by Alex Foti

Precarity in the Great Recession

The Great Recession is making millions of precarious workers unemployed. Millions of precarious youth, women, immigrants are being made redundant. The crisis is swelling the ranks of the precariat, the new class created by neoliberalism which is the sum of those who are either unemployed or working under non-standard, temporary, part-time contracts in service, creative, knowledge industries. Those responsible for the crisis — big banks, investment funds, free-market economists and governments — whitewash and greenwash without shame hoping to go on with business as usual. Governments are giving trillions to the bankers and peanuts to the precarious. Riots and protests are spreading as a result, also resisting rising securitarianism and racism, but the fight against political and economic power to defend society and nature has just begun.

This historic crisis parallels the Great Depression in scope, if not in depth (extraordinary monetary expansion has so far cushioned the blow of the financial crisis), and will have similarly far-reaching socioeconomic and political consequences. From the ashes of early 20th century free-market liberalism, the Fordist-Keynesian mode of regulation emerged, ensuring working-class economic inclusion into mass consumerism via high wages and social integration via extensive welfare-state provisions. From the ashes of early 21st century free-market liberalism, a new form of social and political regulation of the economy will have to emerge if the crisis is to find a democratic solution. In fact, just like in the interwar period, especially in Europe, the danger of authoritarian and xenophobic solutions to the Big Crisis is significant.

Today’s crisis marks the end of Neoliberal-Hayekian regulation, as imposed over the course of the 1980s and 1990s, thanks to the seminal political work done by Reagan, Thatcher, Deng, Pinochet in the two hemispheres. But this once-in-a-century crisis occurs in the scary geoclimatic setting of Anthropocene, the man-made geological age triggered by the extremely rapid burning of fossil fuels in order to feed capital accumulation. The climate crisis is becoming frighteningly apparent, from polar caps to river deltas, from temperate plains to tropical forests. Millions of species are dying, millions of people are being displaced by droughts and floods. From the likes of Gore and Stern it’s hard to expect a veritable solution to the causes of climate change, since this would mean to confront the major carbon emitters, such as energy conglomerates, manufacturing corporations and their logistics, the aviation industry, fast food and agribusiness, mass tourism, in essence to shelve global, free-trade capitalism as we have known it since the Fall of the Wall. Turned liberals, most greens today just lack the political teeth needed to confront squarely corporate capitalism for its double responsibility in the economic and ecological crises. If anything, they are for green capitalism. So it falls onto the anarchists, feminists, precarious, immigrants, on those radical actors that have a stake in subverting the present financial order, to fight for real climate justice, to bring the economy back under the control of polities and communities, so that bioregional and atmospheric balances and constraints are respected.

The Great Recession, just like the Great Depression three generations ago, is a major demand crisis leading to mass unemployment and underemployment. It won’t be solved until the collective fruits of social productivity finally accrue to the employed and unemployed instead of managers and financiers. This requires massive fiscal redistribution from the tiny élites to the precarious multitudes. Free public health and education, basic income and leisure expansion, green jobs and new labor and property laws are the first-aid tools to address the crisis and ferry us toward a postcapitalist society, where corporations and investment banks are dismantled, credit is socialized, copyright is abolished, culture and knowledge are freely shared, the global economy is regionalized, food distribution networks are localized, energy production is decentralized, and political power is federalized, in regional and transnational federations of autonomous cities and liberated lands.

The issue of the distribution of productivity is crucial. The structural cause of the Great Recession lies in the failure of neoliberalism to distribute the productivity growth afforded by the digital revolution to large strata of society, who then had to take on debt to finance consumption of the new informational goods and services. Green capitalism wants to solve the economic crisis via green jobs and a new welfare system, but it will succeed in its task, only if it manages to widely redistribute what Negri and Hardt call “common wealth” i.e. the backlog of collective inventions, creations, relations and desires presently appropriated by Gates, Murdoch, Berlusconi, and the like.

The debate is open among leftists about whether green capitalism is economically sustainable (possibly so), and if so, if will lead to ecological sustainability (hardly so). Ecomarxists, for whom the labor theory of value is dogma, believe that the ecological crisis entails a squeeze in the rate of surplus value and thus a tendency for the rate of profit to fall*. Empirically, if productivity declines because of the ecological crisis, due to increases in the cost of energy or to the internalization (inclusion in the business cost of products and services) of the environmental damages caused by the economic process, then ecomarxists are right and green capitalism is unsustainable due to falling profits. If, conversely the ecological crisis triggers a green technological revolution, the rate of profit can stay equal as wages rise, so that green capitalism can create its own demand. In simpler words, if green capitalism is just greenwashing, i.e. marketing hype unsupported by hard facts, ultimately the ecological crisis will end up endangering capitalist accumulation leading to the the common ruin of today’s contending social classes: the global élite and the transnational precariat. If, on the other hand, green capitalism is the harbinger of a fourth industrial revolution (first: steam and textiles; second: electricity, steel, chemicals; third: electronics, networking; fourth: genomics, greenomics), productivity will rise and this would create a favorable context for victories on wages and labor conditions, as well as ease political resistance to income redistribution via progressive taxation (when taxes hit the rich proportionally more than the poor; under neoliberalism taxation has instead been regressive). Another way of looking at this is to consider the fact that the price of a good is equal to the wage rate divided by productivity (production per hour worked) multiplied by one plus the rate of profit, the margin that rewards the entrepreneur and pays interest to the banker. At constant prices, if productivity increases because of a rise in energy efficiency, either the wage rate rises or the rate of profit must increase, or a combination of the two factors§.

Contrary to what Marx predicted, improvements in wages and living standards have been made possible under capitalism thanks to the combination of much-sweated technological innovation and hard-fought social redistribution. Have these improvements come at the cost of bankrupting the biosphere? It will end up like that if social resistance to capitalism is not strong enough to decarbonize the economy. In other words, if climate anarchists lose the incipient struggle with green capitalists. If movements lose the fight for climate justice, Earth might become like Venus. From the experience of the poor and precarious of New Orleans, we know the horrors that lie in store when climate disaster strikes a class-polarized urban society. The climate question conceals a social question, because the precarious stand to lose the most in the biocrisis. On the other hand, precarious need to be empowered to be effective antagonists to global financial élites; only if they secure income and leisure, they can have the freedom to erect the postcapitalist society. Precarious-to-precarious community solutions to urban habitats, energy, food production and social housing will have to become increasingly common as answers to unemployment and environmental crisis. Whole cities can be redesigned by expanding self-organized groups of precarious ecohacktivists living from their collective labor and the sharing of what’s produced and exchanged in their social networks.

If climate justice movements lose the battle that is taking tens of thousands to Copenhagen in December and thus fail to impose their collective will onto government and corporate technocrats, then by the middle of this century most of us will be either drowned or toasted. What’s at stake is neither the survival of capitalism nor industrialism, but of digital civilization and the promise of the universal access to information, knowledge and culture that the switch to postindustrialism has made possible.

Industrialism, informationalism, green capitalism

Green capitalism cannot be simply liquidated as a marketing ploy. It embodies the faction of the global bourgeoisie that understands the reality of climate change and of its own declining political legitimacy in the face of the banking crisis and the consequent end of neoliberal/monetarist hegemony. Capital does seek now to be submitted to a light top-down, as opposed to bottom-up, form of regulation, which, while warranting the survival of megabanks and megacorporations, tries to accommodate ecological imperatives and social needs. Fossil capitalism, on the other hand, is purely reactionary. It has long denied the existence of man-made planetary heating and it is now lobbying to seize upon the spaces opened by geopolitical (Iraq, Sudan etc become up for grabs) and ecological (the North-East and North-West passages are open) disasters. It has spawned the growth of an oil-military complex that is the biggest threat to the peace and welfare of humankind. The open defeat of Bushism by Obama’s civil society (young, women, Blacks, Latinos, churches, unions, community movements) signals the decline of petromilitarism and the rise of green capitalism. The new US administration is a definitely a friend of global capitalism and to ensure its viability is putting forward a set of policies amounting to eco-keynesian regulation lite, to salvage what’s left of the hegemony of US banks and corporations over the world economy. Obama’s economic policy is keynesian because it provides a demand stimulus via deficit spending: in a deep recession, banks are not lending, firms are not investing, consumers are not spending, so the state must step in to provide spending power and capital for investment. But it is eco- in the sense it provides incentives to augment energy efficiency of the economy and de-carbonize part of its power production.

Original Fordist keynesianism was incredibly wasteful in energy terms. Oil was made so cheap and consumer goods so abundant that the biosphere was trashed in the short space of three decades (1945-1975). The Soviet bloc, placing an increasingly oblolescent emphasis on heavy industry and lacking societal counterbalances to communist policies of industrial might, was proportionally more wasteful, producing a larger share of nuclear and environmental disasters. In their ideological competition, both the US and the USSR strove to empower their working classes as loyal citizens, producers and consumers. Industrialism was their common structural base. However, it will be wrong to look at the present ecological crisis as the crisis of “industrial society”. In fact, over the last three decades, informationalism has replaced industrialism as the dominant system of accumulation. Indeed the failure of command economies to perform the transition from industrialism to informationalism, from the electrical engine to the electronic chip, is viewed by contemporary sociology as the structural reason behind the implosion of the Soviet Union. Now the inherited neoliberal form of informational capitalism is morphing into green capitalism. The evidence for this is mounting: from Silicon Valley becoming a hotbed for solar to green sectors soon surpassing aerospace and defense in economic weight, according to a recent study made by the international bank HSBC. Industrialism is dependent on oil, coal and other hydrocarbons in a way that informationalism is not. Steel needs coal, the Net doesn’t. The problem with green capitalism is that the scale effect is likely to more than offset any improvements in energy intensity, so that emissions continue rise. Left to its own instincts, green capitalism would be ecologically unsustainable. A steady-state market economy can only come into being through extreme regulation from below and above.

Yet, economic growth only has a meaning if measured in money terms, not in physical terms. So, in principle a socially regulated form of capitalism can be envisaged that still grows in dollar terms (and this overcomes the economic crisis), but not in entropic terms. A stage of the economy where immaterial growth becomes the norm, along with the maximization of collective knowledge and social well-being, rather than corporate profit or private wealth. An economy where people mostly exchange immaterial services rather than material goods. In other words, a world where there’s money to be made in the economy, because informational as well as green jobs are available in large and increasing numbers. The question of growth must be reconsidered, and is in fact being reconsidered by economists and politicians in the light of the crisis: GDP will be soon replaced by alternative indicator of economic performance and socio-environmental progress.

Today, the décroissance approach is likely to fall on deaf ears, because it preaches parsimony to a population which is being precarized by the global recession. Climate justice is definitely a stronger rallying cry for all the forces resisting capitalist domination today, one that already resonates from North to South. If the overdeveloped North must certainly decrease material consumption, the recovery from the crisis can only occur if there’s more effective demand in euro, dollar, yuan terms in the hands of those with less money in their pockets and thus likely to spend it when given the opportunity: the poor, women, precarious and/or immigrant youth. Social regulation must ensure that this extra money is not spent at the mall but in ways that are thermodynamically sound: into sustainable mobility, local agricultural produce, reforestation, and renewable energy deployment, for example. Social spending must be used to strengthen the social networks of solidarity within and across generations and lands. The precarious strata and the informal, marginal sectors of society are the ones that stand to benefit the most from fiscal redistribution. Only generalized conflict can emancipate the precarious and lead to sharp increases in social spending.

Like the wobblies a century ago, the precarious must organize across genders and ethnic groups to create their own unions and fight for a much larger slice of the pie. If the pie’s shrinking like Latouche wants, as people save more and consume less, many more will be made jobless and the precariat is gonna end up in an even more precarious condition than under neoliberalism. It’s true that capitalism is addicted to growth, but this is monetary growth, not necessarily an increase in the amount of “stuff” produced.

The distinction between bounded material growth and unbounded immaterial growth is useful to conceive a social scenario that is postcapitalist and progressive. Politically, this would also be a society where the different aims of anarchosyndicalists (constructing a postcapitalist egalitarian commonwealth) and anarchogreens (creating a thermodynamicist society of peers on a biodiverse planet) can be reconciled. It’s a social scenario where the autonomous, pirate, queer practices of the immaterial precariat are able to defeat the political offensive of green capitalism and drive the transition toward postcapitalism, an economy meeting ecological and social targets where grassroots experimentation is encouraged and regulation is horizontal and bottom-up, rather than vertical and top-down. To address both the economic and ecological crisis in my view we would have to push for a service, relational, commons-based peer-production economy, whose aim is the growth in knowledge, leisure and culture as opposed to the growth of goods and material wealth. This would be a society based on ecological remediation, immaterial accumulation and the maximization of happiness among its participants, rather than on material opulence for a minority of people.

Synopsis so far: we have an economic and ecological crisis of capitalism where class and climate struggles become central. The social actors of class struggle are new, since capitalism is no longer industrial, but has become informational. They are the precarious, those whose rights and talents have been immolated on the altar of labor flexibility and financial profit. The precarious in the informational economy must embrace the climate question, because the solidaristic postcapitalist welfare society they demand can only be achieved if the ecological struggle fought by the climate anarchists is won. Since the precariat is the new anticapitalist social subject, radical ecology shall become its ideology.

Anarchist movements and postcapitalism

The death of communism two decades ago and the birth of the antiglobalization movement a decade ago have brought anarchism to the fore as the only plausible anticapitalist ideology, online and offline. But what’s anarchism today? Or more interestingly, who are the anarchists? I think they mainly come in three types: anarchogreens, anarchosyndicalists and anarchoautonomists. One could add the anarchoinsurrectionists, but Julien Coupat in theory and the Greek rebellion in practice have created a new hybrid category, dubbed anarcho-autonomie in France, which is highlighted by the insurgent, antiauthoritarian practices spreading across the dissident/immigrant youth of Europe and North America. Increasingly, the Italian and German traditions of autonomia are intertwined with anarchist, antifascist and antiracist strands to form an anarchoautonomist synthesis across Europe. A generation totally oblivious of 20th century ideological disputes does not distinguish between anarchist and autonomous resistance: on the barricades, all you see is black hoodies fighting state repression and corporate domination. The comparative table below portrays the three major anticapitalist tendencies at work today, and the spectrum of resources for conflict they offer to the disaffected youth of the metropolises of the planet. It will be interesting to see how the various discourses of anticapitalism and radical ecology will mesh into direct action between December 11 and 16 during the COP15 Climate Summit targeting fossil capitalism, policed borders, agribusiness, indigenous peoples’ sovereignty, and the very legitimacy and effectiveness of the conference itself.

Anarchy, Autonomy, Ecology: A Trinity for Anarchists?

It’s vital for anarchist and libertarian tendencies to look out to the wider world, while keeping themselves open to the queer and creative influences coming from contemporary society and popular culture. Ideological purity and historical fidelity are usually obstacles to political effectiveness. What’s important is not showing our lack of complicity in the self-destruction of human civilization, but to prevent it. The fight is not to return to pre-industrial nature, whatever it was, but foster a postcapitalist natural environment, where ecosystems, water, trees and bees are the most precious forms of common wealth.

The solution to the precarious question is not going to be found in the return to the old speculative, overindebted, overdeveloped, ecocidal, supremely unequal consumer economy of yore, but in the fight for a new economic and welfare system built around the environment’s priorities and the social needs of the precarious sectors of society. Redistribution can be achieved thanks to massive strike movements and via capital, corporate and carbon taxation to pay for universal health and education, basic income for all adults and finance a reduction in worktime such as the 4-day week, provide everybody with free access to online knowledge, supply economic incentives for commons-based peer production and sharing, subsidize green housing and green job creation for all unemployed wishing to work, socialize banking to fund renewable energy and sustainable living community projects, promote urban and labor rights of solidarity striking, self-organization and self-unionization, and most of all end the scandalous discrimination and persecution of immigrants and asylum-seekers. The politics of the common and the struggle around commons — and especially of the most precious common of all, the atmosphere — cannot but start from the collective defense and expansion of our own urban commons: squats, social centers, radical associations, alternative theaters, self-managed parks and gardens etc. Social cooperation needs to find its own organizational resources and political strategies to prevail over capitalist enclosures of immaterial assets and privatizations of social space.

Redistribution of wealth and power toward the precarious, growth of immaterial knowledge, cultural enrichment of society and massive expansion of leisure are fundamental social preconditions for the horizontal eco-social design of a resilient postcapitalist society, freeing the time to pursue ecohacktive and permacultural activities, giving the time and money back to precarized people to work for environmental remediation and think collectively about their own future, cutting the need for quick consumption and instant satisfaction. A strongly relational and solidaristic economy would fulfill many of the needs today obviated by individualized market transactions. The multigendered and multiethnic precariat can be the social driver for local low-carbon economies of cooperation, exchange and mutual aid, food and energy production, just as the immaterial precariat has so far been the core constituency of the climate camp movement. After all, in a networked information economy, it’s the anarchists not the capitalists that control the strategic means of production — the computing power of connected PCs — enabling the distributed elaboration and production of information, culture and knowledge through networks which is making the age of mass media obsolete. Immaterial labor puts a new, non-market and non-proprietary sector at the center of wealth creation. But capitalist domination strongly resists the encroachment of p2p cooperation on its hitherto unchallenged prerogatives (directing production and marketing innovation) and has parliaments and tribunals squarely on its side striking at the growing commonalism of the precarious class.

To conclude, capitalism destroys environments as it precarizes peoples. The climate anarchists of the world and the precarious of europe must come together in Copenhagen to unmask Barroso’s and Obama’s carbon trading and government bailouts for the rich. We must fight for that money to go to social transfers, green jobs and renewable energy instead, ‘cos the Recession don’t do discounts and the Earth won’t do bailouts.

Notes

*     In algebraic terms, S/V, the ratio between surplus and variable capital (wages and fuel), goes down. The rate of profit is equal to surplus value over total capital invested C+V, which is turn the sum of fixed capital, plant and equipment, and variable capital, wages and raw materials. As V rises, the rate of profit decreases (divide numerator and denominator by V to verify it is so). The same occurs as K rises, which is the case originally considered by Marx.

§          Mark-up price equation: P = w/ π (1 + r) where p is the price level, w is the hourly wage, π is hourly productivity, and r is the rate of profit. Introducing energy costs, the equation gets transformed into P = (w/ π) (1 + r)/( 1 – θp_E) where θ is the energy requirement per unit of output and p_E is the relative price of energy (the price of energy divided by the general price level P) and 1 > θp_E . If θ decreases, because of a rise in energy efficiency, this has the same effect as an increase of productivity π: in order for prices to stay constant, either w or r must rise.

µ             The conflict between the two versions of American capitalism is still unfolding. See for instance the recent exclusion of Van Jones, the prophet of green-collar jobs, from Obama’s circle of close advisors, after the negative campaign orchestrated by the neocon TV channel Fox News.

Bibliositography

Gopal Balakrishnan, “Speculations on the Steady State”, New Left Review, 59, September-October, 2009
David Balleby Rønbach, “Green jobs are blowing in the wind”, http://www.modkraft.dk/spip.php?article11281, Modkraft Online, August 2009
Murray Bookchin, The Ecology of Freedom: the emergence and dissolution of hierarchy, AK Press, 2005
Murray Bookchin and David Foreman, Defending the Earth: A Dialogue between Bookchin and Foreman, South End Press, 1991
William Calvin, Global Fever: How to Treat Climate Change, University of Chicago Press, 2008
Manuel Castells, The Information Age, 3 volumes, Blackwell, 1996-2004 (various editions)
Manuel Castells, Communication Power, Oxford University Press, 2009
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Bye, Greatrecessionists yours

Europe’s new Iron Lady is even criticizing Trichet for doing some little covert easing on the side. Traditionally, central banks have been sacred to German governments. And yes, right-wing teutons would have us believe that the country is still traumatized by a bout of hyperinflation happening 85 years ago, so that monetary orthodoxy and financial rigor shall never be doubted, much less undermined. So Ms Merkel, while the country is sinking into a hole dragging the whole of Europe into unemployment and eurozone is falling into deflation (it wouldn’t if the ECB were doing some serious quantitative easing), is worrying about inflation and fiscal profligacy. Call it the Maastricht fixation. Hope the european and national elections punish here. If that weren’t the case, it’d be as if europeans had signed their own pink slip and rewarded Europe’s present élites for the mess they got us into and cannot get us out of.

NAOMI KLEIN & AVI LEWIS  from huffpost

In 2004, we made a documentary called The Take about Argentina’s movement of worker-run businesses. In the wake of the country’s dramatic economic collapse in 2001, thousands of workers walked into their shuttered factories and put them back into production as worker cooperatives. Abandoned by bosses and politicians, they regained unpaid wages and severance while re-claiming their jobs in the process.

As we toured Europe and North America with the film, every Q&A ended up with the question, “that’s all very well in Argentina, but could that ever happen here?”

Well, with the world economy now looking remarkably like Argentina’s in 2001 (and for many of the same reasons) there is a new wave of direct action among workers in rich countries. Co-ops are once again emerging as a practical alternative to more lay-offs. Workers in the U.S. and Europe are beginning to ask the same questions as their Latin American counterparts: Why do we have to get fired? Why can’t we fire the boss? Why is the bank allowed to drive our company under while getting billions of dollars of our money?

Tomorrow night (May 15) at Cooper Union in New York City, we’re taking part in a panel that looks at this phenomenon, called Fire the Boss: The Worker Control Solution from Buenos Aires to Chicago.

We’ll be joined by people from the movement in Argentina as well as workers from the famous Republic Windows and Doors struggle in Chicago.

It’s a great way to hear directly from those who are trying to rebuild the economy from the ground up, and who need meaningful support from the public, as well as policy makers at all levels of government. For those who can’t make it out to Cooper Union, here’s a quick round up of recent developments in the world of worker control.

Argentina:

In Argentina, the direct inspiration for many current worker actions, there have been more takeovers in the last 4 months than the previous 4 years.

One example:

- Arrufat, a chocolate maker with a 50 year history, was abruptly closed late last year. 30 employees occupied the plant, and despite a huge utility debt left by the former owners, have been producing chocolates by the light of day, using generators.

With a loan of less than $5,000 from the The Working World, a capital fund/NGO started by a fan of The Take, they were able to produce 17,000 Easter eggs for their biggest weekend of the year. They made a profit of $75,000, taking home $1,000 each and saving the rest for future production. 

UK :

- Visteon is an auto parts manufacturer that was spun off from Ford in 2000. Hundreds of workers were given 6 minutes notice that their workplaces were closing. 200 workers in Belfast staged a sit-in on the roof of their factory, another 200 in Enfield followed suit the next day.

Over the next few weeks, Visteon increased the severance package to up to 10 times their initial offer, but the company is refusing to put the money in the workers’ bank accounts until they leave the plants, and they are refusing to leave until they see the money. 

Ireland:
- A factory where workers make legendary Waterford Crystal was occupied for 7 weeks earlier this year when parent company Waterford Wedgewood went into receivership after being taken over by a US private equity firm.

The US company has now put 10 million Euros in a severance fund, and negotiations are ongoing to keep some of the jobs.

Canada:

As the Big Three automakers collapse, there have been 4 occupations by Canadian Auto Workers so far this year. In each case, factories were closing and workers were not getting compensation that was owed to them. They occupied the factories to stop the machines from being removed, using that as leverage to force the companies back to the table – precisely the same dynamic that worker takeovers in Argentina have followed.

France:

In France, there’s been a new wave of “Bossnappings” this year, in which angry employees have detained their bosses in factories that are facing closure. Companies targeted so far include Caterpillar, 3M, Sony, and Hewlett Packard.

The 3M executive was brought a meal of moules et frites during his overnight ordeal.

A comedy hit in France this spring was a movie called “Louise-Michel,” in which a group of women workers hires a hitman to kill their boss after he shuts down their factory with no warning.

A French union official said in March, “those who sow misery reap fury. The violence is done by those who cut jobs, not by those who try to defend them.”

And this week, 1,000 Steelworkers disrupted the annual shareholders meeting of ArcelorMittal, the world’s largest steel company. They stormed the company’s headquarters in Luxembourg, smashing gates, breaking windows, and fighting with police. 

Poland:

Also this week, in Southern Poland, at the largest coal coking producer in Europe, thousands of workers bricked up the entrance to the company’s headquarters, protesting wage cuts. 

US:

And then there’s the famous Republic Windows and Doors story: 260 workers occupied their plant for 6 world-shaking days in Chicago last December. With a savvy campaign against the company’s biggest creditor, Bank of America (”You got bailed out, we got sold out!”) and massive international solidarity, they won the severance they were owed. And more – the plant is re-opening under new ownership, making energy-efficient windows with all the workers hired back at their old wages.

And this week, Chicago is making it a trend. Hartmarx is 122-year old company that makes business suits, including the navy blue number that Barack Obama wore on election night, and his inaugural tuxedo and topcoat.

The business is in bankruptcy. Its biggest creditor is Wells Fargo, recipient of 25 billion public dollars in bailout money. While there are 2 offers on the table to buy the company and keep it operating, Wells Fargo wants to liquidate it. On Monday, 650 workers voted to occupy their Chicago factory if the bank goes ahead with liquidation. 

To be continued…

As Franklin Roosevelt understood, Americans will postpone immediate gratification and endure hard sacrifices–if they must–so long as they are convinced the future can be better than the past. But we face a far more difficult problem at our moment in history. What do you promise people who have been told they can have anything they want, who are repeatedly congratulated for living in the best of all possible circumstances? How do you tell them “the good times,” as we have known them, are not coming back? Americans need a new vision that helps them deal with reality, a promising story of the future that helps them let go of the past.

Here is the grand vision I suggest Americans can pursue: the right of all citizens to larger lives. Not to get richer than the next guy or necessarily to accumulate more and more stuff but the right to live life more fully and engage more expansively the elemental possibilities of human existence. That is the essence of what so many now seem to yearn for in their lives. People–even successful and affluent people–are frustrated because the intangible dimensions of life have been held back or displaced in large and small ways, pushed aside by the economic system’s relentless demands to maximize yields of profit and wealth. Our common moral verities have been trashed in the name of greater returns. The softer aspects of mortal experience are diminished because life itself is not tabulated in the economic system’s accounting.

The political order mistakenly accepts these life-limiting trade-offs as normal, as necessary to achieve “good times.” At earlier periods of our history, the sacrifices demanded by the engine of American capitalism were widely tolerated because the nation was young and underdeveloped. The engine promised to generate higher levels of abundance, and it did. But what is the justification now, when the nation is already quite rich and the engine keeps demanding larger chunks of our lives?

What families, even those who are prosperous, typically lose in the exchange are the small grace notes of everyday life, like the ritual of having a daily dinner with everyone present. The more substantial thing we sacrifice is time to experience the joys and mysteries of nurturing the children, the small pleasures of idle curiosity, of learning to craft things by one’s own hand, and the satisfactions of friendships and social cooperation.

These are made to seem trivial alongside wealth accumulation, but many people know they have given up something more important and mourn the loss. Some decide they will make up for it later in life, after they are financially stable. Still others dream of dropping out of the system. If we could somehow add up all the private pain and loss caused by the pursuit of unbounded material prosperity, the result might look like a major political grievance of our time.

More important than all the other losses is that people are also denied another great intangible–the dignity of self-directed lives. At work, at home and in the public sphere, most people lack the right to exercise much of a voice in the decisions governing their daily lives. Most people (not all) are subject to a system of command and control over their destinies. They know the risks of ignoring the orders from above. Not surprisingly, many citizens are resigned to this condition and accept subservience as “the way things are,” and their lives are smaller as a result. Many find it hard to imagine that these confinements could be lessened, even substantially removed, if economic organizations were informed by democratic principles.

What’s needed in American life is a redefinition of “life, liberty and the pursuit of happiness.” Given the nation’s great wealth, the ancient threats of scarcity and deprivation have been eliminated. Yet people remain yoked to economic demands despite wanting something more from life–freedom to explore the mysteries and bring forth all that is within them. Collectively, Americans need to take a deep breath and reconsider what it means to be rich.

The challenge, as John Maynard Keynes wrote long ago, is how “to live wisely and agreeably and well” once desperation and deprivation are no longer the driving forces of our existence. As the British economist predicted, the old economic problems of scarcity and survival have been solved, at least for developed nations. People should put aside the old fears, Keynes suggested, and learn how to enjoy life. Free of want and worry, we face a new challenge: to discover what it means to be truly human.

That wondrous pursuit is what I recommend as the alternative to our old definition of progress. In the years ahead, Americans will suffer unavoidable losses of familiar pleasures and be compelled to alter some deeply ingrained habits of material consumption. These painful adjustments can be endured if the people are confident the country is progressing toward a more fulfilling transformation. The essential trade-off could be expressed on a bumper sticker: Smaller Cars for Larger Lives.

To accomplish this sweeping change, people need power–more power to say what they think without getting fired and to make choices that are more in line with their values and aspirations. They need more security–which would give them the self-confidence to explore new options without dooming their families to poverty. People need more philosophical space–the room to decide what “success” is in their own terms and to make their own “mistakes.”

We should start thinking of living larger lives as a fundamental human right and begin throwing off the confinements imposed on us by the old order. Since scarcity has been vanquished, the collateral suffering manufactured by the economic system should also be declared unnecessary–even immoral–in a healthy and wealthy society. A minority of Americans, people blessed with special talents, wealth or status, may already enjoy this level of freedom. But as rich people can attest, wealth does not exempt one from the human struggle, the search to find one’s groove in life, to draw forth one’s unique purpose and strengths. That treasure cannot be bought. It has to be earned.

Government can do many things, but it cannot transform the society. Only the people can accomplish that. They change the fabric of society gradually and in unannounced ways with their behavior and creativity, guided roughly by their enduring moral values. If government set out to impose transformed values on the rest of us, the results would be oppressive and wrong. During the last generation, the coarsening pressures of the market system did a lot of damage to our society, but they did not succeed in stripping Americans of what they believe. Most people still know the difference between right and wrong, and despite the obstacles, they struggle to live accordingly.

What government can do is construct the rules, legal premises and supportive platform that enable people to pursue social transformation more aggressively. Our inventive popular culture–the marvel of the world–does this in freewheeling ways. With a little help and less interference from Washington, Americans can similarly reinvent the society. An era of innovation and random experimentation would draw upon this same spirit, the life force of Americans, the people who are practical and idealistic.

One important condition government can provide is the platform of “essential needs” that will give everyone more security and therefore more confidence to explore new and different choices. We could dust off Roosevelt’s “second Bill of Rights” and address its unmet goals. FDR recognized in early 1944 that Americans were weary of the sacrifices imposed by World War II and so he announced a broadly conceived promise. After the war is won, he said, the country must construct a new set of meaningful “rights” for all, everything from health and education to work with remunerative wages. His vision of the future became the postwar political agenda of the Democrats, and in large measure the promises were kept. I think Barack Obama may eventually face a similar necessity to spell out the vision of what a transformed America can become on the other side of the ditch we are in. Some goals are already well understood. The thick backlog of legislative proposals that have been repeatedly blocked by powerful interests during the last generation should be revisited in order to establish concrete rights and protections for families and children, workers and employees. The extensive family-centered social systems in Europe suggest opportunities for US reforms. Reversing national economic policy on work and wages is, likewise, a necessary step toward healing the society. If government constructs a rising floor under wage incomes, starting from the bottom up, people at every level will be liberated to pursue creative social invention. In the face of deep recession and rising unemployment, there is not much anyone can do at present to boost wages. But government can make this promise for the future. When the economy recovers and unemployment declines, the minimum-wage floor will rise in step, and other work-improvement rules will kick in. Congress can enact the laws in advance and time their effective date to economic conditions.

Beyond these essential steps, there are taller mountains to climb. We can envision loftier goals that require social imagination and then practical testing before gaining broad agreement and implementation. This is where we get to dream a little. Can we imagine, for instance, a country that is virtually without poor children? A nation in which every child grows up entitled to explore life’s possibilities, free to go anywhere in this diverse country and feel at home? Can we imagine an economic system that is not organized on the principle of command and control, on the few giving orders to the many? Can we envision an economy designed to serve the society, rather than the other way around? Some will say this is an idle daydream. I say it is our birthright, our inherited privilege. We are Americans. We get to think larger thoughts about our country and ourselves. Daydreams are a seedbed for the possible. We can argue later about how to achieve them.

To encourage people to free up their imaginations, I add a radical proposition: instead of asking what will be good for the economy, government should start by asking what will be good for our people and society. Instead of thinking first about how to help businesses flourish, ask what people need in order to flourish in American life. Essentially, I am suggesting a reversal of the usual process employed by the system. In its efforts to take care of business, the social question is often never asked. Here are three big ideas–favorite daydreams of mine–to illustrate what it means to put the people first.

First, every American who is willing and able ought to have the right to a job that pays a livable wage. If the private sector will not provide these jobs, then the public sector should be the employer of last resort. Franklin Roosevelt described the goal–the practical equivalent of full employment–in his “second Bill of Rights,” and the public has overwhelmingly endorsed the principle ever since. In recent decades, the economy has drifted even further from the promise, creating in its place a broad labor market of the underclass–temporary jobs paying unlivable wages and often filled by undocumented immigrants. Guaranteed public jobs paying more than the minimum wage would permanently and automatically stabilize the economy, swelling the ranks of public workers in recessions and shrinking them when private jobs become more abundant. Instead of punishing the working poor most severely in downturns, as the system does now, the government would redistribute the costs of recession so that all taxpayers would share the burden as a public obligation.

The social consequences of a change like this could be profound: it would be a direct assault on the poverty and hopelessness of inner-city precincts and decaying rural towns where the same pathologies ravage families and young people without regard to race or ethnicity. Real jobs would mean that reliable incomes would flow into those communities, providing a concrete basis for economic development and neighborhood restoration as well as the redemption of damaged lives, especially the prospects for young people.

Obviously, permanent public employment–jobs for all who need them–would be enormously expensive, but the fulfillment of large goals can begin with smaller steps. The government might set some guidelines, then sponsor 100 or 200 projects sited around the country and invite impoverished communities to compete for those in their area. What work needs to be done? What skills and equipment are required? People can answer those local questions for themselves. Some initial efforts will fail, but the country will learn from the mistakes and from the successes.

The second idea is that everyone who works, whether in the front office or on the assembly line, deserves to “own their work”–that is, the right to exercise personal responsibility for what they do and enjoy mutual respect and the capacity to contribute and collaborate in important decision-making within the firm. These elements of individual voice and status are critical to satisfaction in one’s work, but democratic qualities are largely missing from American workplaces. When most people go to work, they submit to a master-servant relationship in which a few people determine everyone else’s behavior and most employees are denied a voice in the matter and have no right to object or criticize. These confinements are especially strict for lower-wage workers but often extend far up the occupational ladder to include middle managers and professionals.

Breaking free of this rigid top-down system and liberating workers to enjoy the freedom (and responsibility) of being human would represent a profound change for our society, a great leap forward in our social development as a people. As it happens, the shift to more cooperative and respectful workplaces can also yield economic gain for the nation. As numerous academic studies have shown and outstanding companies already understand, collaborative relationships between top management and the workforce are more productive and profitable. Instead of being ruled by fierce conflicts, the different elements within these companies share information constantly and steadily improve by learning from their mistakes. The profits are shared because the workers are also the owners.

This reorganization of employment and ownership cannot be commanded from afar, because it requires everyone–workers and bosses–to change, to put aside old hostilities and begin trusting in more open communication. That change is very difficult for people to achieve in any setting. Government can encourage the pursuit, however, by setting out some incentives and loose guidelines for reforming work. One of the most promising routes to change is the employee stock ownership plan that invests everyone as co-owners with the same economic incentive–sharing the returns from self-improvement. Some 11,000 companies–mostly smaller businesses–are organized this way, and workers accumulate capital savings in addition to their pensions. Employee-owned companies, however, must also make internal reforms to establish mutual accountability and honest communication if they want to gain the full benefits of having worker-owners. The concept may seem alien to many, but its core assumptions are very American: a practical belief that equality and liberty can be present in our daily lives.

The third idea is that to lead the way for social values, the economy needs a new, reform-minded business organization–call it a social corporation–that competes with old-line corporations adhering to their narrower values that enforce the supremacy of profit over society. The social corporations could be chartered by government and given certain benefits. To pursue a different set of values, they may need some protections in their infancy and perhaps modest start-up subsidies, and exemptions from the usual rules, but most of them would be independent and privately owned. They would produce needed goods or services that the private sector won’t provide and sell them at a price most people could afford. They might, for instance, fulfill the market for very cheap computers and other high-tech devices that are stripped of the bells and whistles that run up the prices. The social corporation would be a working model for how the social imperatives–environmental values and equitable relations with workers and communities–can be integrated into firms and efficient production processes. Business lore and economic dogma say this is impossible. Social corporations would set out to prove them wrong. The purpose of this competition is not to replace orthodox companies but to put real market pressures on them to change. Creating social enterprises, including nonprofit cooperatives, can liberate us from the political vetoes business interests exert over promising new ideas.

Another crucial objective is to limit the size of business organizations, including social corporations, in line with E.F. Schumacher’s famous dictum “Small is beautiful.” The bloated scale of America’s leading corporations has become a major impediment to innovation and experimental reforms, not to mention a corrupting influence in politics. Americans are learning anew from the financial crisis why it is a mistake to let private firms concentrate more and more power under one management. The failure of megabanks that the government helped create threatens our general well-being, and then government bails them out with taxpayer money because they are “too big to fail.” Revived antitrust laws could simply prohibit the concentration of economic power as a threat to social values as well as to healthy competition.

Economic power must be dispersed in this broad nation, especially in banking and finance. We need many more financial intermediaries to allocate capital and credit and demonstrate more respect for society’s needs. That includes regional banks, which are naturally closer to the customers. It means supporting and protecting the small and adventurous financial firms founded on commitments to social responsibility. They put capital into companies that have embraced environmental concerns, have equitable dealings with workers and communities and practice high-road behavior. On many fronts one can see the gradual advance of “social responsibility” in US capitalism. The pace is too slow to attract much political respect, but the current crumbling of the old order will clear the way for more dramatic progress.

These ideas may seem distant from the usual chatter of policy thinkers, but they offer alternatives to an economic system that has abused rather than served American life. I know a lot of smart people across the country who are pursuing these ideas in different ways–they constitute the beginnings of formations of citizens that can disrupt inert politics and overcome the timidity of incumbent politicians. These agitators are engaging in action for the long run, and the fainthearted need not apply.

Due to the lifting of the foreclosure moratorium at the end of March, the downward slide in housing is gaining speed. The moratorium was initiated in January to give Obama’s anti-foreclosure program — a combination of mortgage modifications and refinancing — a chance to succeed. The goal of the plan was to keep up to 9 million struggling homeowners in their homes. But it’s clear now that the program will fall well-short of its objective. (Legislation for cram-downs, that is, allowing judges to reduce the face-value of the mortgage, is still bogged-down in Congress. Most economists believe that cramdowns are the only way to keep people from abandoning their homes when they are underwater on their loans.)

In March, housing prices fell faster than anytime in the last two years.  Trend-lines are now steeper than ever before, nearly perpendicular. Housing prices are not falling, they’re crashing and crashing hard. Now that the foreclosure moratorium has ended, Notices of Default (NOD) have spiked to an all-time high. These Notices will turn into foreclosures in 4 to 5 months time. Market analysts predict there will be 5 million more foreclosures between now and 2011. Soaring unemployment and rising foreclosures ensure that hundreds of banks and financial institutions will be forced into bankruptcy. 40 percent of delinquent homeowners have already vacated their homes. There’s nothing Obama can do to make them stay.  Worse still, only 30 per cent of foreclosures have been relisted for sale suggesting major hanky-panky at the banks. Where have the houses gone? Have they simply vanished?

Here’s a excerpt from the SF Gate explaining the mystery:

“Lenders nationwide are sitting on hundreds of thousands of foreclosed homes that they have not resold or listed for sale, according to numerous data sources. And foreclosures, which banks unload at fire-sale prices, are a major factor driving home values down.

“We believe there are in the neighborhood of 600,000 properties nationwide that banks have repossessed but not put on the market,” said Rick Sharga, vice president of RealtyTrac, which compiles nationwide statistics on foreclosures. “California probably represents 80,000 of those homes. It could be disastrous if the banks suddenly flooded the market with those distressed properties. You’d have further depreciation and carnage.”

In a recent study, RealtyTrac compared its database of bank-repossessed homes to MLS listings of for-sale homes in four states, including California. It found a significant disparity – only 30 percent of the foreclosures were listed for sale in the Multiple Listing Service. The remainder is known in the industry as “shadow inventory.” (”Banks aren’t Selling Many Foreclosed Homes” SF Gate)

If regulators were deployed to the banks that are keeping foreclosed homes off the market, they would probably find that the banks are actually servicing the mortgages on a monthly basis to conceal the extent of their losses. They’d also find that the banks are trying to keep housing prices artificially high to avoid heftier losses that would put them out of business.  One thing is certain, 600,000 “disappeared” homes means that housing prices have a lot farther to fall and that an even larger segment of the banking system is insolvent.

Here is more on the story “California Foreclosures About to Soar…Again”

“Are you ready to see the future? Ten’s of thousands of foreclosures are only 1-5 months away from hitting that will take total foreclosure counts back to all-time highs. This will flood an already beaten-bloody real estate market with even more supply just in time for the Spring/Summer home selling season…Foreclosure start (NOD) and Trustee Sale (NTS) notices are going out at levels not seen since mid 2008. Once an NTS goes out, the property is taken to the courthouse and auctioned within 21-45 days….The bottom line is that there is a massive wave of actual foreclosures that will hit beginning in April that can’t be stopped without a national moratorium.”

JP Morgan Chase, Wells Fargo and Fannie Mae have all stepped up their foreclosure activity in recent weeks. Delinquencies have skyrocketed. According to the Wall Street Journal:

“Ronald Temple, co-director of research at Lazard Asset Management, expects home prices to fall 22% to 27% from their January levels. More than 2.1 million homes will be lost this year because borrowers can’t meet their loan payments, up from about 1.7 million in 2008.” (Ruth Simon, “The housing crisis is about to take center stage once again” Wall Street Journal)

Another 20 percent carved off the aggregate value of US housing means another $4 trillion loss to homeowners. That means smaller retirement savings, less discretionary spending, and lower living standards. The next leg down in housing will be excruciating; every sector will feel the pain. Obama’s $75 billion mortgage rescue plan is a mere pittance; it won’t reduce the principle on mortgages and it won’t stop the bleeding. Policymakers have decided they’ve done enough and refuse to lift a finger to help. They don’t see the tsunami looming in front of them plain as day.  The housing market is going under and it’s going to drag a good part of the broader economy along with it. Stocks, too.

The Headless Chicken Keeps on Running…

The Fed’s $12.8 trillion of monetary stimulus has triggered a six week-long surge in the stock market. Think of it as Bernanke’s Bear Market Rally, a torrent of capital gushing from every leaky valve and rusty pipe in the financial system. The Fed’s so-called “lending facilities” are a joke; stocks rocket into the stratosphere while the broader economy is stretched out corpse-like on a cold marble slab. Is this an economic recovery or just more of Bernanke’s “no down” zero-percent “no doc” faux prosperity?

Bernanke has provided generous “100 cents on the dollar” loans for Triple A mortgage-backed collateral that is now worth 30 cents on the dollar. The Fed stands to lose trillions of dollars on these loans because the assets will never regain their original value. Eventually the taxpayer will have to pony up the difference in higher taxes, fewer public services and a weaker dollar.

Naturally, some of Bernanke’s liquidity has made its way into the stock market where the prospects for maximizing profit are still the best. The Fed’s debtors  didn’t borrow the money just to stick it in a dusty vault in their offices. They’ve put it where they think it will do them some good.  At the same time, the relentless systemwide contraction continues apace and hasn’t been eased by Bernanke’s low interest rates or lending programs. All of the economic indicators point to a deepening recession that will last for two years or more. Here’s a clip from a recent statement from the IMF:

“Recessions associated with financial crises have typically been severe and protracted. Financial crises typically follow periods of rapid expansion in lending and strong increases in asset prices. Recoveries from these recessions are often held back by weak private demand and credit reflecting, in part, households’ attempts to increase saving rates to restore balance sheets. They are typically led by improvements in net trade, following exchange rate depreciations and falls in unit costs.

Globally synchronized recessions are longer and deeper than others. Excluding the present, there have been three episodes since 1960 during which 10 or more of the 21 advanced economies in the sample were in recession at the same time: 1975, 1980 and 1992… Recoveries are usually sluggish, owing to weak external demand…”

The recession will be a long uphill slog regardless of developments in the stock market. Bernanke admitted as much last Thursday when he said that the collapse of U.S. lending will cause “long-lasting” damage to home prices, household wealth and borrowers’ credit scores.

“One would be forgiven for concluding that the assumed benefits of financial innovation are not all they were cracked up to be….The damage from this turn in the credit cycle — in terms of lost wealth, lost homes, and blemished credit histories — is likely to be long-lasting.”

Unlike Treasury Secretary Geithner, Bernanke has been surprisingly candid in his analysis of the crisis. That doesn’t mean that his policies have been worker-friendly; far from it. But he has been honest about the shortcomings of deregulation and financial innovation. So far, the meltdown has wiped out more than $11 trillion of household wealth, ignited soaring unemployment, and pushed millions of people from their homes. As Bernanke admits, the country will not quickly bounce back.

Economists Kenneth Rogoff and Carmen Reinhart have conducted a study on the last 18 international financial crises and compiled their findings in a document called: “Is the 2007 U.S. Subprime Financial Crisis So Different?” What they discovered was that “rising public debt is a near universal precursor of other post-war crises” and that countries that experienced large capital inflows were particularly vulnerable to crises. By 2006, two-thirds of the world’s surplus capital was flowing into the United States via its current account deficit. This flood of foreign capital kept interest rates low, housing and equity prices high, and Wall Street flush with money. Now foreign investment is drying up, housing prices are falling, the secondary market is frozen, and deflation is setting in across all sectors of the economy.  Rogoff and Reinhart believe that “recessions that follow in the wake of big financial crises tend to last far longer than normal downturns, and to cause considerably more damage. If the United States follows the norm of recent crises, as it has until now, output may take four years to return to its pre-crisis level. Unemployment will continue to rise for three more years, reaching 11–12 percent in 2011.”  (Newsweek, “Don’t Buy the Chirpy Forecasts”)

The proliferation of opaque, unregulated debt-instruments (MBSs, CDOs, CDSs) also played a big role in the present crash by reducing transparency and increasing systemic instability. Here’s Rogoff and Reinhart in their Newsweek article “Don’t Buy the Chirpy Forecasts:

“Assuming the U.S. continues going down the tracks of past financial crises, perhaps the scariest prospect is the likely evolution of public debt, which tends to soar in the aftermath of a crisis. A base-line forecast, using the benchmark of recent past crises, suggests that U.S. national debt will rise by $8.5 trillion over the next three years. Debt rises for a variety of reasons, including bailout costs and fiscal stimulus. But the No. 1 factor is the collapse in tax revenues that inevitably accompanies a deep recession.”

Tax revenues are already falling sharply across the country as the recession deepens. In fact, Bloomberg News reports that  “State and local sales-tax revenue fell more sharply in the fourth quarter of 2008 than at any time in the past half century”… (Corporate and personal income taxes are also declining at a record pace.)  This makes it impossible to predict the ultimate cost of the crisis.  But what makes it even harder is that Treasury Secretary Timothy Geithner refuses to remove toxic assets from the banks balance sheets using the usual “tried and true” methods. A recent report from a congressional oversight committee (The Warren Report) revealed that there are three ways to fix the banking system; liquidation, reorganization and subsidization. Geithner has rejected all three of these preferring to implement his own make-shift Public Private Investment Program (PPIP) which is thoroughly untested, has no base of public or political support, and is clearly designed to shift the toxic debts of the banks onto the taxpayer through publicly-funded non recourse loans. (Geithner’s plan will allow the banks to establish off-balance sheet operations so they can buy their own bad assets from themselves using 94 per cent public money) The whole thing is a obvious swindle papered-over with gibberish.

So far, less than $10 billion has been transacted through Giethner’s PPIP; a mere drop in the bucket. The IMF estimates that the banks and other financial institutions may be holding up to $4 trillion in toxic assets. At the current rate, Geithner’s strategy will take a century to succeed. The Treasury Secretary knows his plan won’t fix the banking system; he’s just hoping that the economy rebounds before the government is forced to nationalize the big banks. It’s just a stalling ploy, but, even so, there are risks.  As the economy worsens, the likelihood of another financial meltdown or a run on the dollar increases. Foreign central banks and investors are getting antsy and are starting to rattle Geithner’s cage.  In recent months China has slowed its purchases of US Treasuries, traded tens of billions of USD in currency swaps, and gone on a spending spree for raw materials; all to protect itself from weakness in the dollar. According to Bloomberg:

“People’s Bank of China Zhou Xiaochuan called for the establishment of a “super-sovereign reserve currency” last month after Chinese Premier Wen Jiabao said he’s worried a weaker US dollar may hurt China’s investments. Inflation and a depreciating dollar would erode the value of US holdings owned by international investors.”

Again, Bloomberg: 

“China, Japan and Korea should establish a routine mechanism to diversify the region’s reserve currencies away from the dollar, the China Securities Journal reported, citing central bank adviser Fan Gang. The Asian countries need to consider setting up a transitional arrangement to help reduce reliance on the dollar before the problems in the international financial system are resolved.”

Geithner’s foot-dragging could be extremely costly for America’s long-term economic prospects. The Treasury Secretary should be tackling the toxic assets problem head-on and stop the dilly-dallying. 

Mike Whitney lives in Washington state. He can be reached at fergiewhitney@msn.com

Less politically and more economically, optimists pin their philocapitalist hopes on China’s keynesian demand boost (which is working but is not enough to reverse the negative macroeconomic trends worldwide) and on the fact that prices of raw materials are rising again (this could spell doom for hundreds of millions, as food prices are set to rise).  We anticapitalists turning postcapitalists look at unemployment and housing data and conclude that the opposite is still true: they are just trying to provide self-fulfilling prophecies of financial optimism on friendly media, so that reform of capitalism doesn’t have to go too deep.  But the Atlantic regime of financial speculation is dead for good and can’t be resurrected, not even at huge cost for government finances. Economic redistribution and geopolitical rebalancing are the two major things that can solve the crisis. Put people first: sack the bankers, milk the capitalists, invest in society and the environment.

The three-day “Group of 14″ meeting will bring together the G8 leading industrial powers with the emerging giants China, India and Brazil as well as Mexico, South Africa and Egypt at a time when worldwide job losses are sparking fears of social unrest.

The meeting comes before a much-anticipated summit of the Group of 20 developed and developing nations next Thursday in London to discuss recovery strategies for the world economy and reforms to the financial regulatory system.

The G14 “social summit” in Rome will urge the G20 to put “people first,” Italian Labour Minister Maurizio Sacconi said Thursday.

“The concept of economic and financial stability encompasses the concept of social stability,” Sacconi told a news conference.

He said the G14 would advocate a “global pact” to ensure sustainable social protections, investment in people, notably skills development, and job creation, especially in the areas of environmental protection, health and education.

Alex Foti, an activist for the EuroMayDay organisation defending vulnerable workers, said EU governments are prevented by the European Union’s founding Maastricht treaty from implementing such a pact.

The rule by which EU members cannot run public spending deficits of more than three percent of gross domestic product “is a straitjacket on social progress, a major impediment to solving the crisis,” Foti told AFP.

IMF chief Dominique Strauss-Kahn warned Monday that “dramatic” rises in unemployment around the world would set the stage for conflict.

The world financial crisis could spark “social unrest, some threats to democracy and maybe for some cases, it can also end in war,” he warned during an International Labour Organization (ILO) meeting in Geneva.

“This crisis must not be allowed to become a wasteland of unemployment,” Strauss-Kahn said just days after the IMF forecast that the world economy will shrink by up to 1.0 percent this year.

The ILO in January said the global financial meltdown could claim up to 50 million jobs over 2008 and 2009, while the World Bank warned that the crisis could push 46 million back into poverty.

ILO chief Juan Somavia will stress in Rome “that we are confronting an inter-connected financial, economic and social crisis, and that the attention of policy makers should turn to the three crises at the same time,” his deputy Philippe Egger said Thursday.

An ILO study of more than 40 national stimulus packages “found that resources that governments have put forward to support financial markets are five times that allocated to social and economic matters,” Egger told AFP by telephone from Geneva.

EU Economic Affairs Commissioner Joaquin Almunia predicted a “hot autumn” of social protest in Europe, in an interview with the Italian daily La Stampa.

France last week saw more than a million workers take to the streets in a nationwide strike to force President Nicolas Sarkozy to boost wages and protect jobs. A protest in Paris left nine police officers injured and led to some 300 arrests.

In Rome on Saturday an Italian student movement plans to protest the G14 meeting, calling for “new rights and guarantees against the crisis,” following a similar protest last week that ended with clashes between students and police.

Italian Prime Minister Silvio Berlusconi meanwhile was accused Thursday of insensitivity towards the jobless after the billionaire media tycoon said the answer to unemployment was to “try and find something else, maybe in sales, or set up (your) own business.”

Nearly 400,000 Italians lost their jobs in January and February.