Louis Proyect: The Unrepentant Marxist

December 21, 2019

Pete Buttigieg and the $900 bottles of wine: what they tell us about capitalist politics

Filed under: capitalism,two-party system,water — louisproyect @ 8:27 pm

Last Thursday, during the Democratic Party presidential candidate debate, Elizabeth Warren took a dig at Pete Buttegieg, the gay, neoliberal Mayor of South Bend, Indiana:

So, the mayor just recently had a fund-raiser that was held in a wine cave, full of crystals and served $900-a-bottle wine. Think about who comes to that. He had promised that every fund-raiser he would do would be open-door, but this one was closed-door. We made the decision many years ago that rich people in smoke-filled rooms would not pick the next president of the United States. Billionaires in wine caves should not pick the next president of the United States.

Buttegieg defended himself by pointing out that she too has taken donations from rich people and that he, unlike her and the other people on stage with them, was no millionaire. Clearly anticipating some static over his unabashed sucking up to billionaires, he told her:

Senator, your presidential campaign right now as we speak is funded in part by money you transferred, having raised it at those exact same big-ticket fund-raisers you now denounce. Did it corrupt you, Senator? Of course not. So to denounce the same kind of fund-raising guidelines that President Obama went by, that Speaker Pelosi goes by, that you yourself went by until not long ago, to build the Democratic Party and build a campaign ready for the fight of our lives, these purity tests shrink the stakes of the most important election. We’d like to bring everyone in.

Warren, trying to triangulate between Bernie Sanders’s grass-roots fundraising and the sort of feeding at the trough that routinely goes on in Democratic Party campaigns for President and Congress, had no answer for this. She is clearly a stealth candidate who, if elected, would probably cave in to corporate interests willingly. In the unlikely event that Sanders was elected, the caving would be unwillingly.

With much of the controversy revolving around the ostentation of the fund-raiser, much more has to be said about Craig Hall who was upset over being in the spotlight. Hall, a real estate and winery baron who has donated more than $2.4 million to Democratic Party candidates over the years, felt like they were picking on the wrong guy: “These people don’t know who they’re talking about when they throw me in the class that they did. As much as it’s frustrating, it’s more disappointing to me that Democrats are fighting with each other when we have a common goal, which is to get back to the White House.”

Like most billionaires, Hall is involved in philanthropy, which means that for every $100 he gets in tax cuts, he gives “worthy causes” $10 off the top—and tax-deductible, if you please. Unlike his fellow real estate magnate, the grubby Donald Trump, Hall runs what practically sounds like it was based on Murry Bookchin’s writings: “[W]e strive to do business responsibly. This includes developing environmentally sustainable buildings, encouraging employee volunteerism through paid time off‑, and operating our business with unwavering integrity, morality and a commitment to truth. We believe in doing what is right over what is easy.”

In the mid-80s, Hall was implicated in a crooked deal to avoid bankruptcy with Jim Wright, a member of the House of Representatives from Texas who was as powerful as Nancy Pelosi in his day. Like the 2007 subprime mortgage crisis, the 1980s Savings and Loan crisis was all about gambling on real estate. Craig Hall was Texas’s biggest real estate mogul, who had financed his empire with high-interest loans from S&L’s that were never supposed to get into that kind of business, just as banks 30 years later were not supposed to get involved with mortgage-based securities.

Hall used his massive donations to the Democratic Party to influence Jim Wright’s intervention on his behalf. Overseeing the efforts to keep the failing S&L’s afloat was a government agency called the Federal Home Loan Bank Board. In a strong-arm effort reminiscent of Trump’s phone call with Zelensky, Wright told the regulators to look the other way when it came to Craig Hall, who was having trouble making payments on more than $1 billion in mortgages to some 20 S&Ls. If he couldn’t pay, the S&L’s would come tumbling down like dominos, which were under the supervision of the Federal Savings and Loan Insurance Corp. (FSLIC).

Like Hall, the FSLIC was on thin ice. When the S&L crisis was just beginning in 1986, the FSLIC asked Congress for permission to sell $15 billion in bonds to recapitalize their insurance fund. The “FSLIC recap bill” was approved by the House and headed for a vote.

In late September of 1986, Wright called the Federal Home Loan Bank Board Chairman Edwin Gray and asked him to lay off Craig Hall using the same kind of indirection mafia bosses and Donald Trump use. Gray told House Ethics Committee investigators that Wright did not ask for anything specific, but “anybody who has worked in government for very long knows that when the soon-to-be speaker of the House of Representatives is asking you to look into it, its not just anybody.”

On September 26, Wright put a hold on the bill to recapitalize the FSLIC. As Hall himself put it, “Congressman Wright has in some manner held up the bill and … it appeared it somehow related to us.” Like the cut-off of military aid to Ukraine, Wright’s pressure had the desired effect. Hall got new loans at tax-payer expense and dodged bankruptcy.

One of the other types of pressure that Wright used was to get regulators fired if they were too uppity. Edwin Gray told ethics investigator about one instance:

And so I received a call and it basically was another call about the treatment of Texas S&L; institutions. And then (Wright) said that he understood that (names a federal bank regulator in Texas)) was a homosexual. And he understood from people that he believed and trusted (that the regulator) had established a ring of homosexual lawyers in Texas at various law firms, and that in order for people to deal with the Federal Home Loan Bank supervision people, they would have to deal with this ring of homosexual lawyers.

Wright’s ham-fisted interference eventually led to the end of his career, which unfortunately doesn’t seem in the cards for Trump. He resigned as House Speaker on May 31, 1989, the first on account of a scandal.

Like all financial crises, the S&L crisis petered out and Hall began making out like a bandit again. He wrote a book in 1990 titled “News of My Death Was Greatly Exaggerated: How I Survived the Texas Depression: My Financial Strategies for the ’90s.” Somehow I doubt that it gets too deeply in Jim Wright’s role in keeping him alive.

Once the cash started flowing again, Hall began using it to buy protection if disaster fell again. He got added to Vice President Al Gore’s rolodex and attended a White House coffee gathering. President Clinton nominated his wife Kathryn to serve as ambassador to Austria, undoubtedly because the Halls contributed more than $240,000 to the Democrats during the 1996 election cycle and not because of her expertise in Middle European diplomacy. The Center for Public Integrity’s Charles Lewis said, “The fact that a sitting Vice President would call someone whose failed S&L cost the taxpayers hundreds of millions of dollars — that’s a metaphor for the whole campaign fundraising scandal itself. … This person Hall should be a pariah that politicians would run away from.” The Fort Worth Star-Telegram reported that more than $100,000 of the Hall’s contributions to the DNC came after the Halls received a call from Gore’s office in April 1996.

Showing the same inclination to feed at the billionaire’s trough, Hillary Clinton made a pilgrimage to the Halls’ winery in 2015. The invitation-only event, with tickets reportedly ranging from $250 to $50,000, targeted the same rich bastards that showed up last Thursday to greet Buttegieg.

As for the winery, the Halls run the same jive that they run on their real estate business: “Responsibility is one of our core values. This translates to developing LEED certified buildings, sustainable farming and operating our business with unwavering integrity. We are constantly innovating to turn our words into actions.”

The reality contradicts this bullshit as Wine Business reported last year:

A Napa County Superior Court on Tuesday tentatively ruled against the opponents of a vineyard slated to be developed above the Napa Valley floor.

Judge Thomas Warriner’s tentative ruling in favor of Napa County is not final as lawyers representing environmental groups and a residential water district continue to argue their case in court.

Attorneys for Living Rivers Council, the Center for Biological Diversity, the Sierra Club and Circle Oaks County Water District seek to overturn Napa County’s 2016 decision to approve Kathryn and Craig Hall’s plans to develop Walt Ranch on Atlas Peak. The attorney for the Center for Biological Diversity also represents the Sierra Club.

Walt Ranch is the 200-acre vineyard development long proposed by Craig and Kathryn Hall of HALL Wines.

Like Stewart and Linda Resnick, the pistachio and pomegranate juice billionaires, the Halls have little interest in how their wine-making impacts working people. They proposed removing nearly 23,000 trees to develop 271 acres of vineyards on the 2,300-acre Walt Ranch, which occupies a sensitive watershed. Geoff Ellsworth, a member of Wine and Water Watch, told the Food and Environment Reporting Network: “We’re in the middle of a business war. This big corporation is competing against that big corporation, and the collateral damage are the citizens and the flora and fauna.” The worries are the same as when farmworkers living near the Resnick plantations discovered that they often lacked enough water pressure to take a shower or flush a toilet:

While the Napa Valley conjures images of idyllic winery estates and luxurious lifestyles, all is not well in wine country. A growing number of residents decry the region’s proliferation of upscale hotels, the wineries that double as event centers and the strain on Napa Valley’s water resources. In the wake of California’s unprecedented drought, the city of Calistoga—like others—has been under mandatory water rationing. “We’re told not to flush our toilets,” says Christina Aranguren, a vocal critic of the proposed resort, whose guests will be under no such restrictions. “I want to know where the water will come from.”

Yeah, where will the water come from? Who cares, as long as the wine keeps flowing.

 

November 10, 2019

Capital in the 21st Century

Filed under: capitalism,Film,Keynesianism — louisproyect @ 8:21 pm

This minute, the documentary “Capital in the Twenty-First Century” is playing at the SVA Theater as part of the DOC NYC film festival. Obviously, this review is behind the curve but you will still be able to see it in theaters in April 2020. It is based on Thomas Piketty’s 816-page book of the same name, with Piketty reprising the same arguments found there. Since I doubt that many of my readers, including me, have read Piketty’s book, the film is must-viewing if for no other reason that it will familiarize you with the post-Keynesian foundation upon which the book rests. Besides Piketty, you will hear from other economists and social scientists who are trying to figure out a way to combat neoliberalism without going the whole hog and becoming—god forbid—Marxists. This includes among others Joseph Stiglitz, Gillian Tett of the Financial Times, and Suresh Naidu, a youngish Columbia University professor who organized a conference there celebrating the work of Samuel Bowles and Herbert Gintis. Bowles and Gintis are famous (or infamous) for their criticisms of “orthodox Marxism”, i.e., Marxism. I have a strong suspicion that post-Keynesianism or post-Marxism (about the same thing really) will give you a leg up in a tight job market in the academy.

The film begins with Piketty reminiscing about a trip he took to Eastern Europe and Russia just after Communism collapsed. This weighed heavily on his mind since it dramatized the vulnerability of society when its economic foundations begin to be eaten away, as if by termites. The lessons he drew were a major inspiration for his book that essentially warned about capitalism’s vulnerability as its elites develop the same kind of indifference to the pain as that of the bureaucracy toward those on the bottom of the “Communist” world. To help him drive home these points, he includes another expert not ordinarily associated with post-Keynesian thought, namely Francis Fukuyama whose reputation was based on the idea that liberal capitalist democracies would soar above the wreckage of the USSR and other post-capitalist societies. In an interview with the New Statesman in October 2018, Fukuyama echoed the main idea found in Piketty’s writings, as well as Stiglitz, Krugman, et al. Asked how he viewed the resurgence of socialism in the USA, he replied:

It all depends on what you mean by socialism. Ownership of the means of production – except in areas where it’s clearly called for, like public utilities – I don’t think that’s going to work.

If you mean redistributive programmes that try to redress this big imbalance in both incomes and wealth that has emerged then, yes, I think not only can it come back, it ought to come back.

For the first half of the film (roughly 60 minutes), we get a history of capitalism from the 18th century to the current day. It is very informative and of great use even to people like me, who believe that New Deal economics is never coming back.

The chief worry of Piketty is that we are returning to the 18th century when the common folk lived in terrible conditions. Economist Kate Williams claims that the average life expectancy was 17 years at the time (it was probably more like 40, which of course is also a horrible sign of inequality). It was also nearly impossible for a commoner to become middle-class or wealthy, a function of fortunes being handed down from generation to generation. A large part of Piketty’s critique of capitalism is its susceptibility to dynasty-building of the kind that existed under feudalism. Drawing upon a rich trove of stock footage and old movies, we see a snippet of a scene from “A Tale of Two Cities” that shows Basil Rathbone as a French aristocrat sneering at the idea that ordinary people should get a fair share of society’s wealth. To reinforce this point, we see excerpts from “Les Miserables”, a very good film based on the Victor Hugo novel.

Finally, relief came in the form of new societies created in virgin territories in the British colonies like North America, New Zealand (where the film was produced) and Australia where the class system did not have the chance to consolidate, or at least not to the extent of Europe. Unfortunately, the film does not refer to the fate of the indigenous peoples but frankly there’s not much attention paid to them in Marx either.

As capitalism matured in the 19th century, its growth slowed down because of rivalries between various empires, England and France the foremost. Eventually, the competition became so extreme that the solution took the form of intermittent warfare and, finally, the Great War that led to millions dying and capital going up in smoke. Piketty argues that one good thing came out of it: the dissolution of feudal privilege that had persisted under capitalism, particularly with the Junkers ruling class in Germany.

The Great Depression and WWII had the same contradictory effect. On one hand, it caused death and suffering. On the other, it led to social democratic reforms that allowed working people to be entitled to health, education and housing benefits that never would have existed in the 18th or 19th century. Once again, the film brackets out an important factor that would help make this understandable, namely the existence of the USSR as an alternative to the capitalist system. Would the New Deal, England under Labour, Sweden, et al have existed without the communist alternative putting pressure on the ruling classes? I would argue not. Suresh Naidu, the most impressive of the post-Keynesians heard from in the film, is also honest enough to say that the prosperity that made such programs possible owed a lot to WWII that put people back to work and fostered economic growth, a function of military Keynesianism, the only fruitful application of Keynes’s theories.

The second half of the film examines the worrisome tendency of capitalist economies to revert to the 19th century and earlier as all of the gains of the welfare state are eradicated. A good part of this is devoted to a searing critique of the Reagan and Thatcher regimes that set in place the neoliberal model that has led to the gross inequalities of today, including under New Labour and Clinton-type presidencies. Piketty maintains that the model was built on a lie. Workers were told that even if the gap between their income and the capitalist class would grow as a result of trickle-down economics, they would still be better off because the pie would also grow exponentially. The workers slice might decrease from 25 percent to 20 percent but if the pie doubled, they’d still be better off. Piketty, Stiglitz, et al supply the statistical evidence that shows most workers living only slightly better than decades ago, with the poorest among them even having a loss of real income.

The film ends with an appeal for political action that might reverse the by now 50-year decline of working class security and income. In April of this year, Stiglitz sat down with the dreadful Andrew Ross Sorkin of the NY Times to discuss the renewal of interest in socialism. Stiglitz reassured Sorkin that Sanders’s agenda is not focused on “ownership of the means of production” or a statist system. Instead, “He’s really concerned about the social contract of health, education.” As for Stiglitz, he also supports a return to the good old days of liberal democracy but under private ownership as indicated by the title of his new book “People, Power and Profits: Progressive Capitalism for an Age of Discontent.”

What Piketty, Stiglitz, et al don’t seem to grasp (or grasping it, disavow it) is the structural barriers to liberal democracy or even social democracy that Stiglitz correctly described as having little to do with socialism. The film pointed out that the pie has not been growing, a function no doubt of the tendency of the rate of profit to decline. In areas where it has been growing, it has been at the expense of democracy such as in China. As Suresh Naidu pointed out in the film, it was WWII that broke the back of the Great Depression, not New Deal measures.

WWIII anybody? No thanks.

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