimination of social funding for pensioners, low income wage earners and school children).

The Troika paints a catastrophic picture of Argentina: a decaying economy run by a demagogic political leadership engaged in falsifying data…to mask an imminent collapse…Troika and its ‘Hate Venezuela’ Campaign

The Troika’s journalists and editorial writers, portray Venezuela as an unmitigated disaster: a stagnant and collapsing economy, ruined by an authoritarian populist regime repressing peaceful opposition dissenters.

According to the Troika, Venezuela is incapable of providing basic goods to consumers. Instead it resorts to draconian confiscation of goods from honest businesses – unjustly accused of hoarding and profiteering. The daily reality of manufactured ‘shortages’ is consistently ignored.

When the Venezuelan government attempts to stop violent cross border raids by Colombian paramilitary gangs and smugglers it is denounced as arbitrarily repressing Colombian immigrants.

When Caracas arrests opposition leaders because of their well-documented involvement in violent street demonstrations, promoting the sabotage of power plants and clinics and for planning coups, they are portrayed as violating the ‘human rights of legitimate dissidents.’.

The Troika never mentions the tens of millions of US dollars provided by Washington to opposition NGOs to pursue its destabilization campaign against Venezuela. It labels US-funded opposition NGO’s as “independent civil society organizations” (just like Ukraine before the putsch).

For almost 2 decades, the Troika has praised Venezuelan opposition groups as formidable critics of the Chavez-Maduro government, but has never explained to their readers why such ‘formidable’ groups have been soundly defeated in 14 of the 15 elections.

The Troika and Palestine: In Defense of Israeli Terror

In its Middle East coverage, the Troika consistently depicts the Palestinians as violent terrorists and aggressors while describing Israelis as their victims. According to the Troika, the Israeli army is engaged in justifiable ‘reprisals’ when they bomb and slaughter Palestinian civilians trapped in Gaza. The endless dispossession of Palestinians of their homes, farms and rights and the violent settler occupation by Israeli Jewish colonists is presented as the just settlement of Jews escaping persecution.

No mention or little importance is given to:

(1)  Israeli-Jewish desecration of Islamic and Christian religious sites;

(2)  Israeli systematic terror and mass jailing of peaceful protesters.

Palestinian resistance is described as ‘incendiary, irrational violence’.

The Troika journalists produce ‘articles’ which are virtually indistinguishable from the press handouts of the Zionist Power Configuration in the US. The Troika even chastises their partner US-EU regimes for their bland criticism or expression of shock at Israel’s most egregious crimes.

The Troika echoes Israeli and Zionist attacks on international tribunals charging Israeli officials with crimes against humanity. The Troika claims they lack ‘balance’.

The Troika and Syria: Armchair Generals

The Troika has demonized the Syrian government of Bashar Assad while backing jihadi terrorists dubbed ‘rebels or ‘moderates’. It has long argued for greater direct military intervention by NATO armies to overthrow the government in Damascus.

The Troika, masquerading as an independent ‘financial press’ publishes scores of articles by dozens of ‘armchair generals’ who concoct military strategies against Damascus while ignoring heavy economic costs, the social catastrophe of 4 million internal and external Syrian war refugees and the grave consequences of the splitting up a once-unified secular nation-state.

The Troika and Wayward Neo-Liberals

The Troika even chastises states and governments which have adopted ‘free market policies’ but maintained or introduced moderate social palliatives. For example, the Chilean regime of Michelle Bachelet fell victim to Troika criticism for promoting a mild increase in corporate taxes and implementing trade union legislation allowing for greater workers’ rights. According to the Troika, these mild reforms have led to economic stagnation, a decline in investment and greater social polarization.

Evaluation: Unmasking the Troika’s Distortions, Fabrications and Falsifications

The Troika’s ‘journalism and editorializing’ on Russia has totally distorted its recent political and economic history. Like all confidence men, Troika journalists and editors mix a few threads of facts with patent falsehoods, magnifying defects and minimizing achievements, ignoring positive long-term trends and emphasizing episodic negatives.

The Troika’s accounts of Russia’s recent military and diplomatic assistance to the Syrian government’s struggle against Islamist terrorists, ignores the achievement in reversing IS advances and stabilizing the central government.

The Troika paints a specter of Great Russian geopolitical expansion and ignores the long-standing political partnerships and alliances between Russia and major countries in the region, Iraq, Iran, Lebanon, Syria and Jordan.

With matters ‘economic’, the Troika describes the ‘catastrophic’ impact of US-EU sanctions against Russia over Ukraine, while ignoring the positive long-term results for Russia’s economy –greater self-reliance and investment in manufacturing and agriculture as a stimulus to local producers and the emergence of alternative overseas suppliers and markets, especially China and Iran.

The Troika highlights Russia’s two-year recession while ignoring a decade and a half of substantial growth after the catastrophic ‘Yeltsin’ years.

The Troika falsifies past and present political developments. They discretely praise the Western-backed violent gangster-oligarchs who ruled Russia during the pillage years of the 1990’s as a democracy while denouncing the relatively peaceful and competitive elections under the Putin Presidency as ‘authoritarian’.

The Troika resorts to similar propaganda ploys with China. Any slowdown from China’s three decades of double digit growth gets spun as an imminent collapse, ignoring the fact that the US-European business community can only dream of China’s still robust growth rate of 7%.

The allegations of Chinese cyber theft of Western science and technology ignore the obvious fact that China’s enormous public investment in basic and applied science and technology in dozens of centers of excellence has produced stunning achievements and levels of scholarship. A review of the international scientific literature and journals – paints an entirely different picture of Chinese advances from that described by the Troika.

Chinese economic growth through seaborne exports requires major investment and commitment to its maritime routes and security. To counter Chinese growth and assert US supremacy, Washington has signed new, provocative military pacts with Japan, Australia and the Philippines and escalated the intrusion of its planes and ships into Chinese waters and airspace. The Troika labels China’s defense of its waterways as an “aggressive” military threat to its regional neighbors, while US military investments in bases in Asia and constant intelligence gathering exceed Beijing’s five- fold. US warships brazenly violate China’s 12 mile maritime boundary.

Troika scribes completely ignore the recent history of US and Japanese empires invading dozens of Asian countries, establishing colonies, and killing scores of millions of people. In contrast to the enormous US strategic ring of military bases and communications outposts throughout the Asia-Pacific region, China has no foreign bases or overseas troops – a fact one will never learn from the ‘Troika’

The Troika’s campaign against Argentina, permeating its pages, minimizes the role of a short-term contemporary slow-down in international demand for commodities and attributes Argentina’s problems to its welfare programs, capital controls and state regulation. The Troika fails to acknowledge the past decade of growth, prosperity and rising living standards among the people in Argentina.

The source of Argentine stagnation is not because of a lack of free market policies but the Fernandez regime’s accommodation and promotion of the interests of international bankers, virtually all foreign debt holders (except one notorious ‘vulture’!) and extractive capitalists (agribusiness, Monsanto, Barrack Gold etc.).

The Troika ignores ‘the decade of infamy’ – the 1990’s – during which Argentina served as a bargain bazaar for the privatization of lucrative public enterprises and eventually collapsed in the 2001 crash with major bank closings, one hundred thousand bankruptcies and five million unemployed (30% of the labor force) – a thoroughly pillaged economy. Instead the Troika fabricates an ideal world of past free market prosperity in order to condemn contemporary Argentine, ignoring the real historical record of a liberal debacle and Keynesian recovery.

Venezuela is currently in a severe crisis, as the Troika scribes remind us in their shrill reports – blaming it entirely on ‘populist’ (i.e. public spending on social welfare) and ‘nationalist’ policies.

The Troika ignores the well-documented sabotage by the importers and distributers in the private business community, hoarding, excess profiteering and currency speculation. These problems are exacerbated by the sharp decline of oil revenues resulting from international market forces, and not merely government mismanagement.

The Troika tells their readers that the Chavez and Maduro governments are authoritarian, ignoring the dozen and a half free and competitive elections since Chavez’ ascent to power. Moreover, the Troika has remained rather quiet over their verbally violent editorial support for the opposition business-led and US embassy-backed military coup in 2002 and an aborted coup in 2014.

Conclusion

The Troika: the Wall Street Journal, New York Times and the Financial Times have repeatedly made false prognoses regarding the economic performances of governments targeted for ‘regime change’. Their economic predictions were repeatedly wrong and their readers among the investor public would have lost their shirts if they had taken their cues from the Troika’s editorial pages and bet ‘short’ against China and the rest…

Their perverse denunciations of Russian and Chinese military defense activities are sharpening world tensions. Their support for ethnic separatists in the Russian Caucuses and western China has encouraged acts of terrorism leading to the deaths of hundreds of Chinese workers murdered by Uighur and Tibetan terrorists, hundreds of Russians at hands of Chechen terrorists and thousands of Russian-speakers in Ukraine’s Donbas region.

The Troika cannot be relied on for reliable information, especially regarding the economic, political and foreign policies of US and EU adversaries (those targets for ‘Regime change’).

At most their polemical screeds give the discerning reader an insight into the propaganda line promoted by the Western powers.

Moreover in recent times, the Troika has become even more strident and militaristic than the ruling elites. The Troika’s armchair generals mocked Obama for not sending ground troops into Syria; chastised the US and EU for signing the nuclear agreements with Iran; and embraced Israel’s systematic murder of Palestinians.

Unreliable and more given to strident invective than reporting the facts in a balanced way, the Troika has lost credibility for intelligent, serious readers who strain to ‘read between the lines’ when they write that a government is ‘unpopular’ during elections. More likely than not, the incumbents sweep the elections and retain popular majorities as has been the case so far in Russia, Argentina, Venezuela and elsewhere.

If and when the Troika succeeds in promoting more wars, as it has been doing in Iraq, Libya, Syria, Yemen and Somalia, each and every militaristic adventure will lead to economic and social disasters spawning millions more refugees.

When imperial governments, like England, adopt conciliatory policies toward China, eschewing zero sum confrontations, in favor of win-win cooperation, the Troika’s armchair generals are sure to mock and accuse the conservative government of ‘kowtowing’ to authoritarians – dismissing the $30 billion dollar investment deals.

The Troika has gone far beyond its earlier role of presenting the line of imperial regimes. They now march, rather independently, to the military drum of real and imagined nuclear warriors and terrorists. Welcome to the “free press” and the ‘lies of our Times’!

Whitewashing the IMF’s Destructive Role in Greece

by Michael Hudson

This autumn may see anti-austerity coalitions gain power in Portugal, Spain and Italy, while Marine le Pen’s National Front in France presses for outright withdrawal from the eurozone. These countries face a common problem: how to resist the economic devastation that the European Central Bank (ECB), European Council and IMF “troika” has inflicted on Greece and is now intending to do the same to southern Europe.

To resist the depression and debt deflation that the troika seeks to deepen, one needs to bear in mind the dynamics that make the IMF un-reformable. Its destructive role in Greece provides an object lesson for how southern Europe must shun its horde of ideologues, as Third World countries learned to avoid it by May 2013, the year that Turkey capped the world’s extrication from IMF “advice.” Already in 2008, Turkey’s prime minister Recep Tayyip Erdogan announced: “We cannot darken our future by bowing to the wishes of the IMF.”[1] Greek voters have now said the same thing.

To soften resistance to the IMF’s austerity demands, a public relations drive is being mounted to rehabilitate the myth that the Fund can act as an honest broker mediating between anti-labor finance ministers and the PIIGS – Portugal, Italy, Ireland, Greece and Spain. On Friday, August 28, three Reuters reporters published a long “think piece” trying to show that the IMF is changing and that its head, Christine Lagarde, has seen the light and seeks to promote real debt relief.[2]

The timing of this report seems significant. The IMF got “back in business” in 2010 when its head, Dominique Strauss-Kahn, overrode its staff and many Board members in order to join the troika and shift the country’s bad debt from French and German bankers onto the Greek people. That is the story I tell in Killing the Host, which CounterPunch published in an e-version last week. (The hard-print and Kindle versions are now available on Amazon.)

President Obama and Treasury Secretary Tim Geithner insisted that Angela Merkel and French President Sarkozy pressure the IMF to go against the opposition of its own staff and 2KillingTheHost_Cover_rulejoin the European Central Bank’s hardline demands that Greece impose austerity. Geithner and Obama warned that if Greek bondholders were not paid in full, some giant U.S. banks would lose heavily on the default insurance contracts and derivatives they had written, and their losses could spread “contagion” to Europe.

It was at this 2011 G8 meeting that Merkel told Greek PM George Papandreou that he had to cancel his proposed referendum on whether Greece should surrender to austerity to help foreign bondholders. As the late Frankfurt Allgemeine Zeitung editor Frank Schirrmacher observed at the time, this meant that “Democracy is Junk.”

Papandreou’s acquiescence led his PASOK party to be swept utterly away, having lost all credibility – the same credibility that the IMF has lost. Papandreou was replaced by a pro-bank puppet. Italy’s Prime Minister suffered the same fate later that week, in a continent-wide crisis turning the eurozone into an economic dead zone.

It took until last July, four years later, for Greek voters finally to be given their say in a referendum. And just as Merkel, Sarkozy and Obama feared, they voted by an overwhelming 61 percent (a 3:2 margin) to reject austerity.

The Reuters piece quotes the same complaints by IMF insiders that my book records – as if this is a revelation that has just came out in their “examination of previously unreported IMF board minutes.” Actually, the information has been out for a year. So the question is, why is this information being reported as if it were new?

The aim seems to be to distract attention from the political dynamics that actually were going on and the conflicts of interest that were at work – and still are. In addition to my own book published last week, former Greek finance minister Yanis Varoufakis has gone public with his own sad experience with Lagarde and the European Central Bank (ECB) demanding further austerity and mass privatizations.[3] “If you were a fly on the wall watching our negotiations,” he reports, “you would see as well as I saw that Ms Lagarde, Mr Draghi, Mr Juncker, certainly Dr Schäuble, were interested in one thing: In dictating to us ‘terms of surrender’. Terms that put an end to the Athens Spring.”

By comparison, the Reuters whitewash distorts history, dumbing it down and censoring the U.S. role of Obama and Geithner, while trying to depict Christine Lagarde as urging an alleviation of Greek debt and austerity.

The world needs to know the whole story, because it will show the degree to which the IMF is under the thumb of Wall Street and European banks, and of U.S. political leaders backing hardline creditor interests. This in turn shows the impossibility of reforming the IMF (or World Bank, whose presidents traditionally are drawn from the U.S. Defense Department or its Cold War supporters).

Killing the Host discloses complaints leaked by angry IMF officials who became whistleblowers and published their complaints at Canada’s prestigious Center for International Governance Innovation (CIGI). These same quotes were just cited breathlessly by Reuters. What the wire service did not report was the point that the IMF’s former economists made.

Lagarde continues to insist that Greek debts can be paid by “extend and pretend,” lowering the interest rate and stretching out the maturities. This is her definition of “writing down Greek debts.” Most peoples’ definition would mean writing down the debt principal. Reading Reuters’ selective quotes, it is almost as if the seemingly detailed report was written to counter the political points Varoufakis, I and others have been making.

What Reuters excluded from its report that provides the key to unlock what is most politically embarrassing: The behavior of Obama and Geithner in protecting Wall Street’s casino bets that Greece could be arm-twisted to pay. Dominique Strauss-Kahn had two conflicts of interest: He wanted to run for the presidency of France, gaining favor by protecting French banks; and he wanted to get the IMF back into the austerity advice business, by joining the Eurozone troika. When Christine Lagarde started to repeat his refusal to back the recent IMF staff report endorsing write-down of Greek debt, the staff leaked it this spring, much to her embarrassment when the IMF signed onto a troika program with no real debt relief.[4]

The Reuters report throws up a cloud of disinformation saying that she backs debt relief, as if this means backing a writedown of unpayably high Greek debt. Quite the contrary, Lagarde has said again and again that her idea of debt relief is simply to extend and pretend – to stretch out the maturity of Greece’s debt, to lower the interest rate charged.

The real story is not simply the warnings that Reuters published so breathlessly from IMF staff members and board members that Greece could not pay its debts and that attempting to do so would bring on depression. The real story is why Strauss-Kahn overrode them in 2010. The IMF officials who resigned blamed his action on his political ambitions in French politics and his opportunism in trying to finally get the IMF “back in business” rather than being left out by the ECB for not being sufficiently pro-creditor. To override the fact that the IMF was violating its own directives, the Fund introduced a “contagion” escape clause that nullified the demand that it not endorse loans that could not be paid. (I describe the small print in Killing the Host.)

Lagarde is still adhering to the demand that Greece must repay all the debt principal, including what IMF staff members urged to be written off four years ago. Like Strauss-Kahn, she was about to override her own staff when they leaked their report on Greece’s inability to pay. An indication of her position was her statement at a May 2012 IMF meeting in Riga, where they came to celebrate Latvia’s punishing austerity model that could be exported to “serve as an inspiration for European leaders grappling with the economic crisis.”

The fact that the IMF’s head has to be a French pro-bank, pro-austerity ideologue, taking orders from Washington officials wield veto power on behalf of Wall Street bankers and bondholders, makes the IMF hopelessly compromised. The icing on the cake is its recent loan to Ukraine, money that Ukrainian President Poroshenko has said will be spent to wage war on Russian-speakers in eastern Ukraine where most of the export industry was located.

By no stretch of the imagination can Ukraine pay this debt. It already has negotiated a 20 percent writedown of its debt to private bondholders, and both Poroshenko and “Yats” insist that they will default on their $3 billion debt to Russia’s sovereign wealth fund falling due this December. That alone will require the IMF to withdraw, because the terms of its Articles of Agreement prevent it from lending to countries that unilaterally default on debts owed to official institutions. (The original idea had in mind the United States, not Russia or China.)

Yet the IMF has not warned that Ukraine must either pay or see itself turned into a financial pariah Greek-style. The Fund has been pulled into the New Cold War in addition to the financial war against labor and against government ability to resist austerity.

Past Reuters reports (and those of the New York Times and other neoliberal press) have popularized the trivializing idea that the reason China, Russia and other BRICS countries have created their own alternative development banks and international currency institutions is merely because they don’t have a large enough vote within the IMF. (Congress has blocked new U.S. contributions to the IMF, preventing a renegotiation of quotas.)

This is not what the BRICS countries say. Their disagreement is that the development philosophy of the IMF and World Bank is to promote austerity to pay bondholders and sell off the public domain to U.S. and other foreign financial investors. No matter how large the foreign quota, the U.S. Government retains veto power to enforce these U.S.-centered rules. The BRICS want a different development philosophy, an alternative to austerity economics and IMF “stabilization plans” whose effect is to destabilize countries submitting to their austerity.

The tragic Greek experience should stand as a warning of the need to withdraw from the rules that have turned the eurozone into an economic dead zone, and the IMF and Troika into brutal debt collectors for European, U.S. and British banks and bondholders. This is not a story that the mainstream press is happy to popularize. And as for the academic economists trotted out as talking heads, they still don’t get it.

Notes.

[1] Delphine Strauss, “Turkish politicians argue over need for IMF help as crunch bites,” Financial Times, October 28, 2008.

[2] Lesley Wroughton, Howard Schneider and Dina Kyriakidou, “How the IMF’s misadventure in Greece is changing the fund,” Reuters, Aug. 28, 2015, http://www.reuters.com/investigates/special-report/imf-greece/

[3] Introduction: Our Athens Spring, https://varoufakis.files.wordpress.com/2015/08/frangy-2-23-aug-2015.pdf

[4] Jack Ewing, “I.M.F. Report Shines Uncomfortable Light on Greece’s Financing Gap,” The New York Times, July 15, 2015, and Peter Spiegel and Shawn Donnan, “IMF raises doubts over its bailout role,” Financial Times, July 15, 2015.

Michael Hudson’s new book, Killing the Host is published in e-format by CounterPunch Books and in print by Islet.

By Yanis Varoufakis

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The Eurogroup — which has no legal standing — is anti-democratic, disdainful of the European Commission, which it now commands, and internally fractured. This is what it did to Greece.

In 2010 the Greek state lost the capacity to service its debt. Put simply, it became insolvent and thus lost access to capital markets. To prevent a default on fragile French and German banks that had irresponsibly lent billions to irresponsible Greek governments, Europe decided to grant Greece the biggest loan in world history on condition of the largest ever fiscal consolidation (better known as austerity) which, naturally, resulted in a world-record loss of national income — the greatest since the Great Depression. And so began a vicious cycle of austerity-driven debt deflation, spearheading a humanitarian crisis and a complete inability to repay the nation’s debts.

For five years the troika of Greece’s official lenders (the International Monetary Fund, European Central Bank and European Commission, representing creditor member-states) were committed to this dead-end strategy that financiers label “extend and pretend”: lending to an insolvent debtor more and more money in order to avoid having to write off a bad debt. The more the creditors insisted on this strategy, the greater the damage to Greece’s social economy, the less reformable Greece became, and the larger the creditors’ losses.

This is why our party, Syriza, won last January’s election. Had the electorate believed that Greece was on the mend, we would not have won. Our mandate was straightforward: to stop the “extend and pretend” loans and the associated austerity, which were driving Greece’s private sector into the ground. And to lift the fog of doom in which it was impossible to carry the people with us along the road toward the crucial, deep reforms that Greek society needed.

In my first Eurogroup meeting (1), on 11 February, I delivered a simple message: “In our government you will find a trustworthy partner. We shall strive for common ground with the Eurogroup on the basis of a three-plank policy to tackle Greece’s economic malaise: deep reforms to enhance efficiency and defeat corruption, tax evasion, oligarchy and rent-seeking; sound state finances based on a small but viable primary budget surplus that does not impose too heavy a burden on the private sector; and a sensible rationalisation, or re-profiling, of our debt structure so as to allow for the viable primary budget surpluses consistent with the rates of growth necessary to maximise the true value of our repayments to our creditors.”

A few days earlier, on 5 February, I paid my first visit to Dr Wolfgang Schäuble, the German finance minister. I reassured him that he could expect from us proposals aimed not at the interests of the average Greek but at the interests of the average European — German, French, Slovak, Finn, Spaniard, Italian, etc.

But none of our noble intentions were of any interest to Europe’s powers-that-be. We were to find this out the hard way during the five months of ensuing negotiations.

Threats

On 30 January, a few days after I became finance minister, the president of the Eurogroup, Jeroen Dijsselbloem, paid me a visit. Within minutes he asked me what I was planning to do vis-à-vis the Memorandum of Understanding (MoU) that the previous government had signed up to. I explained to him that our government was elected to re-negotiate that MoU; that is, we would be asking for an opportunity to re-visit the blueprint of fiscal and reform policies that had failed so spectacularly over the past five years, having diminished national income by one third and turned the whole of Greek society against the very notion of reform.

Dijsselbloem’s response was immediate and crystal clear: “That won’t work. It is either the MoU or the programme crashes.” In other words, either we would have to accept the failed policies that were imposed on previous Greek governments, and which we were elected to challenge, or our banks would be shut down — for this is what a “crashed programme” entails in the case of a member state that has no market access: the European Central Bank removes financing of the banks, whose doors and ATMs then shut down.

This blatant attempt at blackmailing an incoming, democratically elected government was no one-off. At the Eurogroup meeting that followed 11 days later, Dijsselbloem’s disregard for democracy’s most basic principle was confirmed, and enhanced, by Schäuble, who spoke immediately after Michel Sapin, the French finance minister. Sapin had just argued in favour of discovering common ground between the validity of the existing MoU and the right of the Greek people to mandate us to re-negotiate crucial parts of the MoU. Schäuble lost no time in giving short shrift to Sapin’s reasonable point: “Elections cannot be allowed to change anything,” he said, with a large majority of finance ministers nodding along.

At the end of that same meeting, while negotiating the joint statement to be released, I asked that the word “amended” be added in front of “MoU” in a sentence that was meant to commit our government to the latter. Schäuble vetoed my proposed phrase, saying that the existing MoU was not to be negotiated just because the Greeks had elected a new government. After a few hours of the resulting standoff, Dijsselbloem threatened me with an imminent “programme collapse” (which translated into bank closures by 28 February) if I insisted on adding “amended” in front of “MoU”. On instructions from my prime minister, Alexis Tsipras, I left the meeting without a communiqué being agreed to, ignoring Dijsselbloem’s threat. Although the threat proved empty, it soon returned with a vengeance.

Time and again we would be threatened with bank closures when refusing to endorse a programme, the MoU, which had so demonstrably failed in every possible way. The creditors and Eurogroup refused even to engage with our economic arguments. They demanded that we capitulate. They even accused me of daring to “lecture” them on economics!

And so it was that Greece’s negotiations with its creditors were conducted — under a dark cloud of threat. That the threat was credible we knew from the outset, even though we were not prepared to stand down or to lose hope that Europe would change tack.

A month before we were elected, the previous Greek government, in cahoots with the governor of the Bank of Greece (who had previously served as that same government’s finance minister), had already sparked off a mild bank run. After our election, the ECB began to signal that it would steadily switch off the flow of liquidity to Greece’s banking system, reinforcing the deposit flight that, at a time of the Eurogroup’s choosing, would “justify” the closing down of the banks — as Dijsselbloem had threatened.

Stonewalling, propaganda and fragmentation

The negotiations, once they commenced at the “technocrat” level, confirmed our worst fears. The creditors publically proclaimed their concern for getting their money back and for reforming Greece. In truth, however, they only cared about humiliating our government and forcing us to choose between resignation and capitulation, even at the cost of ensuring that creditor nations would never get their money back and jeopardising a reform agenda that only our party could convince Greeks to adopt as their own.

Time and again, we proposed that legislation should be passed on three or four areas that we agreed with the institutions — measures to tackle tax evasion, shield the tax authority from both political and corporate influence, address corruption in procurement, reform the judiciary, etc. Their reply was: “No way!” Nothing should be legislated before a “comprehensive review” was complete.

During the Brussels Group negotiations, we would be asked to present our plans for VAT reform. Before we could pin down an agreement on VAT, the troika representatives would shift to pension reforms. They would immediately rubbish our proposals before moving on to, say, labour relations. Once they rejected our proposals on that, they would shift to privatisations. And so on, ensuring that the discussions moved from one topic to another before anything was agreed, without any serious negotiation on any topic, creating a process that resembled a cat chasing its tail. For months the troika representatives stonewalled, insisting that we should talk about everything, which is equivalent to negotiating on nothing at all.

Meanwhile, without having put forward any proposals of their own, and while threatening us with a cessation of talks if we dared publish our proposals, they would leak to the press that our proposals were “weak”, “ill-thought-out” and “not credible”. In the hope that they would, at some point, meet us halfway, we went along with this impossible process.

Perhaps the greatest impediment to a sensible negotiation was the fragmentation of our interlocutors. The IMF was close to us on the importance of debt restructuring but insisted that we should remove any rights that organised labour retained while destroying the surviving protections of middle-class professionals. The Commission was far more sympathetic to us on these social issues, but forbade any talk of a debt restructuring. The ECB had its own agenda. In short, each of the institutions had different red lines, which meant that we were imprisoned in a grid of red lines.

Even worse, we had to deal with our creditors’ “vertical disintegration”, as the bosses of the IMF and Commission had a different agenda from their minions, and the German and Austrian finance ministers had an agenda totally at odds with that of their chancellors.

Defeated friends, defeated Europe

Perhaps the most dispiriting experience was to be an eyewitness to the humiliation of the Commission and of the few friendly, well-meaning finance ministers. To be told by people holding high office in the Commission and in the French government that “the Commission must defer to the Eurogroup’s president”, or that “France is not what it used to be”, made me almost weep. To hear the German finance minister say, on 8 June, in his office, that he had no advice for me on how to prevent an accident that would be tremendously costly for Europe as a whole, disappointed me.

By the end of June, we had given ground on most of the troika’s demands — with one exception: we insisted on a mild debt restructuring that would involve no haircuts, and smart debt swaps. On 25 June I attended my penultimate Eurogroup meeting where I was presented with the troika’s “take it or leave it” offer. Having met the troika nine tenths of the way, we were expecting them to move towards us a little, to allow for something resembling an honourable agreement. Instead, they backtracked in relation to their own, previous position (on VAT). Clearly they were demanding that we capitulate in a manner that demonstrated our humiliation to the whole world, offering us a deal that, if we had accepted it, would have destroyed what was left of Greece’s social economy.

The following day, Prime Minister Tsipras announced that the troika’s ultimatum would be put to the Greek people in a referendum. A day later, on Friday 27 June, I attended my last Eurogroup meeting, which put in train the foretold closure of Greece’s banks — a form of punishment for our audacity in consulting our people.

In that meeting, Dijsselbloem announced that he was about to convene a second meeting later that evening, without me: without Greece being represented. I protested that he could not, of his own accord, exclude the finance minister of a eurozone member state, and I asked for legal advice.

After a short break, the advice came from the Secretariat: “The Eurogroup does not exist in European law. It is an informal group and, therefore, there are no written rules to constrain its President.” In my mind, that was the epitaph of the Europe that Adenauer, de Gaulle, Brandt, Giscard d’Estaing, Schmidt, Kohl, Mitterrand, etc had worked towards. Of the Europe that I had always thought of, ever since I was a teenager, as my point of reference, my compass.

A week or so later, despite the closed banks and the scaremongering of the corrupt Greek media, the people of Greece delivered a resounding no in the referendum. On the following day the Euro Summit responded by imposing on our prime minister an agreement that can only be described as our government’s terms of surrender. And the weapon of choice? The illegal threat of severing Greece from the eurozone.

Whatever one thinks of our government, this episode will go down in European history as the moment when official Europe, using institutions and methods that no treaty legitimised (the Eurogroup, the Euro Summit, the threat of eviction from the eurozone), dealt a major blow to the ideal of an ever-closer democratic union. Greece capitulated, but it is Europe that was defeated.

Greece Is Just The Beginning: The 21st Century ‘Enclosures’ Have Begun

Submitted by Paul Craig Roberts,

All of Europe, and insouciant Americans and Canadians as well, are put on notice by Syriza’s surrender to the agents of the One Percent. The message from the collapse of Syriza is that the social welfare system throughout the West will be dismantled.

The Greek prime minister Alexis Tsipras has agreed to the One Percent’s looting of the Greek people of the advances in social welfare that the Greeks achieved in the post-World War II 20th century. Pensions and health care for the elderly are on the way out. The One Percent needs the money.

The protected Greek islands, ports, water companies, airports, the entire panoply of national patrimony, is to be sold to the One Percent. At bargain prices, of course, but the subsequent water bills will not be bargains.

This is the third round of austerity imposed on Greece, austerity that has required the complicity of the Greeks’ own governments. The austerity agreements serve as a cover for the looting of the Greek people literally of everything. The IMF is one member of the Troika that is imposing the austerity, despite the fact that the IMF’s economists have said that the austerity measures have proven to be a mistake. The Greek economy has been driven down by the austerity. Therefore, Greece’s indebtedness has increased as a burden. Each round of austerity makes the debt less payable.

But when the One Percent is looting, facts are of no interest. The austerity, that is the looting, has gone forward despite the fact that the IMF’s economists cannot justify it.

Greek democracy has proven itself to be impotent. The looting is going forward despite the vote one week ago by the Greek people rejecting it. So what we observe in Alexis Tsipras is an elected prime minister representing not the Greek people but the One Percent.

The One Percent’s sigh of relief has been heard around the world. The last European leftist party, or what passes as leftist, has been brought to heel, just like Britain’s Labour Party, the French Socialist Party, and all the rest.

Without an ideology to sustain it, the European left is dead, just as is the Democratic Party in the US. With the death of these political parties, the people no longer have any voice. A government in which the people have no voice is not a democracy. We can see this clearly in Greece. One week after the Greek people express themselves decisively in a referendum, their government ignores them and accommodates the One Percent.

The American Democratic Party died with jobs offshoring, which destroyed the party’s financial base in the manufacturing unions. The European left died with the Soviet Union.

The Soviet Union was a symbol that there existed a socialist alternative to capitalism. The Soviet collapse and “the end of history” deprived the left of an economic program and left the left-wing, at least in America, with “social issues” such as abortion, homosexual marriage, gender equality, and racism, which undermined the left-wing’s traditional support with the working class. Class warfare disappeared in the warfare between heterosexuals and homosexuals, blacks and whites, men and women.

Today with the Western peoples facing re-enserfment and with the world facing nuclear war as a result of the American neoconservatives’ claim to be History’s chosen people entitled to world hegemony, the American left is busy hating the Confederate battle flag.

The collapse of Europe’s last left-wing party, Syrzia, means that unless more determined parties arise in Portugal, Spain, and Italy, the baton passes to the right-wing parties – to Nigel Farage’s UK Independence Party, to Marine Le Pen’s National Front in France, and to other right-wing parties who stand for nationalism against national extermination in EU membership.

Syriza could not succeed once it failed to nationalize the Greek banks in response to the EU’s determination to make them fail. The Greek One Percent have the banks and the media, and the Greek military shows no sign of standing with the people. What we see here is the impossibility of peaceful change, as Karl Marx and Lenin explained.

Revolutions and fundamental reforms are frustrated or overturned by the One Percent who are left alive. Marx, frustrated by the defeat of the Revolutions of 1848 and instructed by his materialist conception of history, concluded, as did Lenin, Mao, and Pol Pot, that leaving the members of the old order alive meant counter-revolution and the return of the people to serfdom. In Latin America every reformist government is vulnerable to overthrow by US economic interests acting in conjunction with the Spanish elites. We see this process underway today in Venezuela and Ecuador.

Duly instructed, Lenin and Mao eliminated the old order. The class holocaust was many times greater than anything the Jews experienced in the Nazi racial holocaust. But there is no memorial to it.

To this day Westerners do not understand why Pol Pot emptied Cambodia’s urban areas. The West dismisses Pol Pot as a psychopath and mass murderer, a psychiatric case, but Pol Pot was simply acting on the supposition that if he permitted representatives of the old order to remain his revolution would be overthrown. To use a legal concept enshrined by the George W. Bush regime, Pol Pot pre-empted counter-revolution by striking in advance of the act and eliminating the class inclined to counter-revolution. The class genocide associated with Lenin, Mao, and Pol Pot are the collateral damage of revolution.

The English conservative Edmund Burke said that the path of progress was reform, not revolution. The English elite, although they dragged their heels, accepted reform in place of revolution, thus vindicating Burke. But today with the left so totally defeated, the One Percent does not have to agree to reforms. Compliance with their power is the only alternative.

Greece is only the beginning. Greeks driven out of their country by the collapsed economy, demise of the social welfare system, and extraordinary rate of unemployment will take their poverty to other EU countries. Members of the EU are not bound by national boundaries and can freely emigrate. Closing down the support system in Greece will drive Greeks into the support systems of other EU countries, which will be closed down in turn by the One Percent’s privatizations.

The 21st century Enclosures have begun.