Hidden History: How China’s Peasants Lost Collective Farming and Gained Urban Poverty

From Commune to Capitalism: How China’s Peasants Lost Collective Farming and Gained Urban Poverty

By Zhun Xu

Monthly Review Press (2018)

Book Review

The purpose of this book is to dispel common Chinese Communist Party (CCP) myths about the rapid privatization of Chinese collective farms following Mao Tse Tung’s death in 1976. For me, the most interesting section concerns Mao’s decision to collectivize Chinese agriculture (which occurred more than nine years after he assumed power in 1949). It becomes clear that throughout his tenure as president, Mao was in constant conflict with a strong anti-socialist faction of the CCP that supported full adoption of capitalism in China. Prior to reading this book, I had no idea that Mao’s disastrous Cultural Revolution (1966-1976) was a last ditch effort to rid his government of his pro-capitalist enemies. Following Mao’s death, his pro-capitalist successor Deng Xiaoping lost no time in privatizing all China’s collective farms and industry.

Xu mainly focuses on three common myths promoted by the current CCP. The first myth is that Chinese collective farms suffered from gross inefficiency and that productivity improved when collectives were dissolved and replaced with small family farms. The second myth blames this inefficiency on laziness and work avoidance, which the CCP alleges was common on collective farms. The third maintains that rural peasants initiated decollectivization spontaneously from the grassroots because they were dissatisfied with collective farming.

Myth 1: Citing detailed crop records and peasant interviews, Xu makes a compelling case that productivity declined significantly following the neoliberal* reforms (including decollectivization) the CCP implemented in the 1980s. The economic advantage of collective agriculture of small privately held family plots is that it enable rural peasants to pool their resources to mechanize their farms, set up irrigation schemes and invest in high yield hybrid crops and chemical fertilizers. Many small farmers lost access to machines and irrigation schemes following decollectivization. In fact many were left landless when cadres* and party bureaucrats seized the best land for themselves. Peasants who were left landless were forced to migrate to the cities, where they contributed to a large surplus labor pool. The latter put great pressure on urban workers who resisted privatization of state-owned industries. At present, the CCP is seeking to increase agricultural productivity by consolidating remaining family farms into large industrial scale land holdings (ie driving even more peasants off their land).

Myth 2: Work avoidance was relatively rare under Chinese collective farming, except where there was significant “stratification.” Most collectives employed a system in which members’ reimbursement was directly linked to the number of work points they accumulated. However in “stratified” collectives, the cadres running the farm abused their authority (by shirking work themselves, trading cushy work assignments for sexual favors, and punishing personal enemies with heavier work duties). This drastically impacted morale and initiative of many of the peasants under them.

Myth 3: Evidence is clear from the interviews Xu conducted that decollectivization was forcibly imposed by the CCP. Xu estimates that 30% of rural peasants supported privatization of the collectives, 30% strongly opposed it, and 40% were indifferent.

The good new is that China is having the same reaction to the failures of neoliberalism as the rest of the world (eg extreme poverty and inequality). Xu describes a renewed interest in Marxism in Chinese academic and activist circles.

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*Neoliberalism is a school of economic thought popularized by Ronald Reagan and Margaret Thatcher that promotes privatization of public industries and services, fiscal austerity, deregulation, free trade, and greatly reduced government spending.

**The Cadres were officials appointed by the CCP to run the collective farms, either because of their role in the Revolution or strong links to party officials.

The New Women’s Movement to Reclaim the Commons

Re-enchanting the World: Feminism and the Politics of the Commons

by Sylvia Federici

PM Press (2019)

Book Review

This book is a collection of essays about capitalism’s continuing seizure and privatization of the “commons” and growing women’s movements in Africa, Latin America and Asia to resist enclosure and reclaim privatized land.

Federici divides her book into two parts. The Part One (“On the New Enclosures”) essays describe the original 15-17th century enclosure laws that drove my European ancestors off common lands they had farmed communally for more than 1,000 years. This process (which Marx refers to as “primitive accumulation”) laid the groundwork for capitalism in two important ways: 1) it allowed the accumulation of capital (ie land) to finance the industrial revolution and 2) it forced landless peasants into factories.

Part One goes on to explore how the World Bank and IMF continues to expel drive third world peoples from their communal lands, creating the largest mass migration of refugees in history. I was quite surprised to learn that communal land ownership survives intact throughout much of Africa and that women produce 80% of the continent’s food via subsistence farming.

This section also features excellent essays on the role the Chinese government has played in driving their peasant population off their communal lands – and the role of microcredit in inflicting debt on rural populations that were previously immune to the forces of globalization.

In Part Two “On the Commons,” Federici details numerous examples of third world women’s movements that are reclaiming the commons via such strategies as squatting on privatized land, urban gardening (growing crops on privatized land), time banks, savings pools, and programs to collectively undertake shopping, cooking and care of street children.

This section also offers an excellent critique of Marx’s failure to acknowledge the essential role under capitalism of the unpaid work of women and colonized peoples – nor of the degradation of the “commons” known as the environment.

The book’s final essay warns of the seductive nature of Internet technology and role it plays in distracting people from genuine face-to-face interaction that brings about real change.

The Link Between Globalization and Violence Against Women

Witches, Witch-hunting and Women

by Sylvia Federici

PM Press (2018)

Book Review

This book is a collection of essays that continue the theme feminist historian Sylvia Federici introduced in her 2004 book Caliban and the Witch: Women, The Body and Primitive Accumulation (see Witch Burning and Women’s Oppression). In addition to re-exploring historical links between witchcraft trials, enclosures, land privatization, and systematized oppression of women, Witches, Witch-hunting and Women extends her analysis to the present day. Federici sees strong links between increasing violence against women and “globalization,” a euphemism for an elitist campaign to dispossess third world peoples of their lands and livelihoods. This dispossession, in turn, has led to the largest mass refugee migration in history.

In tracing its historical origins, the book makes the case that capitalism was actually a “counterrevolution” against the widespread 14th century rebellions that improved both the working and living conditions of both peasants and early urban workers. In constant fear of new rebellions by landless peasants (expelled from common lands under enclosure laws), the landed and merchant classes introduced a totally new form of production that imposed even harsher labor discipline than feudalism.

The witchcraft trials of the 16th and 17th century were essential to this transformation. They were primarily directed against women who resisted enclosure, widows, women who had children out of wedlock, landless women who were driven into the streets (either as market vendors or prostitutes), midwives and women who practiced folk healing.

At a time when thousands of women were killed for accusations of witchcraft, all women were banned from guild membership and prohibited from engaging in crafts other than brewing or spinning and bringing legal cases to court. Under capitalism, they were generally confined to the home to perform unpaid domestic labor in total submission to their husbands.

In looking at modern equivalents, Federici sees a direct link between the massive dispossession occurring under globalization and escalating violence against women. She points to a big increase in domestic violence and rape (especially “handbook” rape*), in sex traffcking, in unprosecuted murders of women (especially women of color), in witchcraft accusations against tribal women in Africa and India, and in dowry and honor killings in India and Pakistan.

She also sees strong links between the current mass incarceration of people of color and the 17th century Great Confinement, in which droves of peasants were incarcerated in prisons and workhouses after being driven off their land.

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*”Handbook rape” rape by trained military and paramilitary forces is deliberately designed to terrorize targeted populations. Examples include inserting knives or guns into a woman’s vagina or slitting open her pregnant belly.

Why Growth is the Main Cause of Poverty

Growth Equals Poverty

Vendana Shiva (2013)

In this presentation, environmentalist and anti-globalization activist Vendana Shiva challenges the Wall Street mythology that economic growth reduces poverty. Using her own country India as an example, she demonstrates how poverty (and inequality) increase in direct correlation to GDP increases.

The examples she offers clearly apply to the US, UK and New Zealand. All three countries are experiencing alarming increases in poverty and inequality as GDP increases. As in India, the quality and availability of health, education and other public services have declined steeply as “growth” has increased.

She goes on to demonstrate what GDP growth really represents: the privatization (ie theft) of natural and public resources by a small number of elites.

In India at present, 1/4 of the population lives in abject poverty and 1/2 of children are malnourished. Vendana blames the increase in hunger on the forced adoption of industrial agriculture and GMO crops. Monsanto and GMO advocates like Bill gates argue that GMOs will decrease world hunger. In India, where Monsanto has successfully lobbied to make it illegal for farmers to save seed, just the opposite has happened.

This due partly to Monsanto’s seed monopoly, which has caused an 8,000% increase in the cost of seed; partly to the high cost of fertilizers, herbicides and pesticides GMO crops require; and partly to the destruction of soil, bees and biodiversity caused by industrial agriculture and GMO crops.

How Putin Outwitted the Russian Oligarchs

The Rise and Fall of the Russian Oligarchs

Directed by Alexander Gentelev (2006)

Film Review

The Rise and Fall of the Russian Oligarchs focuses on the scandalous period after the collapse of the Soviet Union, in which 100 opportunist oligarchs destroyed the economy of a relatively wealthy country (with the help of the CIA, USAID, the IMF and the World Bank) by seizing $20 billion of assets for roughly a billion dollars. The admitted goal of these Russian oligarchs (and their CIA supporters) was to privatize as many industries as possible behind the scenes before the Communist majority in the Russian parliament could consolidate power and stop them. The documentary’s overarching theme concerns Putin’s rise to power in 1999, which is credited for saving the Russian economy via his shrewd confrontation and defeat of these oligarchs.

This Russian-made documentary focuses on three specific oligarchs: Mikhail Chernoy, who now lives in exile in Israel; Theodore Gusinski, who now lives in exile in Spain, and Boris Beresovksy, who now lives in exile in London. It’s divided into two parts.

Part 1

Part 1 describes how these men used privatization schemes introduce by the last Soviet president Mikhail Gorbachev (under Perestroika – 1985-1991) to acquire a variety of Russian assets for pennies on the dollar. With the collapse of the Soviet Union in 1991, many state-owned factories were threatened with closure, the Russian government initially privatized them through an ill-conceived voucher scheme. Ownership in the factories was broken up into millions of shares in the form of vouchers distributed to all Russian citizens. Because they had no other source of income, many were forced to sell their vouchers cheaply for food. Others were tricked into “investing” them in phoney investment schemes as their owners sold on their hoard of vouchers and pocketed the proceeds.

Chernoy wound up with hundreds of thousands of these vouchers, which he used to buy up Russia’s aluminum industry.

Using western financing, Gusinski would form Russia’s first commercial TV network in 1993. In 1994 Berezovsky (again with the help of western financing) would buy Russian state TV for a few million dollars. Joining with other oligarchs, they skillfully used their media monopoly to promote their privatization agenda.

Part 1 also covers the 1991 attempted coup against Gorbachev (a desperate attempt by the Communists to reverse rapid privatization); Yeltsin’s successful (CIA-backed) coup in 1993, in which he used the military to attack the Russian parliament, effectively dissolving parliament and the constitutional court; and the vast human misery caused by the “shock therapy” Wall Street imposed Russia as they looted their economy. This, in turn, would lead to escalating mass protests demanding a return of the Communists to power.

Part 2

Part 2 focuses on the oligarch (and CIA) financed and controlled election of Boris Yeltsin in 1996 – as well as the direct role the oligarchs assumed in government following Yeltsin’s victory against his more popular Communist opponent.

The Russian economy reached breaking point in 1998. By then, the Russian government had lost so main state-owned industries (75%) that it could no longer pay its debts and Russian banks froze depositors assets.

This, along with Yeltsin’s failing health, would lead to a political crisis, resulting in Vladimir Putin’s appointment as acting president initially supported by the oligarchs – in 1999. Following Putin’s election in 2000, he quickly turned on oligarch supporters, who expected to control his government as they had Yeltsin’s.

Then, as now, he excelled at media manipulation, capitalizing on popular fear of Chechen terrorism to heighten his popularity. He also shrewdly confronted individual oligarchs for tax evasion and other financial crimes during televised cabinet meetings.

This was followed up by security raids and harassment, arrest – and in some cases imprisonment – to encourage numerous oligarchs to relinquish their ill-gotten shares to state control.

In this way, Putin essentially ended Wall Street’s wholesale exploitation of the Russian economy and the Russian people – and Wall Street and the US military-intelligence complex have never forgiven him for it.

The documentary’s main weakness is its failure to explore the major role Wall Street and US intelligence played in the destruction of the Russian economy between 1991-2000. Good background on this at the following links:

The Harvard Boys do Russia

US Meddling in 1996 Russian Elections in Support of Boris Yeltsin

USA Russia

The Plunder of Russia in the 1990s

Reclaim the Commons: Take Back the Grid

On average, Germany obtained 27.8%  of their electrical power from renewable sources in 2014, up from 6.2% in 2000. This contrasts with 13.2% renewably produced electricity in the US and 18% in the UK.

Writing in the October 22, 2014 Guardian , Kate Henderson, Chief Executive of the Town and Country Planning Association, attributes much of Germany’s success in greening their power supply to a growing grassroots movement to re-muncipalize power production. Since 2007, 170 German municipalities have bought back their grid from private power companies. This is in addition to 650 energy cooperatives owned by private individuals and cooperatives. Due to the innate inefficiency of power grids,* numerous communities have abandoned large regional grids for local distributed energy projects.

As Nick Rosen writes in Off the Grid, there’s no question that smaller, decentralized energy supply networks are cheaper and more efficient for consumers. Grids only developed because they’re more profitable for power companies.

I totally agree with Henderson’s premise: citizens need to quite relying on dishonest politicians and sociopathic corporations to help them reduce their dependence on fossil fuels. It makes much more sense to take back power generation into local community control.

What I find especially exciting is that it’s already happening.

Taking Back the Grid

In late 2013, the citizens of Hamburg (Germany’s second largest city) voted to buy back their electrical power grid. Two other major cities, Frankfurt and Munich, resisted privatization in the 1990s and retained their electrical supply in public hands. In 2013, Berlin voters also passed a referendum to re-muncipalize their power supply, but the voter turnout was too low for it to take effect.

Several US cities have hosted similar re-municipalization movements. In 2011 owing to Xcel Energy’s reluctance to pursue solar energy alternatives, Boulder Colorado passed two ballot initiatives  empowering the city council to buy back the power grid. The process has been stalled fighting Xcel lawsuits challenging the city’s right to buy the energy grid.

The Privatization of US Energy Utilities

Until about the 1980s, most US cities had public utilities. However, the lingering effects of the 1970s energy crisis and the privatization and deregulation frenzy of the Reagan and Clinton years led many cities to sell their power plants and distribution grids in the eighties and nineties. Since that time, large energy conglomerates, most of which are hooked on coal-fired power or fracked gas, have controlled most of America’s energy production.

Santa Fe and Minneapolis are also considering initiatives to buy back their electricity supply.

Sacramento, Austin and Seattle, which never gave theirs up, are far ahead of the rest of the country in their reliance on renewable power generation.

Sacramento derives 38% of its electricity from renewable resources, Austin 20% and Seattle 93.8%.

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*According to the EPA. Our current electrical power system operates at approximately 33% efficiency.

photo credit: wikimedia commons

Privatization and the Theft of the Commons

Catastroika

by Aris Chatzistefanou and Katerina Kitidi

Film Review

Catastroika is a Greek documentary on neoliberalism, with a specific focus on the privatization of publicly owned resources. Although it makes no mention of historian Richard Linebaugh, its depiction of the neoliberal privatization movement provides an elegant illustration of the ongoing theft of the Commons (see Stop Thief: the Theft of the Commons).

After a brief overview of the University of Chicago economists (championed by Milton Friedman) who first put neoliberal theory into practice during the Pinochet dictatorship, the documentary tracks the wholesale privatization of Russia’s state owned industries after the 1993 coup by Boris Yeltsin, in which he illegally ordered dissolution of the Russian parliament (see The Rise of Putin and the Fall of the Oligarchs).

The fire sale of state assets to oligarchs and western bankers would virtually destroy the Russian economy, throwing millions of people into extreme poverty and reducing average life expectancy by ten years.

The Privatization of East Germany

With German reunification in 1990, East Germany would be the third major target for massive privatization. According to German economists interviewed in the film, the process amounted to an “acquisition” of East Germany by West German bankers. The West German government set up an agency called Treuhand to buy up state owned East German businesses at the rate of ten to fifteen a day – a total of 8,500 businesses in four years. The process, undertaken with virtually no oversight, predictably resulted in massive chaos and fraud. Many well-performing East Germany companies were dissolved for the simple reason they competed with West German businesses. Three million (out of 4.5 million) East German workers lost their jobs, which East Germany’s GDP shrank by 30%.

Using Debt to Compel Compliance

With the gradual demise of the world’s dictatorships during the 1990s, debt, rather than brute force, became the main mechanism to compel people to give up their publicly funded assets. At present, most of the focus is on Greece.

Current EU Commission Jean-Claude Juncker holds up Treuhand (which incurred a 250 million euro debt German taxpayers are still paying off) as a model for the Greek Asset Development Fund. The latter has been steadily selling off (at bargain basement prices) Greek railroads and municipal power and water systems.

The Dismal Track Record of Privatized Utilities

The filmmakers end the film by highlighting the disastrous outcome of Britain’s decision to privatize its railroads in 1993, the city of Paris decision to privatize its water service in the 1980s (it’s recently been re-municipalized due to massive public unrest – like privatized water systems in Bolivia, Ecuador and Argentina) and California’s experiment with electricity deregulation in the 1990s (leading to the Enron scandal).*

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*The Enron scandal involved massive securities fraud and a deliberate conspiracy by power companies to withhold power to drive up electricity prices.

Sacred Economics – Life After Capitalism

Sacred Economics: Money, Gift & Society in the Age of Transition

by Charles Eisenstein

2011,  Evolver Editions (link to free download)

Book Review

The title Sacred Economics sounds like a New Age treatise on spirituality. The book is actually about the end of capitalism. It offers an extremely well-researched discussion of the history of money, capitalist economics and the world wide movement for economic re-localization. By avoiding simplistic clichés about greedy corporate CEOs and amoral banksters, Eisenstein arrives at some startling conclusions. Tracing the western conception of money back to its earliest origins, he makes a strong case that money itself is responsible for rapacious growth and resource depletion, greed and the demise of community.

Money and the Loss of the Commons

The main focus of Part I is an exploration of the profound effect money has on human thinking and psychology. Part II focuses on economic relocalization and other practical steps activists can take to restore the original gift economy.

Part I begins with an analysis of the dual illusions of separateness and of scarcity. Both, Eisenstein argues, are mistaken beliefs stemming from the privatization of communally owned land. This, in turn, was an early consequence of the introduction of money.

Prior to Roman times, land, like air and water, was considered part of the commons and couldn’t be owned. Under Roman tradition, there was no way for an “individual” (a Greek invention related to the concept of money and personal wealth) to legitimately take possession of common lands. Thus the Roman aristocracy had to seize it by force, just as Europeans stole the communal lands of Native Americans, Maori and indigenous Australians.

During the many centuries our ancestors had access to communal lands for their herds and crops, they enjoyed a sense of interconnectedness and interdependency. This was lost when the wealthy began fencing it off as private property. This loss of interconnectedness has left all of us with a profound inner emptiness we experience as never having enough.

How Money Destroyed the Gift Economy

Part I also describes the gift economy that characterizes all primitive cultures. Public gift giving was the primary mechanism all early societies used to satisfy basic survival needs. As civilizations became more complex, gift exchange and barter were impractical over long distances. This led money was introduced as a common medium of exchange.

An early artifact of the introduction of money is the mistaken belief that the basic necessities of life are in short supply. This illusion underpins all western economic theory. In fact many textbooks define economics as the study of human behavior under conditions of scarcity. As Eisentein points out, this is a ludicrous notion in a world in which vast quantities of food, energy and raw materials go to waste.

The Origin of Greed

Eisenstein attributes greed to this illusion of scarcity. He can see no other explanation for low income people giving away far more money, relative to income, than their rich counterparts. Rich people worry about money more and are more inclined to perceive scarcity when none exists. Einstein talks about the immense anxiety people in rich countries experience over “financial security.” No matter how much they accumulate, it’s never enough.

Debt, Usury and Perpetual Growth

Sacred Economics argues that what economists commonly refer to as growth is the expansion of scarcity into areas of life once characterized by abundance. Fresh water, which was once abundant, has become scarce following its transformation into a commodity most of us are forced to pay for.

The fractional reserve banking system, which allows bankers to loan money they create out of thin air, accentuates the pressure to convert more and more of the commons into commodities. The amount of debt created is always greater than the money supply. Current global debt ($75 trillion) is more than twice global wealth ($30 trillion). This results in constant pressure to create more goods and services to repay personal, corporate and public debt.

Growing pressure to repay debt only hastens the rate at which natural resources, such as fossil fuels, minerals, forests, fish and water, are converted to commodities. A parallel process is causing the social, cultural and spiritual commons to be dismantled. Stuff that was free throughout all human history – stories, songs, images, ideas, clever sayings – are copyrighted or trademarked to enable them to be bought and sold.

Einsenstein’s Confusion About Marxism.

The only weakness of Sacred Economics are some mistaken and contradictory assumptions Eisenstein makes about Marxism. He makes the assertion in Part I that capitalism needs to be replaced, but not in a “Marxist” way. He claims this would remove any “monetary” incentive for people to produce goods and services that are useful to the community. This seems to contradict his call for the a return to a gift economy in which people contribute to the community for intangible rewards (public recognition, status and esteem) rather than monetary reward.

Below Eisentein speaks briefly about his book.

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In celebration of read an ebook week, there are special offers on all my ebooks (in all formats) this week: they are free.

This includes my new novel A Rebel Comes of Age and my memoir The Most Revolutionary Act: Memoir of an American Refugee

Offer ends Sat. Mar 8.

In New Zealand We Call It Rogernomics

Roger Douglas, from Wikimedia

(The 7th of 8 posts about my new life in New Zealand)

In brief, the policies introduced by Minister of Finance Sir Roger Douglas in the 1980s included the rapid elimination of import tariffs that protected New Zealand farmers and manufacturers; rapid privatization of state owned industries (most ended up under foreign ownership);  stringent anti-union legislation; and substantial cuts in social welfare benefits. With the abolition of import controls, New Zealand companies struggled to compete against cheap imported goods from Asia. This resulted in multiple plant closures, massive layoffs and more than a decade of unrelenting hardship for communities that relied on these industries.

The 1984 reforms also resulted in seven years of continuous economic stagnation, during which the New Zealand economy shrank by 1% in contrast with an average 20% growth in other OECD countries.

The Mass Exodus of Generations X and Y

The most enduring harm stemming from the 1984 reforms is the staggering loss of human capital that continues to this day. At present approximately one million Kiwis – representing one quarter New Zealand’s current population of four million – live overseas.

As I wrote previously, the massive sell-off of both state-owned and private companies to foreign owners has translated into a chronic accounts deficit (negative balance of trade), as profits and dividends disappear overseas. To compensate for this steady loss of wealth, New Zealand, under pressure to increase exports, entered into “free trade” treaties that forced them to reduce tariffs and quotas even more. This led to the shut down of even more factories, which had no hope of competing with overseas companies that paid sweat shop wages to third world workers.

The Student Loan Debacle

In my view, the most damaging neoliberal reform of the 1980s was the decision to replace government subsidized tertiary education (which until recently was standard in most European countries) with a student loan scheme. While lumbering young people with student loan debt can prove problematic for large, broad-based economies like US and Britain, the policy has proved absolutely disastrous for New Zealand. Repaying a student loan is extremely difficult on the low salaries Kiwi professionals earn. Thus a third or more of new college graduates to emigrate. In my view, this continual hemorrhage of human capital is a major reason New Zealand remains near the bottom of OECD countries for economic growth, productivity and salaries.

At present approximately one-third of medical students leave New Zealand following graduation. Many really have no choice, strapped with giant student loan repayments while simultaneously looking to buy a home and start a family. Their only hope of managing this massive financial stress is to seek work in Australia or the UK, where they can command a 20-30% higher salary than here in New Zealand. And once they buy a home and their kids start school, they very rarely return.

A recent study estimated 37% of new NZ teachers leave New Zealand schools within the first three years. In addition to doctors and teachers, New Zealand also loses a large proportion of the nurses, physiotherapists, social workers, audiologists and other health professionals they train – as well as engineers, urban planners and veterinarians, who are also on New Zealand Immigration’s critical skills shortage list.

New Zealand’s Neoliberal Transportation Policy

Other really destructive neoliberal policies New Zealand enacted in the eighties and nineties relate to public transportation: 1) the privatization of New Zealand railways (leading to the immediate shutdown of all but four routes) and 2) the dismantling of local public transportation systems. Both have resulted in extreme reliance on private automobiles and foreign oil, the second biggest culprit in our accounts deficit.

New Zealand, which still has a predominantly rural population (only 1/3 of Kiwis live in major cities), has also been extremely slow in implementing rational growth management strategies. For all these reasons, it holds the embarrassing honor of the highest rate of car ownership in the world.

 

What Really Happened in Detroit

Guest post by Steven Miller

(This is the 4^th of 6 posts in which Miller describes how Detroit residents and auto industry pensioners were deliberately swindled by Wall Street, with the help of the state and federal government.)

What Really Happened in Detroit

With Detroit’s financial difficulties, the banksters recognized the opportunity to take the next step forward. At its peak in the Industrial Era, the city’s auto plants produced half of the world’s cars with 350,000 workers. Today the few factories that remain produce even more cars with a workforce of only 20,000. Their job is to mind the robots that actually do the manufacturing.

Wall Street and the state apparatus combined to push the city into bankruptcy so they could go after public worker pensions nationally. Across the US there are more than 22 million public workers, about half of them teachers. (10) The financial industry quickly ensnared public worker pensions in predatory debt. Then their political agents loudly proclaimed that local government could no longer function due to these debts. Detroit, like all city governments also owes huge amounts to the banks, the result of various predatory loans. However, there is never a discussion about not paying these contractual obligations, even though there is abundant evidence that they are grounded in criminality. (11)

From 2004 to 2006, 75 percent of mortgages issued in Detroit were subprime. By 2012, banks had foreclosed on 100,000 homes. This trashed the city’s real estate by 30 percent and caused the flight of almost a quarter million people. These two factors drove the tax base severely downward.

Under both Republican and Democratic governors, the Michigan state government cut $700 million in state revenue sharing. Michigan, however, boasts the largest corporate subsidies per capita in the country – a total of $6.2 billion. (12) Detroit also gives more than $20 million a year in subsidies to local corporations for elite downtown projects.

Then the state jumped in to employ coercion against the people. This took the form of an Emergency Manager, imposed by the Michigan governor, with complete powers over the city’s government, including breaking contracts at will and selling off public property. In 2013, the EM closed over 30 schools as “too expensive”, and then he used the money to build a new ice rink for the Detroit Redwings hockey team. The EM is a modern form of fascism; his dictatorial policies are backed up by the police. Detroit residents lost the civil right to vote.

While city operating expenses fell, the financial costs of debt servicing shot up. The public policy organization, Demos, wrote in 2013, “Detroit’s financial expenses have increased significantly, and that is a direct result of the complex financial deals Wall Street banks urged on the city over the last several years, even though its precarious cash flow position meant these deals posed a great threat to the city.” (13)

The Financial Times reports that Detroit will eventually pay nearly double the principal — in other words, Detroit is effectively paying 100 percent interest. (14) So we see that predatory lending against homeowners begets predatory lending against cities. The city’s, debt servicing could rise from 28% to 65% of the city’s annual budget, effectively making it an ATM for the financial industry.

In December, a federal judge ruled the pension rights, guaranteed by Michigan’s state constitution, were simply a “contractual relation”, rather than a right, and held that federal bankruptcy law, as applied to corporations, determines city bankruptcies, even though few US cities have ever gone bankrupt. This means that the interests of hedge funds and banks have priority over the interests of retired city workers, who must already make due with pensions that average only $19,000.

The betting is that city workers’ pensions will be cut by 84%. At the height of the economic Meltdown, alpha financier and speculator, Lawrence Summers, was asked why the banks used public money to pay exorbitant executive salaries. “A contract is a contract”, he bellowed. Obviously this rule of law no longer applies to public worker contracts.

Just as international banks are demanding that Greece sells off its ports, transport systems, tourist attractions, beaches and other assets in the public domain, so Detroit is now planning to sell the bridge and tunnels to Canada, the Joe Louis Boxing Arena, and the tremendous collection of art in the Detroit Institute of Art. This crime is not too different from the Nazi rape of art from across Europe, nor the US organized destruction of the Iraq Museum after they took Baghdad in 2003.

But it’s all so legit! These items will be bought by billionaires and banks with credit, which the city will then send to the banks to pay off the debt. Detroit becomes a simple pass-through account. This is naked expropriation of the wealth of the public. These are the worst of times.

References and Resources

10)  “How Many Government Employees Are There?”

http://www.freerepublic.com/focus/news/2466363/posts

 11)  Matt Taibbi. “The Scam Wall Street Learned From the Mafia”. 6-21-12

 12)  http://systemicdisorder.wordpress.com/2013/08/07/wall-street-plunders-detroit/

 13)  Wallace Turbeville. “The Detroit Bankruptcy. 11-20-2013

 14)  Sender and Foley. “Details of Detroit’s Troubles Come to Light”, Financial Times, 7-25-2013

To be continued.

photo credit: Thomas Hawk via photopin cc

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Steven Miller has taught science for 25 years in Oakland’s Flatland high schools. He has been actively engaged in public school reform since the early 1990s. When the state seized control of Oakland public schools in 2003, they immediately implemented policies of corporatization and privatization that are advocated by the Broad Institute. Since that time Steve has written extensively against the privatization of public education, water and other public resources. You can email him at nanodog2@hotmail.com

Originally posted at Daily Censored