The Berlin Consensus

Europe’s blind march forward to depression

by Philip S Golub

Le Monde diplomatique (December 12 2011)

Last week’s decision of European heads of state and the European Commission to establish a fiscal union based on permanent quasi-automatic disciplinary mechanisms to secure balanced budgets in the midst of the worst world economic downturn since the 1930s will go down as one of the greatest collective policy errors in post-1945 history. Hailed by self-congratulatory leaders as a sign of political will and a new step forward in unification, the Berlin Consensus forged by conservative elites will more likely lead to the breakdown of Europe.

Despite ample evidence that generalized austerity is generating a vicious cycle of low or negative growth, lasting mass unemployment, declining incomes and hence falling tax revenue, the Europeans have chosen to purge debtor countries through “internal deflations” designed to reduce relative costs and to suppress demand. Deep expenditure cuts affecting welfare, health, education and other public services are thus being coupled with wage cuts and increases of indirect taxes on consumption.

While limitless cheap funding is being made available to private creditors through the European Central Bank (ECB), debtor countries are being compelled to compress their peoples’ living standards, sometimes drastically, and downsize their welfare states. The distributional costs of the crisis are being exclusively shifted to the poor and the middle classes, which depend on the public services that are being slashed.

This choice has nothing to do with external constraints. Rather, global market speculation on sovereign European debt has become a convenient excuse to enforce an ideologically driven agenda to curb labour and roll back the welfare state. Austerians in the United States are advocating the same medieval bleeding cure, as Paul Krugman has pointed out {1}. There was and still is an alternative: the federalization of sovereign debt through Eurobonds, the creation of which would put an end to speculation on national debt and reduce global market volatility, and the restoration of progressive tax policies to generate revenue.

That option was never seriously considered by the German chancellor or other surpluses countries however, no more than the less ambitious proposal to have the European Central Bank act as a lender of last resort. Instead of a collective exit strategy based on growth, European solidarity and a gradual rebalancing between surplus and deficit countries, we now have a rigid pan-European austerity regime enforced from on top, without democratic control or consent. The UK, which is engaged in its own harsh internal deflation, has decided to opt out. It decided to so for all the wrong reasons, most notably to avoid the City of London being put under external regulatory constraint.

The real question is whether a durable and sharp social regression dictated from on top is sustainable in democratic societies? If history is any guide, it is not. As Barry Eichengreen and Peter Temin have shown {2}, in the early 1930s leaders on both sides of the Atlantic, who were wedded to a “hegemonic ideology” of self-regulating markets and automatic budget balancing through the Gold Standard, responded to the 1929 crisis by engaging in draconian policies of reduction of domestic prices and costs. The main instrumentality was curbing wages and crushing the trade unions. Like today, they were “supported by a rhetoric of morality and rectitude”, exemplified by US Treasury Secretary Andrew Mellon’s well known call to “liquidate labor, liquidate stocks, liquidate the farmers” and to get “people to work harder and live a more moral life” by purging “rottenness out of the system”. Balanced budgets and fiscal rectitude led to deflation on both sides of the Atlantic, which “magnified the burden of outstanding debt, forcing creditors to curtail their spending still further”.

Ultimately, the disciplines of the Gold Standard proved unsustainable in the face of the extreme social distress they produced. In the US, with unemployment running at 25 percent, Roosevelt pulled the US off the Standard in 1933, leading to significant recovery. He later erred by reinstating a policy of budgetary rigour in 1937, which plunged the US into recession once more. Sustained recovery occurred only during World War Two. Germany experienced two years of extreme austerity and “authoritarian democracy” under Chancellor Bruning in 1930 and 1931, paving the way for Nazism. The rest of Europe was likewise swept up in the vast social and political turbulence that culminated in tragedy.

Today’s apparently self-confident European leaders, who want to bend reality to their preferences, either have not read their history or have too much faith in their own powers and competence. True, it’s unlikely and probably unthinkable that the path chosen by the EU will usher in war. But like their predecessors in the 1920s and 1930s whose adherence to the Gold Standard led to deflation and social chaos, current leaders are marching blindly towards depression. The Berlin Consensus will fail as surely as the obstinate effort to maintain the Gold Standard. But after a decade or so of deflation, what will remain of Europe?


{1} Paul Krugman, “The Bleeding Cure”, New York Times, 18 September 2011.

{2} Barry Eichengreen and Peter Temin, “The Gold Standard and the Great Depression”, Contemporary European History 9, 2 (2000): 183-207.


Philip Golub teaches at the American University of Paris; he is the author of Power, Profit and Prestige: a History of American Imperial Expansion (Pluto Press, London, 2010).

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Instruments of Repression

Nation of Laws, The Immorality of Today’s Government

by Professor John Kozy

Global Research (December 13 2011)

… laws were most numerous when the commonwealth was most corrupt.

— Tacitus

For a society to be well governed, it’s laws must be just and moral. The Ancients knew that “Those who are rightly governed … do not fill their porticoes with written statutes but only cherish justice in their souls; for it is not by legislation, but by morals that states are well directed”. Nations that use repressive laws to exact conformity do so because they have no interest in perfecting society. Without an interest in perfecting society, morality has no content and nations disintegrate. What the world needs are fewer laws and more morals.

While reading a piece about Libya a few days ago, I found that Abdul Jalil has said that the new Libya would be a nation of laws. I immediately said to myself, “Oh dear, pity the poor Libyans. Ours is a nation of laws and look at the mess we’re in.”

I’m always amazed at how much more was known by our forefathers than seems to be known today. Read the federalist and anti-federalist papers and learn how much the founders of this nation knew about the democracies that had existed prior to 1775. These people not only knew what nations had tried democracy but why their democracies had failed. The hope was that Americans would avoid the things that had destroyed those democracies. But look at America’s political establishment today and compare what you see to what the founders said. You will notice that all the things we were told to avoid have been adopted instead. Instead of learning from the past, we have reproduced it.

I am also always amazed at how much progress mankind has made in knowledge and how little progress it has made in social cohesion. In terms of societies, the world today is little different from what it was when the Greeks and Persians were hell bent on slaughtering each other 2,500 years ago. Today we have midget Alexanders attempting to conquer The Near East and Southern Asia just as Alexander attempted to. Alexander was far more successful than we. When he died, his generals divided his conquests into their personal realms but failed to make them into Greek colonies. Instead, the conquerors were quickly assimilated by the conquered. Instead of Palestinians and Egyptians becoming Greeks, the Greek conquerors became Palestinians and Egyptians. Today, in its attempt to export Western democracy, nothing has been accomplished except the installation of governments in Baghdad and Kabul that are as corrupt as those in London and Washington. The British put a corrupt government in India, and the Indian people are still paying the price. So how do these governments control their peoples. Well, they become nations of laws. Yet the language of law that passes for conventional wisdom is mostly meaningless. Nation of laws indeed!

Sometimes this expression is written as a nation of laws, rather than men, but the addition is hardly helpful. Aren’t laws promulgated by men? The meaning of the phrase is at best obscure.

When an expression doesn’t display its meaning on its face, it can mean whatever anyone wants it to. So ask yourself, what this expression’s contrary is. Is it a nation without laws? Perhaps, but somehow that sounds wrong. Has any nation anywhere been without laws? Furthermore, can anyone point to a nation of laws that is better governed than some other kind of nation? Are westerners better governed than Saudis or Mongolians or Tibetans? How would anyone collect evidence to answer the question?

The notion of law itself is not univocally clear. When anyone tries to think clearly about it, it becomes evident that even why it exists is enigmatic. Why do nations promulgate laws? To regulate behavior? No, laws don’t do that; if they did, we would have no prisons. To distinguish between right and wrong? No, laws don’t do that either; if they did the phrase “bad law” would be meaningless. People don’t obey laws because they are promulgated. Laws are obeyed by people because they have no reason not to. When a law is violated and the violator is caught, the police always seek a motive, a reason? People are not inclined to do what they’re told merely because they’re told to. All that laws do is indicate how the establishment wants people to behave. What happens when people don’t want to behave that way? Well, a lot of laws are broken.

And what about law enforcement? What do police do when they engage in law enforcement? They certainly don’t compel obedience. They’re not even involved until a law has been violated.

Since neither the promulgation of law nor its enforcement compels behavior of any kind, why do we have laws? Because they provide justifications for punishing nonconformity, meting out retribution to those who refuse to conform. Law is just a way of telling people how those in control of a society want the society’s members to behave and of justifying penalties as a means of trying to compel compliance. Law is mostly just an instrument of repression. The more laws promulgated, the more repressive the state, and when the police “enforce” laws, only the establishment’s position is being protected. Just look at what the police protect when dealing with the Occupy movement. Certainly not the demonstrators. They are confronted by police clad in more armor and holding more powerful weapons than the American infantryman possessed when he landed on Omaha beach. If laws are instruments of repression, those who enforce them also are instruments of repression. Your neighborhood policeman is not there to protect you, he’s there to get you to conform to the establishment’s wishes and protect the establishment’s values. The same is true of armies. Ask yourself why so many nations that have no belligerent neighbors have armies and how many have used their armies to suppress popular dissent.

Only societies in which social order is lacking require numerous laws. If order exists in a society, law is unnecessary, and if law is necessary, order is absent. Law and order are incompatible concepts. Societies with huge amounts of law are comprised of a lot of people who are unwilling to voluntarily comply with the ruling class’ wishes, so the governments of such societies attempt to compel conformity by enacting laws that micromanage behavior and become more and more repressive. Ultimately such societies collapse.

Non-conformity in the United States is astronomical: Richard Posner in the November 17 issue of the New Republic writes,

the percentage of our [US] population that is incarcerated is the highest of any country in the world … it exceeds by factors of four to seven the percentage incarcerated in any of our peer countries.

In fact, crime in America has reached a level of absurdity. Americans are reaching the point of having to release a previously incarcerated person to make room for a newly convicted one (see California). If things continue as they have, the threat of incarceration will be completely empty and sentences become absurd. So compelling conformity to society’s wishes can not be and has never been effective. (Compare the Stalinist Gulag.)

As a society, the United States is in disarray. Its foreign policies have made it necessary to protect Americans from foreign “terrorists” while our domestic policies have made it necessary to protect Americans from other Americans. But no society that must protect itself from everyone can possibly be said to be well governed. There are many ways to show that the United States is a failed state. It’s use of laws is one of them.

For a society to be well governed, its laws must be ones its people want to obey. Only one kind of such law exists – reasonable, just and moral law. The Ancients knew this too: Isocrates in his speech entitled Areopagiticus said,

Those who are rightly governed … do not fill their porticoes with written statutes but only cherish justice in their souls; for it is not by legislation, but by morals that states are well directed.

No nation full of filled prisons can even pretend to be well directed. Yet many do.

Nations that use repression to exact conformity do so because they have no interest in perfecting society, and that is their greatest fault. Their leaders prefer societies as they are, full of violence, injustice, unfairness, poverty, helplessness, and hopelessness. The people in such societies are easily herded into disparate groups. The cohesion a society requires is shattered. The state becomes not merely ill-governed but ungovernable. Many now claim that America has reached that stage. Without an interest in perfecting society, morality too is a meaningless concept.

The immorality of today’s governments of laws world-wide makes it impossible for the world’s peoples to live together peacefully, and consequently, generation after generation of human beings are regularly sacrificed to protect ruling classes and fulfill their wishes. Things won’t change until governments function for the benefit of people everywhere, not organizations, institutions, or practices.

Throughout the world, governments are doing the opposite. People are being sacrificed for the benefit of a financial system that is bereft of even a tincture of morals. The peoples of entire nations are being asked by their elected “representatives” to sacrifice so that investors who elected no one and who wagered their money and lost can be repaid. The world is standing on its head, a world that cares not a wit for the welfare of people, a world that seeks to preserve a decadent, criminal financial system that benefits the establishment. Even some economists are beginning to see the light: Mark Thoma has recently written, “the point is that we need to focus policy on people, not banks”. Ancient Greek and Roman philosophers said it millennia ago. What the world needs are fewer laws and more morals. People have to be taught the wisdom and advantages of doing good instead of exploiting others; yet the ruling classes have no incentive or inclination to do that.

Eighty-nine percent of Americans say they don’t trust government to do the right thing. What percentage of Afghans do you believe trust their government to do the right thing? Or Brits or French or Russians or Chinese or Italians or Canadians or or or or and or? Nations that don’t do the right thing do what’s wrong. That’s what the world’s nations are doing. The Arab Spring must become a world-wide freezing Winter. Although many sing paeans to it and others pray for it, only when hell freezes over will “peace on earth; goodwill to men” become a reality.

My thanks to Barry S M Condell for reminding me of Isocrates.


John Kozy is a retired professor of philosophy and logic who writes on social, political, and economic issues. After serving in the US Army during the Korean War, he spent twenty years as a university professor and another twenty years working as a writer. He has published a textbook in formal logic commercially, in academic journals and a small number of commercial magazines, and has written a number of guest editorials for newspapers. His on-line pieces can be found on and he can be emailed from that site’s homepage.

Disclaimer: The views expressed in this article are the sole responsibility of the author and do not necessarily reflect those of the Centre for Research on Globalization. The contents of this article are of sole responsibility of the author(s). The Centre for Research on Globalization will not be responsible or liable for any inaccurate or incorrect statements contained in this article.

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Why Free-Market Economics is a Fraud

by Ian Fletcher

Real World Economics Review (December 18 2011)

If there’s one thing everyone in America knows, it’s that free-market economics is true and free markets are best.

After all, we’re not communists, are we? They starved and lost the Cold War because they believed otherwise. And their watered-down European cousins the socialists? More of the same, only less so. Even liberals get this nowadays. All hail the free market!

Trouble is, things “everyone” knows are often wrong. And this is no exception.

It’s time to start getting honest about a very simple fact: Nobody, but nobody, really believes in free markets. That’s right. Not the Republican Party, not the libertarians, not the Wall Street Journal, nobody.

Here’s why: a truly free market is a perfectly competitive market. Which means that whatever you have to sell in that market, so does your competition. Which means price war. Which means your price gets driven down. Which means little or no profit for you.


Naturally, businesses flee perfectly competitive markets like the plague. In fact, the fine art of doing so is a big part of what they teach in business schools.

That’s why businesses use strategies like product differentiation, so their competition is no longer selling the exact same product they are. That’s why they use strategies like branding, so their buyers don’t think the products are the same.

Businesses will, in fact, do almost anything to get out of the hell of pure head-to-head competition.

They don’t do it because they’re crooked; they do it because they have an intrinsic economic incentive to. Always.

This is part of the innate essence of capitalism. It is not a flaw or a defect.  It is part of what makes the whole system go. It is part of what makes capitalism capitalism.

People are the same way. Consider your own career. Why do you get paid more than the minimum wage? (I’m hoping you do.) Probably because you have some skill that everybody else doesn’t have. So you don’t have to bid against every unemployed person in your area to hold your job. Just a few of them. Which pushes your wage above the legal minimum.

That skill of yours is what economists call a “barrier to entry” – entry into the market for your job, that is. And if you’re anything other than a damn fool, you’ll cherish it like your very life.

I sure do.

Now let’s consider the other side of the equation. We’ve looked at free markets in things you sell. Now let’s consider free markets in things you buy.

Here everything gets turned around. If I’m buying something, I want the freest possible market in that product.

I don’t, to take an example recently on my mind, want there to be only one market for live Christmas trees in my town. I want there to be two (or more), and right next to each other so I can easily comparison shop. And I want to shop for more-easily shippable goods on the Internet, if possible, where I can potentially find the lowest price in the entire world.

I want, in other words, every seller’s nightmare. Which every smart seller will use every legal trick in the book to avoid.

As a result, nobody with any wits about them really believes in free markets. People believe in them when it’s in their interest, but not when it’s the other way around.

This is a systemic, structural condition, so anyone who tells you they believe in “free markets” is either lying, stupid, or hasn’t thought the whole concept through properly.

The latter category is quite common. Many people do their thinking about political ideology in an entirely different – and dreamily disconnected – mental space than they use for managing real life.

Frankly, everyone I’ve ever met gets the truth well enough in practice, in their own personal life or in how they run their business, so I just don’t believe anymore that anyone does believe in free markets.

Like any rational person, I’m open to counter-examples if anyone can show me any. But I’ve been asking around for a while on this, and haven’t come up with much.

This is not just an esoteric point, still less yet one more example of the familiar fact that people are hypocrites in politics.

Here’s why it matters. The political players in America today who claim to support free markets don’t. They support free markets in the things their backers buy, but maximum barriers to entry in the things their backers sell.

For example, one of the great unnoticed achievements of the Republicans (and their Democrat collaborators) from Reagan onward has been to gut US antitrust law. Having a monopoly, or a cozy oligopoly with friendly rivals, is one of the best barriers to entry around.

As recently documented in Barry Lynn’s fine book Cornered: the New Monopoly Capitalism and the Economics of Destruction (2010), American industry is now concentrated as it hasn’t been since before the era of Teddy Roosevelt and his trustbusters. (There’s a different kind of Republican for you, by the way. These truths are not liberal or conservative.)

Most Americans don’t realize this has happened because, unlike in the old days of Standard Oil, oligopolies today are cunning about masking their existence.

To take just one example, America’s eyeglass frame industry is now dominated by the conglomerate Luxottica. That’s why frames are so expensive. And any company, like Oakley the sunglass maker, that tries to break into the market? They find themselves shut out of a Luxottica-controlled distribution system. And retailers are now afraid to receive distribution from anyone else, lest they be cut off.

It’s a remarkably well-oiled scheme, and it has its parallels in many other industries. But the average consumer has no idea about this, because the range of brands, if not suppliers, in optical shops remains diverse.

We’re fat, dumb and happy.  We’ve been fooled.  But behind the smiling mask of a hundred labels smirks a single monopolist.

But aren’t there laws against this sort of thing?

Well, there sure used to be, enforced by unsung lawyers and bureaucrats (horrors!) at the Justice and Commerce Departments. Whom nobody considered very glamorous, but who were doing the rest of us a big favor. Talk about forgotten wisdom!

Consider some other examples:

* Tyson in chicken

* Smithfield in ham

* Menu Foods in pet food

* Frito-Lay in chips

* InBev and MillerCoors in beer

* PepsiCo, Coca-Cola, and Nestle in bottled water

* Dickinson in medical devices

* Microsoft in operating systems

* Iron ore (three companies)

* Aluminum

* Cement

* Railroads

* Banking

The number of problems caused by letting monopoly power – whose key consequence is known as “pricing power” – is astonishing.

For one thing, this is a huge part of what ails American farmers. Family farmers are caught between the agribusiness monopolies who push up the price of their inputs (feed, seed, fertilizer, et cetera) and the agribusiness monopolies who push down the price of their outputs. (The economists’ term for the latter is “monopsony”, with an “s”, but it works the same way as monopoly.)

It’s the perfect racket.

And it’s no surprise that on the other side of the equation, “free” market politicians are very diligent in imposing genuinely free markets where this suits the interests of the multinational “American” corporations that fatten their campaign coffers.

This is done, of course, as a matter of high principle and sophisticated economic rationality.  It’s remarkably easy to make wonderful after-dinner speeches about free markets.

Let’s start with labor. Post-Nixon Republicans have genuinely supported just about every policy designed to weaken the pricing power of labor. This starts with weakening unions and letting the inflation-adjusted minimum wage fall, but it doesn’t end there.

You think Ronald Reagan got in 1986, and George W Bush wanted in 2007, amnesties for illegal immigrants because they were nice, compassionate people? To ask the question is to answer it. Whatever the ultimate merits of amnesty as policy, for them it was about cheap labor, plain and simple.

The reality is that the past prosperity of America has never been based on pure free markets – starting with the fact that we had the highest average income in the world in 1776 because the colonies had structurally tight labor markets due to the open frontier. (Europeans and other Old World peoples were trapped by the iron law of wages because they had nowhere to go.)

Free, or nearly free, markets do have their rightful place in many parts of the economy, and it would be foolish to sabotage them. But in other areas – above all, in labor markets – our prosperity was based on pricing power.

A number of areas other than labor also worked better thanks to a healthy dose of pricing power. Try advanced technology, for a start. The patent system, which is not natural, is a fairly recent invention, and does not de facto exist even today in much of the world, is one. Innovation doesn’t come cheap, and without pricing power for innovators, few companies could afford it.

Even the existence of scale economies, which are intrinsic to modern, large-scale, capital-intensive industry, implies markets that are less than free. Why? Because scale economies intrinsically imply a small  number of large producers and thus give rise to oligopoly, with the consequences mentioned earlier.

This is why most other industrialized nations aren’t romantics about free markets, are honest about their frequent nonexistence, and focus their policies on taming the negative effects of oligopoly while capturing the positive ones. They understand, for one thing, that big corporations are necessary but often pirates, and focus on making them share their loot with their crews.

We, on the other hand, live in a state of denial about the piracy.

So the next time someone tells you to believe in “free” markets, just tell them you’ll believe as soon as they do.

When pigs fly.

Pentagon gets the go-ahead for offensive cyberwars (December 22 2011)

Within the 680 pages of the Congress-approved National Defense Authorization Act for Fiscal Year 2012 are a lot of provisions that the American public might be peeved over if they could comb through all the contents.

In addition of establishing the ability for the president to detain and torture his own citizens indefinitely is also a tiny clump of text which will provide for the commander-in-chief to, once and for all, legally attack the enemies of America over the Internet.

Under the controversial defense spending act that is awaiting approval from US President Barack Obama, lawmakers can give the Executive Branch the go-ahead to wage a war over the Web against any nation deemed a threat to America. Specifically, Section 954, “Military Activities in CyberSpace”, states, “Congress affirms that the Department of Defense has the capability, and upon direction by the president may conduct offensive operations in cyberspace to defend our nation, allies and interests”.

The White House originally said that it would veto NDAA FY 2012 if it made it off Capitol Hill, but only days before it left Congress, Press Secretary Jay Carney told the media that the president’s advisers will no longer recommend such action. Thus, the inking of Obama’s name to the document will not just give him the power to pursue computer attacks, but also the ability to detain American indefinitely, employ tactics of torture on prisoners and send his own citizens to foreign institutions for prosecution.

The US has been criticized since the early days of the Information Age over alleged cyber crimes against foreign powers. While there has been no legislation keeping Congress from conducting a battle as such, the passing of NDAA FY2012 will insure that any future fights over of the Web will be spared opposition of those crying foul.

Now, says SANS Institute Director Alan Paller, the Pentagon has “explicit permission to do what needs to be done”. To the Federal Times, however, Paller adds that this also afire [sic: affirms?] “what has been done” by America in the past.

While tensions tighten between the US and Iran over the foreign state’s possible nuclear program, some insiders have already suggested that a cyberwar has begun between the nations. America has already been blamed by many for the Stuxnet computer virus that infiltrated Tehran’s networks last year, and in recent weeks the attack on the Pentagon’s drone aircraft program that has left two multi-million dollars crafts out of America’s control has been considered the effects of a cyber attack from Iran. Regardless of if this battle between the countries originated overseas or not, President Obama can now legally blast through Iran’s blurbs of binary to conduct a cyberwar once allowed by Congress.

As with wars waged with bombs and bullets, the commander-in-chief will still need approval from the House and Senate before going to battle, as outlined in the War Powers Resolution Act of 1972. Only this year, however, President Obama directly violated the legislation and deployed American forces into Libya to aid in a NATO coalition to take down then-leader Muammar Gaddafi. In June, House Speaker John Boehner went after Obama by sending a letter stating, “the House is left to conclude that you have made one of two determinations: either you have concluded the War Powers Resolution does not apply to the mission in Libya, or you have determined the War Powers Resolution is contrary to the Constitution”.

“The House, and the American people whom we represent, deserve to know the determination you have made”, added Speaker Boehner. Those hostilities, which Obama insisted did not constitute a war, went on for months and yielded around 145 missile strikes.

Even then, it was revealed that the president was considering launching a cyberwar with Libya to overthrow Gaddafi. An Obama administration official speaking under condition of anonymity to The New York Times in October said that the US has cyber abilities within its arsenal, but said they are “like the Ferrari that you keep in the garage and only take out for the big race and not just for a run around town, unless nothing else can get you there”. The official also said that the administration contemplated a computer attack on Osama bin Laden before the raid and execution that took down the ex-al-Qaeda leader in May of this year.

Defense Secretary Leon Panetta told a Capitol Hill hearing in July that “The next Pearl Harbor we confront could very well be a cyber attack that cripples our power systems, our grid, our security systems, our financial systems [and] our governmental systems”. This time, America is legitimatized the use of taking the offensive, so the next terrorist attack could be compliments of Uncle Sam.

“It is going to take both defensive measures as well as aggressive measures to deal with it”, added Panetta at the time.

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A Christmas Carol 2011

by James Howard Kunstler

Comment on current events by the author of The Long Emergency (2005) (December 26 2011)

Slouched in woe beside the Christmas tree, a lot of Americans missed the point of 2011: Santa Claus had already emptied his goodie sack before the night of wonders and miracles arrived and was back at the North Pole checking the balance sheet to see if he could raise a little cash selling some remaining assets off to the Blackstone Group or maybe work a leveraged buyout deal with Kohlberg Kravis Roberts. A few elves would have to join the unemployment line, but they could probably get by on half-rations of food stamps. Or maybe Henry Kravis could feed them reindeer steaks … at a discount, as long as they last.

It’s remarkable how the year’s great mega-holiday blowout suspends time and circumstance. I didn’t see how the European banks were going to make it to December 25, but then, heading into the shopping frenzy home-stretch, swap lines opened up between the US Federal Reserve  and the European Central Bank and around $600-odd billion in ZIRP loans flowed to over 200 Euro banks. Maybe that will cover the next two weeks of aggregate debt rollovers, and then what? They can’t even look forward to President’s Day over there – unless we rented out the George Washington and Abe Lincoln brands to them.

Who is still not impressed with the ability of these central banks, and their owner-operators, to keep re-circulating immense loads of notional money? Alas, every wash-rinse repeat cycle leaves the certificates a little paler and thinner, and it won’t be long before they just appear to be blank paper. But rackets as grand and insolent as these would not be possible, except in a culture so estranged from truth that anything goes over without notice. I wonder about that scene around the American Christmas tree, though – the empty space between the floor and the lowest boughs where the gaily-wrapped presents used to appear.

I reckon it will take a few weeks, perhaps through the whole winter, for a sense of swindle to set in among the rooked. You may notice a pervasive undertone of grumbling in the background – and winter is the right time for that – like the eerie, ominous chords of ice groaning in the darkness on a still night around the frozen lake. But eventually come the tumults and torrents of spring. I suppose what baffles many of us in the ethers of bloggery is the apparent failure of that demographic slice acquainted with thinking to register any objection to the travesties and organized brigandages of these times. At any other time in the life of this republic, such folk with active frontal lobes would have identified arrant criminal activity for what it is. Apparently, the nostrums of Paul Krugman are as powerfully narcotic as the raptures of Nascar.

I’m afraid events are a little too far gone now. There was some hope that Mr Obama would restore the rule of law, but he has gone even farther in the opposite direction by disabling even the levers of truth – and in so genial a style that nobody noticed that, either. That thinking demographic slice of the public I averred to must have mortgaged their souls the past three years just to keep on keeping on. Hence, when the truly rooked wake from their zombie sleepwalk, there will be hell to pay for sure. Sometimes an intellectual governor on events no longer even avails, as was the case in the French Revolution. When the lawyers, political theorists, and philosophers got into the act, the blood really flowed.

Will that happen here, in the months and years ahead? I do think so. We’ve grown ourselves a toxic aristocracy of privilege and mega-wealth as cheeky (or worse) than the fops and strumpets of Versailles. I confess, I feel a bit lusty for some Grand Guignol action myself. There are stock figures in The New York Observer’s weekly  “Shindigger” column who I would enjoy seeing treated after the manner of Vlad III, Prince of Wallachia, the celebrated “impaler”. And what better place for it than Zuccotti Park, a much more intimate venue than the agoraphobia-inducing Place de la Concord. You see what happens: in the absence of the rule of law even prudent men turn to the reptile agencies of mind.

The truly interesting thing about America’s romance with our Wild West was that there was always an Unwild East to return to – if you survived adventuring in one piece. Well, first the frontier closed about 100 years ago, and now we wake on Christmas morning to discover that the whole land, from sea to shining sea, has gone feral with rot. Enjoy this nebulous week of suspended animation while it lasts. I’ll be back next Monday with the 2012 forecast.

Mr Kunstler’s books are available at all the usual places. His biography is at

Tweedledoom and Tweedledee

by John Michael Greer

The Archdruid Report (December 21 2011)

It occurred to me a few days ago that this week’s Archdruid Report essay will be posted on a date that future generations may remember, at least in passing. One year from now is December 21 2012, a date onto which quite a few people have piled extravagant labels and grand expectations, but which will get a different moniker after the fact; the one I have in mind is Nothing Happened Day.

No doubt the confidence expressed in that latter phrase will rankle with some of my readers. It’s a safe bet, in fact, that somebody’s going to post an indignant comment here insisting with some heat that the future isn’t predetermined, and a giant comet or the space brothers or something might show up on that day and make me look like an idiot. That’s a very common way of looking at things, and there are contexts in which it’s also more accurate than not; it’s just that this doesn’t happen to be one of them.

Not all predictions, after all, fall within the wiggle room that the laws of nature and the innate cussedness of things give to the future. When somebody announces that a working perpetual motion machine is about to hit the market, for example, they’re quite simply wrong – as wrong as if they announced that tomorrow the Sun will rise in the west and rocks will fall straight up into the sky. There are plenty of uncertainties in physics – more than most people outside the physics profession realize, or so I’m told – but the workings of basic conservation laws on the human scale aren’t among them. If somebody makes a prediction that contradicts those, especially if it relies on some tried-and-untrue gimmick that’s been responsible for an abundance of failed predictions before, you can safely bet your bottom dollar that it will fail again.

The same argument is just as valid, interestingly enough, for predictions that fall afoul of the limits of the cosmos in subtler ways. The example I have in mind here is the logic that drives bubbles and busts in a market economy. Behind every speculative bubble, to be a bit more specific, is the conviction that some class of assets which is rising in price will keep on doing so indefinitely. That conviction is always false, and it’s always disproven within a couple of years, but you can’t have a speculative bubble without it – it’s the delusion that the price of the asset class du jour is just going to keep on zooming upwards that leads otherwise sensible people to sink their net worth into stock or subprime mortgages, and lose it all – and so, with weary predictability, that delusion gets trotted out every time an asset class starts blowing bubbles.

What this means is that once you learn to recognize the signs of a speculative bubble, it’s possible to make exact predictions of future events with perfect confidence. A fair number of people – I was one of them, as longtime readers of this blog will recall – did that with the real estate bubble that popped so catastrophically in 2008. Few bubbles in economic history showed the signs of imminent trouble more clearly than this one, and while all but a tiny fraction of economists missed those signs, they were not lost on less blinkered observers. As Keith Brand over at the HousingPanic blog – a voice of sanity all the way through the bubble – used to say, “Dear God, this is going to end so badly”. He was right; his more specific predictions, and those of a lot of other bubble bloggers, were by and large square on target; and those who derided them – and there were a lot of them, some with impressive credentials – have spent the last three years doing their best to pretend that they didn’t make fools of themselves.

None of this is irrelevant to our present situation, as it happens, because we’ve got another speculative bubble going at full roar in America just now. It’s considerably more focused than the real estate bubble – well, to be fair, the real estate bubble was by most measures the most gargantuan speculative bubble in the history of markets, so just about anything is going to be more focused – but it may yet wreak comparable damage on what’s left of the American economy. The asset at its heart? Shale gas.

The shale gas bubble is the big economic story you haven’t heard about, though that will likely change in the near future. Behind all the hype about limitless shale gas are two simpler and noticeably less impressive realities. The first is that fracking technology applied to shale deposits can free up modest amounts of natural gas. The second and more important is that for the last half dozen years or so, at least, fracking technology applied to Wall Street has been able to free up immodest amounts of credit, providing the funding for an explosive growth in the natural gas drilling industry.

The intersection between those two facts has produced a classic bubble, with wildly inflated reserve estimates bringing a torrent of cheap credit to bear on an asset that can’t support the grandiose claims made for it. Because US mineral rights laws and Wall Street’s expectations both require firms that buy shale gas rights to produce right away, irrespective of the state of the market, natural gas is now selling for a price – wobbling around $3.50 per thousand cubic feet, last I checked – that covers much less than the cost of drilling and extraction. My readers will no doubt recall real estate speculators in the midst of the bubble feverishly buying rental properties even when the rent covered only a small fraction of the mortgage payments; the logic here is exactly the same.

Thus it’s as certain as anything can be that at some point in the fairly near future, probably though not certainly within a year or two, the shale gas bubble is going to pop, major names in the industry are going to go the way of Countrywide Mortgage and Washington Mutual, and gas drilling is going to slump until rising gas prices and declining budgets for exploration and drilling come back into a relationship that makes sense. Mind you, it’s equally certain that the closer we get to the bubble’s end, the more extravagant will be the claims made for the permanence and game-changing nature of the so-called “shale gas revolution”, and the more abusive will be the responses of those whose jobs depend on the bubble to any suggestion that a bubble is in fact what’s going on.

All this brings us back to December 21 2012, and the prophecies of cataclysm or mass enlightenment that have clustered around the end of the Mayan calendar. To start with, of course, the Mayan calendar doesn’t end in 2012. In point of fact, it doesn’t end at all – like most ancient peoples, the Mayans saw time as a circle, not a straight line – and the Mayans themselves didn’t predict anything out of the ordinary for that day; it’s just the rollover date for one of the many cycles of time they tracked. The whole shebang was quite simply invented by the late Jose Arguelles out of a free mix of New Age philosophy, scraps of misunderstood Mayan lore, and the drug trips of Terence McKenna, and it’s thus not surprising that no two people agree on what 2012 is supposed to bring. In many ways it’s become the ultimate inkblot onto which any imaginable fantasy can be projected; since the only thing anybody seems to agree on is that whatever happens that year will be very, very big news.

Look closely, though, and the belief in a 2012 apocalypse has a great deal in common with the belief that asset prices can have an infinite upside. Both beliefs offer grand narratives that replace the ordinary patterns of human existence with a something-for-nothing fantasy. The bubble believers insist that they can have limitless wealth without having to work for it; the 2012 believers insist that they can have the new and improved world they think they want – whether that amounts to a new age of enlightenment, on the one hand, or a Hollywood movie world of heroic survivors blazing away against hordes of roving zombies, on the other – without having to work for it. In either case, what drives the fantasy is the conviction that it makes sense to sit on your backside and wait for the market, or the space brothers, or something else to give you the future you think you deserve.

That’s a very appealing notion for many people in America these days, and it’s worth glancing at the reasons why that should be so. To begin with, of course, a great many people in America do sit on their backsides and get rich. Most of them sit in the corner offices of large corporations, where they spend their time making decisions that, to judge by the results, would be better off made with one of those Magic 8-Balls: “reply hazy, ask again later”. John Kenneth Galbraith pointed out with a commendable lack of restraint in his book The Culture of Contentment (1992) that in America, as a rule, the more money you make, the less work you have to do – and, one might add, the less value you have to produce. Consider the upper reaches of the American banking industry, with their multimillion-dollar annual bonuses: what, other than misery for millions of ordinary people, do they actually produce?

For that matter, the vast majority of those who insist they’re part of the 99% these days benefit hugely from the systematic imbalances that give the five percent of humanity that live in the United States around a quarter of the world’s energy resources and around a third of its raw materials and industrial output. If Americans suddenly had to live on their fair share of the world’s resources and economic output, as I’ve pointed out more than once in the past, we’d have to take the equivalent of an eighty percent pay cut. This implies that, if you’re near the average, only around twenty per cent of your lifestyle is paid for by your own labor. The rest? Most Americans don’t want to know, and will insist at the top of their lungs that wealth can pop into being out of thin air or, well, almost any other absurdity you care to imagine; it beats thinking about just who is paying the costs of their comfortable lives.

Still, I’ve come to think that the most important force driving all these something-for-nothing fantasies is a subtler and more pervasive thing: the faith in progress that is the established but unmentionable religion of the modern industrial world. The belief in perpetual progress embodies exactly the same kind of grand narrative as speculative bubbles and apocalyptic prophecies: such everyday realities as diminishing returns and limits to growth are brushed aside by the conviction that the future must, by some irrevocable law of existence, always be shinier than the past. That’s what motivates the people who pop up on this and every other peak oil-related blog to insist that we can keep on powering our SUVs and Blackberries forever by building thorium reactors or harnessing zero point energy or turning the state of Nevada into one vast algae farm. It’s not incidental, either, that the vast majority of these people aren’t actually doing anything to make these daydreams happen; as with the rest of the something-for-nothing fantasies, reasons to do nothing have an important role in the payoff.

It’s the popularity of faith in progress, in turn, that makes believing apocalyptic fantasies so easy for so many people. If you’ve already bought into the idea that history is a grand narrative that assigns you a privileged place in the overall scheme of things, it’s easy to shift from one grand narrative to another – say, from the one that identifies people in today’s industrial societies as destiny’s darlings to the one that identifies them as wicked environmental sinners in the hands of an angry Gaia, or urges them to wait for salvation from outer space with all the fervor and most of the rhetoric of a Melanesian cargo cult, or claims that the Creator of the cosmos is about to unleash His genocidal fury on every human being who doesn’t buy into some particular religious ideology, or – well, you can fill in the blanks yourself, because at heart, they’re all pretty much the same. In the face of a cosmos that generally fails to cater to our sense of entitlement, they all offer narratives that make believers feel special, promise them some variation on pie in the sky, and offer them a good hearty helping of excuses for not taking action at a time in which action desperately needs to be taken.

These days, the old time faith in progress is becoming increasingly hard to sustain. It’s symptomatic that Gordon Moore himself has stated that Moore’s Law, long central to the rhetoric of technological triumphalism, no longer applies. The vagaries of the collective imagination are not one of the things that can be reliably predicted about the future, but the giddy claims about December 21 2012 have me worried. There’s good reason to think that in the year to come we’ll be facing very hard times – not, please note, the imaginary cataclysms of apocalyptic rhetoric, but the sort of slow, plodding, frustratingly mundane hard times our grandparents or great-grandparents faced during the Great Depression before this one – and in such times the glittering promises of apocalyptic fantasy can be hard to resist.

It’s important, though, that at least some of us resist those promises. The grand narratives we’re discussing have another thing in common – they always fail sooner or later – but the narratives of apocalypse by and large fail sooner, more completely, and with more drastic consequences, than most others. The research for my most recent book, Apocalypse Not: Everything You Know About 2012, Nostradamus, And The Rapture Is Wrong (2011) was among other things a first-class education in the pointlessness of apocalyptic prophecy. There’s nothing in today’s advance press for December 21 2012 that doesn’t have precise equivalents in a thousand similar prophecies for a thousand similar dates when nothing happened. One thing this implies, of course, is that there’s precisely no reason to take this prophecy any more seriously.

As I’ve tried to suggest here more than once, on the other hand, there’s a lot that can be done and indeed has to be done to help individuals, families, and communities deal with the prosaic but potent mix of difficulties our society’s misguided choices have brewed up for us. Sitting on our backsides waiting for the space brothers or the Rapture to solve our problems is no more helpful than sitting our our backsides waiting for progress or the free market or algal biodiesel farms to solve our problems. These two ends of the spectrum are twins – think of them as the Tweedledoom and Tweedledee of the imaginary Wonderland that dominates so much collective thinking these days – and getting past them, it seems to me, is an essential step on the way to less futile responses to a challenging future.

Over the next year, as a result, I plan on celebrating Nothing Happened Day in advance with a new weekly feature: the End of the World of the Week Club. Every week, after the usual (or unusual) essay, I’ll be posting a brief discussion of one of the many apocalypses that slipped past its pull date. It should be entertaining and, just possibly, enlightening. If it manages to help at least a few people step outside the hall of mirrors constructed by all those grand narratives that celebrate our supposedly special status, and begin to notice what the world is like when we stop treating ourselves as the center of attention for the entire cosmos, it may even do some good.

Two notes before we get there. First, I’m pleased to report that I was able to talk Viva Editions, the publisher of Apocalypse Not, into offering a winter solstice present to readers of The Archdruid Report. (Yes, one of the benefits of Druidry is that you get your holiday presents a few days early.) From now until January 1, if you go to the Viva Editions website {1}, buy a copy of Apocalypse Not, and type the code APOCNOT25 on the order form where it asks for coupon codes and the like, you’ll get a 25% discount off the cover price. A happy solstice, or whatever else you celebrate at this time of year, to all!

Second, I’m equally pleased to report that Valerie Green and DanceEntropy will be performing Rise and Fall, a work inspired by my book The Long Descent, as part of their show Eternal Return at the Baruch Performing Arts Center in New York City, January 20, 21, and 22 – details and tickets are here {2}. If you’re located anywhere near New York, or will be there in late January, check it out.


End of the World of the Week #1

Chicago, December 20 1954. A circle of typical American suburbanites gathers in a typical backyard on a typical Midwestern winter evening. As evening deepens, they frantically get rid of every scrap of metal on them, down to the eyelets on their shoes. For the last few months they’ve gathered around a housewife turned channeler, Dorothy Martin, who believes she is in contact with intelligent beings from a distant planet, and has been told that a cataclysmic flood will sweep over North America the next day and destroy everything in its path. Martin and her followers have been promised that they will be lifted to safety aboard a flying saucer that night; the prohibition against metal has something, though no one knows quite what, to do with the alien technologies that they believe will save their lives.

The saucer didn’t show, of course, and neither did the flood. The group scattered over the weeks that followed; Martin left Chicago in time to miss a psych evaluation that probably would have landed her in an institution, took the new name of Sister Thedra, and spent the rest of her life preaching the alien gospel to a mostly uninterested world. The entire affair would have passed all but unnoticed, except that a handful of the group’s members were ringers – graduate students from the University of Minnesota who joined the little cult as part of a study. When Prophecy Fails (1956), the book that came out of that study, has become a classic of American sociological literature, and remains well worth reading today – not least because a great deal of the belief system that’s clustered around the supposed end of the Mayan calendar in 2012 comes from sources not noticeably different from the ones that sent Dorothy Martin on her long strange trip.

— Story from Apocalypse Not


John Michael Greer is the Grand Archdruid of the Ancient Order of Druids in America {3} and the author of more than twenty books on a wide range of subjects, including The Long Descent: A User’s Guide to the End of the Industrial Age (2008), The Ecotechnic Future: Exploring a Post-Peak World (2009), and The Wealth of Nature: Economics As If Survival Mattered (2011). He lives in Cumberland, Maryland, an old red brick mill town in the north central Appalachians, with his wife Sara.

If you enjoy reading this blog, you might want to check out Star’s Reach {4}, his blog/novel of the deindustrial future. Set four centuries after the decline and fall of our civilization, it uses the tools of narrative fiction to explore the future our choices today are shaping for our descendants tomorrow.






Outsourced from the Law

Do Private Military Contractors Have Impunity to Torture?

by Laura Raymond

CounterPunch (December 21 2011)

Unbelievably, in 2011 this question has not yet been settled in the courts of the United States. Human rights attorneys are headed back to court in the coming month to argue that, yes, victims of war crimes and torture by contractors should have a path to justice.

Attorneys from my organization, the Center for Constitutional Rights (“CCR”), along with co-counsel, are representing Iraqi civilians who were horribly tortured in Abu Ghraib and other detention centers in Iraq in seeking to hold accountable two private contractors for their violations of international, federal and state law. By the military’s own internal investigations, private military contractors from the US-based corporations L-3 Services and CACI International were involved in the war crimes and acts of torture that took place, which included rape, being forced to watch family members and others be raped, severe beatings, being hung in stress positions, being pulled across the floor by genitals, mock executions, and other incidents, many of which were documented by photographs. The cases, Al Shimari vs CACI and Al-Quraishi vs Nakhla and L-3 aim to secure a day in court for the plaintiffs, none of whom were ever charged with any crimes.

The Department of Justice has thus far failed to prosecute any of the contractors involved, so the only path currently available for any accountability is through these human rights lawsuits.  However, after years of litigation, the allegations of torture by contractors in these cases have still never been seriously examined, much less ruled on, by the courts.  None of the plaintiffs in any of these cases has yet to have his or her day in court to tell their account of what they suffered. The reason is because the private military contractors have raised numerous legal defenses – many of which the plaintiffs’ lawyers have argued are plainly inapplicable to private corporations – which have kept the cases from moving into the discovery phase, where the nature of the contractors obligations, actions and oversight, as well as what happened to the plaintiffs would be examined in detail. So far, CACI and Titan/L-3 have focused the courts on any question but whether the plaintiffs were tortured. As CCR and co-counsel summarize the question in their brief in Al-Quraishi vs Nakhla and L-3:

Are corporate defendants entitled to categorical “law of war” immunity for their alleged torture and war crimes when such a proposed immunity runs counter to settled understandings of the law of war and centuries of Supreme Court precedent, and would give for-profit contractors more protection from suit than genuine members of the US Armed Forces?

This week, CCR and co-counsel filed briefs that argue the cases must go forward. Additionally, yesterday a number of other human rights organizations along with a group of retired high-ranking military officers are filing supporting amicus briefs to add their voices to the chorus of concern over contractor impunity. The military officers’ brief argues that, “given that employees of civilian contractors indisputably are not subject to the military chain of command, and therefore cannot be disciplined or held accountable by the military, it makes little sense to extend to them such absolute tort law immunity for their misconduct”.

This legal battle is taking place as the United States is outsourcing war at a rate beyond anything ever seen in our history. During the wars in Iraq and Afghanistan the number of contractors has at times far exceeded the number of soldiers.



Now, as the US ends the war in Iraq, the State Department is reporting that it has been in the process of tripling the number of armed security contractors it will employ in Iraq to provide security for the thousands of State Department employees that will remain to work in what is now by far the largest US embassy in the world.




It’s important for people to understand what is going on in the courts regarding this current litigation not only because the torture survivors need justice, but also because these cases have wide implications beyond this particular situation.  The corporations involved argue that they should be exempt from any investigation into the allegations against them because, among other reasons, our federal government’s interests in executing wars would be at stake if corporate contractors can be sued.  This is incredibly flawed logic; the lawsuits are for acts that are far outside the “laws of war” and these are crimes that are not in the government’s interest.

They are also invoking a new, sweeping defense that first appeared two years ago in a separate case CCR and co-counsel brought against these same corporations, Saleh vs Titan. The new rule is termed “battlefield preemption” and aims to eliminate any civil lawsuits against contractors that take place on any “battlefield”. Among the numerous alarms this should set off is the fact that in the US’ War on Terror it is argued that many places far from any actual war-zone are now battlefields. Indeed, a detention center in Iraq filled with civilians who were never charged with any crimes, which is what we’re talking about in these current cases before the court, should not be considered a battlefield.   And acts of torture, which is what is at issue in these cases, cannot be characterized as “combat”, which is what this defense allows.

Think about what it would mean for private military contractors to be immune from any type of civil liability, even for war crimes, as long as it takes place on a so-called battlefield during this time of unprecedented use of contracting and when the term “battlefield” is being stretched to meaninglessness in the ever-expanding US War on Terror. Anyone and everywhere could be a target. That is what is at stake here. Everyone who cares about human rights should be paying attention.

In giving their reasoning for dismissing these cases, the Fourth Circuit panel that originally heard the case (over a strong dissenting opinion) expressed its fear that cases like these would “undermine the flexibility that military necessity requires in determining the methods for gathering intelligence”. But this is exactly the point. No one should ever have the “flexibility” to commit war crimes, rape and other forms of torture. There absolutely must be consequences for these violations. If there are not, courts will essentially be saying anything goes – even the most sadistic and brutal torture – if you are a private military contractor.


Laura Raymond is Advocacy Program Manager at the Center for Constitutional Rights.