Secretive US Senate Amendment Would Weaken Biotech Oversight

Tuesday, March 19, 2013 by Inter Press Service by Carey L Biron


Food safety advocates, environmentalists and health professionals here are engaging in a fervent last-minute campaign to highlight a controversial legislative amendment they say would gut the ability of both the judiciary and the federal government to regulate genetically modified agricultural products.

The U.S. Senate is slated to vote early this week on amendments to a massive, “must pass” bill that would fund the U.S. government’s operations beyond Mar. 27 to the end of this fiscal year. That bill – a piece of stopgap legislation known as a continuing resolution – is so important that leaders in the U.S. Senate had previously suggested that they would not include any potentially controversial amendments.

Yet late last week, reports arose that a legislative “rider” had been anonymously proposed that would allow the U.S. Department of Agriculture (USDA) to overrule a judge’s decision to outlaw a genetically modified product. (The amendment can be found here, on page 80.)

As such, even if the courts were to rule that the USDA had illegally approved a particular genetically modified crop, the agency would be allowed to continue telling farmers to use the seed in question. Yet while this would seem to maintain at least the government’s oversight responsibilities, critics say the rider’s impact would go still farther.

“This provision also forces the hand of the USDA, forcing the agency to immediately approve any permits for deregulation of these crops,” Colin O’Neil, a researcher with the Center for Food Safety, a Washington advocacy group, told IPS. “Basically, it takes these oversight responsibilities away from the courts and government and gives them directly to the biotech companies themselves.”

In fact, almost identical language was used in an amendment proposed last year in the House of Representatives, likewise attached to a large, unrelated bill. That attempt, dubbed the “biotech rider”, failed at the time.

“Those behind these provisions have the interests of short-term profits at heart,” O’Neil continues. “We feel that based on the federal court decisions and government reports that have criticised the USDA’s approval of certain biotech products, we need to think long term about better safeguards that will adequately protect all farmers and the environment.”

This time around, critics were tipped off when Jon Tester, a Democratic senator, sounded an alarm on the floor of the Senate, strongly denouncing what he called a “corporate giveaway”.

“Its supporters are calling it the ‘farmer assurance’ provision, but all it really assures is a lack of corporate liability,” Tester stated.

“The provision says that when a judge finds that the USDA approved a crop illegally, the department must re-approve the crop and allow it to continue to be planted – regardless of what the judge says. Think about that.”

Tester is an organic farmer, described as one of the few in the U.S. Congress who continues to farm. He has now sponsored a counter-amendment that would strip away the “biotech rider”.

“These provisions are giveaways worth millions of dollars to a handful of the biggest corporations in this country and deserve no place in this bill,” he added.

“Not only does this ignore the Constitution’s idea of separation of powers, but it also lets genetically modified crops take hold across the country – even when a judge finds it violates the law … the ultimate loser will be our family farmers going about their business and feeding America the right way.”

Herbicide drift

The new rider could also harm U.S. farmers’ attempts to sell their products abroad. In January, for instance, the European Union temporarily froze the approvals process for new genetically modified foods, and dozens of other countries have similarly moved to more tightly regulate their markets.

Yet if the current legislation were to pass, the USDA would be hamstrung from preventing “contamination” of U.S. foodstocks by genetically modified products.

The continued appearance of the “biotech rider” is most likely a reaction to scepticism that has repeatedly been voiced by the federal courts over approval of genetically engineer crops, in addition to the prospect of a new, “next generation” of biotech crops.

The industry has experienced a number of setbacks, including findings that the use of genetically modified crops has increased the use of pesticides, as well as accusations that these crops pose an economic threat to organic and even conventional farmers.

Further, it has become increasingly apparent that genetically modified agricultural material does not necessarily stay on the farms where it is used. In this regard, environmentalists have expressed particular concern over genetically modified crops engineered to withstand stronger and stronger herbicides.

“‘Herbicide drift’ is one of many harms from industrial agriculture – farmers are experiencing economic loss when their crops are killed or damaged when herbicides become volatile and drift in from neighbouring farms,” the Center for Food Safety’s O’Neil says.

“We already have around 64 million acres infested with herbicide-resistant weeds in this country. Yet the next generation of these products appears to be simply moving towards genetically modified crops that are resistant to the older herbicides – what we call the ‘pesticide treadmill’.”

The federal government, he says, has been unable to make headway on the issue.

“So far, the USDA has failed to address issues like the proliferation of herbicide-resistant weeds,” O’Neil says. “We now worry that herbicide drift could be the next issue that the USDA fails to adequately address.”

Amendments to the continuing resolution were to be accepted until late Tuesday, with a vote on all riders expected thereafter. Senate leaders have said a vote would be held on the full bill by the end of the week.

New Fracking Rules Come Up Short Leaving Communities, Earth Unprotected

Friday, May 4, 2012 by Common Dreams
'Seriously inadequate' proposal disappoints

Today, the Obama administration proposed new rules on the fracking industry's procedures and oversight on public lands. Outdated fracking regulations have been replaced with out of touch fracking regulations, falling short of protecting communities from toxic pollution, according to environmental groups.

The new proposal would require that companies get approval before fracking, and would require companies to reveal chemicals they use in hydraulic fracturing; however, the companies will only be required to reveal their chemicals after they complete the process.

Also, the rules only apply to public lands and would not affect drilling on private land, where the bulk of fracking occurs.

Democratic Congresswoman Diana DeGette, a vocal proponent of expanding fracking regulation, called the measure "seriously inadequate," according to Reuters.

Jessica Ennis from Earthjustice stated:

"In light of the near-constant reports of fracking-related air and water pollution, an update to federal rules is long overdue. Unfortunately, these proposed rules from the Department of the Interior fall far short of what’s needed to protect public health. The President promised in his State of the Union that this country’s gas drilling boom would not come at the expense of public health. This proposed rule fails to meet that promise.”

Earthjustice: Interior Department Proposes Updated Fracking Rules, Comes Up Short

The U.S. Department of the Interior unveiled a set of rules governing hydraulic fracturing, or “fracking,” on public lands today. The controversial oil and gas development technique—in which drillers blast millions of gallons of chemically treated water into the earth to force gas from underground deposits—has been linked to air and water pollution and public health problems.

The proposed rule does not require fracking companies to disclose chemicals before they are pumped into the ground—a critical measure that would give nearby communities time to test and monitor water supplies for any fracking-related water pollution. [...]

“The oil and gas industry has gotten used to operating in the shadows for too long—hiding chemical information, fighting against right-to-know laws, silencing families who speak out. It’s unacceptable and needs to end now."

Natural Resources Defense Council: BLM Proposal to Reduce Risks to Ground Water from Oil and Gas Fracking

“We need BLM to be a leader when it comes protecting our lands, water and ultimately our health from fracking pollution, yet several states already have stronger protections in place than what the agency proposed today. This is a critical first step, but so much more needs to be done.

“Oil and gas operations are expanding rapidly with new technologies and into new areas, including closer and closer to where families live and children go to school, but federal safeguards have not caught up. And industry does not inspire confidence when it balks at the notion of sharing chemical ingredients upfront. Communities shouldn’t have to wait for that information until after the deed is done.”

“We hope the agency will strengthen this proposal before it becomes final.”

Reuters: US proposes new rules for fracking on federal lands

Environmentalists and some lawmakers said the rules didn't go far enough.
Interior's proposal on disclosure differs from a draft of the rules that leaked to the media earlier this year, by mandating disclosure after fracking is completed.
"Requiring the information before the fracking occurred would have caused in our view delays that were not necessary," Salazar said on a conference call.

Democratic Congresswoman Diana DeGette, a vocal proponent of expanding fracking regulation, called the measure "seriously inadequate."

"We're all seeking common-sense solutions to ensure the safety of natural gas production, but with all due respect, requiring disclosure after fracking has already occurred seems less common-sense and more 'closing the door after the horse has left the barn,'" DeGette said in statement.

Some environmentalists said communities need to know what chemicals may be pumped into the ground before drilling happens, so water supplies can be monitored in real time, however.

Researchers Hid, Ignored Bad Results in Massive Drug Trial Corruption

April 17, 2012
Patrick Gallagher | NaturalSociety

Pharmaceutical medication has always been very highly regarded in society, and its continued use shows that many individuals seem to use it without knowing — or more likely, even thinking — about the content of the drugs that they so hastily consume. Recently there has been yet another study that shows the Food and Drug Administration, trusted by millions and yet funded with trillions to overlook some of the most detrimental health risks, cares even less about drug trial regulation than previously thought.

The study reveals the varied corruption deeply rooted within the FDA, vying for approval of drugs that serve no medical purpose, sometimes with more harmful effects than good. Specifically, the drug Tamiflu (oseltamivir) — the drug praised as the be all end all cure for the ‘deadly swine flu epidemic‘.

The entire article debunks the use and distribution of the effectively worthless drug, as well as the FDA’s reasons for approval:

“If sales can be considered a proxy for utility, the controversies surrounding even the most successful drugs (such as blockbuster drugs) seem all the more paradoxical, and have revealed the extent to which the success of many drugs has been driven by sophisticated marketing rather than verifiable evidence… Prior to the global outbreak of H1N1 influenza in 2009, the United States alone had stockpiled nearly US$1.5 billion dollars worth of the [drug].”

The researchers continue:

“This analysis, conducted by Kaiser and colleagues, proposed that oseltamivir treatment of influenza reduced both secondary complications and hospital admission. In contrast, the Food and Drug Administration (FDA), which approved Tamiflu in 1999 and was aware of these same clinical trials, concluded that Tamiflu had not been shown to reduce complications, and required an explicit statement in the drug’s label to that effect.”

This study only covers one single drug that has only been approved solely for profiteering; the FDA is known to have approved thousands upon thousands of commercial drugs from the big pharmaceutical corporations over the decades, with many questioning their serious side effects. Such is the case with highly-popular cancer drugs, which have been shown to make cancer worse and actually kill the patient more quickly. It has become abundantly clear that citizens cannot and should not place any sort of trust in many of these corporate-pushed these medications and their supposed ‘benefits’.

Cited:http://www.plosmedicine.org/article/info%3Adoi%2F10.1371%2Fjournal.pmed.1001201http://blogs.mercola.com/sites/vitalvotes/archive/2012/04/13/massive-corruption-revealed-to-be-at-the-core-of-many-drug-approvals.aspx

The Regulation Killers

Making the People Pay
by RALPH NADER
The Republican Party has a sense of humor, however inadvertently. It’s ardent advocates regularly accuse the Obama Administration of heavy handed regulation of business.

Tell that to the hundred federal poultry inspectors who just picketed the Department of Agriculture in opposition to a proposal that would allow those crammed, bacterial poultry slaughterhouses to do their own inspections. The picketers fear that with this license, the poultry bosses will speed up the slaughter rate to 175 birds per minute from the present 70.

Tell that to the Securities Exchange Commission that will have to allow the return of the notorious boiler room practices where “start-ups” with up to $1 billion in annual revenues can sell stock to investors like the old Wild West days with little discourse or regulation. After the recent devastating Wall Street crash and bailout, here they go again—just throw the federal cop off the corporate crime beat.

Tell that to Donald Michaels, the superbly qualified head of the Occupational Safety and Health Administration who can’t get the White House to approve issuance of long-overdue life-saving safeguards for worker health and safety. Fear of Republicans by the Obamaites in an election year super-cedes their oath to enforce laws that save lives in hazardous workplaces. Nearly 60,000 workers lose their lives to workplace-related diseases and trauma every year. That is equivalent to nineteen 9/11 casualty tolls every year.

Tell that to a strapped Environmental Protection Agency that at long last was trying to reduce the toxic materials in your air and water. President Obama personally intervened on two of their forthcoming regulations to stop them.

Tell that to the Food and Drug Administration (FDA) that was the subject of a front page New York Times article on April 3, 2012 titled “White House and the F.D.A. Often at Odds.” It seems that President Obama’s deputy chief of staff, Nancy-Ann DeParle, has been leaning on FDA Commissioner, Dr. Margaret A. Hamburg to drop proposed rules requiring labeling of calories for foods served on airplanes and movie theaters, as well as regulation of sunscreen and asthma inhalers.

The Obamabush White House objected to what the Times said was “the enforcement of an agency decision on a drug to prevent premature births.”

The FDA believed that the Obama “hope and change” campaign in 2008 would start a new day from the years of George W. Bush who believed, for example, that the agency should not issue rules preventing contamination of eggs and other produce. Alas, said a top FDA official to the Times: “Employees here waited eight long years for deliverance that didn’t come.”

Mr. Obama, as with his other choices of White House staff, set himself up by choosing the “regulation czar,” Cass R. Sunstein who can give thumbs down on agency safety proposals. Professor Sunstein, who thinks harder than he feels the pain of victims of non-regulation (or law and order) has a philosophy known as “libertarian paternalism”. (Google it if you wish to discover its meaning.)

FDA scientists sadly recall Mr. Obama’s White House ceremony to sign a memorandum in 2009 to replace Mr. Bush’s politicization of science in government with scientific integrity and to listen to scientists “even when it’s inconvenient—especially when it is inconvenient.” Once again, words, words, words, succumb to the power of corporatism.

Obama’s regulatory agency officials receive constant pressure from Congressional corporatists on their meager enforcement budgets. They are made to behave as if they should fear the criminals and defrauders they are supposed to be catching to protect the American people.

All of them are envious of the new Consumer Financial Protection Bureau (CFPB) created by Congress to shield consumers of credit, mortgages, payday loans and other financial transactions from the Wall Street-driven crime wave. You see, the CFPB resides inside the Federal Reserve and receives its $500 billion budget from the Fed, which gets its budget from bank frees and is free of the Congressional hammers.

Still, the CFPB and its sterling staff (with few exceptions) is an agency waiting to start producing long-needed rules of decent business behavior. It is not clear what is causing the delay, but it couldn’t be Congress now. It may be the high hurdles that the Bureau has to overcome vertically with its supervisory council—real or fancied.

Occupy Washington needs to mass in front of these agency buildings soon to highlight the truth about Obama’s weak-kneed regulatory agencies. In a perverse way, the Obamaites would probably welcome such protests as enhancing their corporate fundraising efforts.

Meanwhile the people pay!

Begging, Pleading for the Abolishment of Gross Domestic Product

"Rightful liberty is unobstructed action, according to our will, within limits drawn around us by the equal rights of others." ~ Thomas Jefferson

(I don't agree with everything this article says, but I think it's interesting and worth consideration.--jef)

+++++

Oct 27th, 2011 | By John Tammy |
 
Nobel Laureate Robert Mundell long ago observed that the only closed economy is the world economy.  As such, U.S. production (think the globalized manufacture of Apple’s iPad, or Boeing’s 787 Dreamliner) is a function of it ties to economic activity occurring around the world. GDP presumes a countries economy in isolation as well as uniformity between economies.

Worse, what often drives GDP up is far from something that would be considered economically stimulative. Indeed, government measures of inflation are notoriously slow to pick up on the horrors of dollar devaluation. Yet when devaluation leads to higher prices, GDP increases.

Government spending — which has no resources that it hasn’t first extracted from the private sector — also boosts GDP, and then if imports to the U.S. decline (a flashing negative economic signal if there ever was one), this actually registers as growth in the calculation of this most worthless of measures of our economic health.

It’s time to abolish GDP because its existence as the accepted measure of economic activity means that we cannot achieve the necessary reforms that would really allow our economy to grow. With so much of our economy directed towards work of little to no economic value, but which ultimately factors into the GDP calculation, we’re restrained from doing what we need to do to truly advance ourselves.

First up is regulation. As even President Obama acknowledges, regulation frequently serves as a barrier to productivity. We’ll see if he’s ever willing to back up his rhetoric with action (signing the REINs Act would be a big step), but for now regulations serve as a massive hurdle to businesses seeking profits for their shareholders by virtue of giving their customers what they want, along with things they didn’t know they want, but now can’t live without – think Google, Facebook and just about anything Apple produces.

Of course if there occurs a massive regulatory overhaul based on the correct kind of analysis which will show regulations merely inhibit profitable activity at best, and frequently miss corrupt actions at worst (Madoff), many in the U.S. whose livelihood is dependent on either regulating what they cannot, or helping businesses deal with regulators, will find themselves out of work. Their unemployment will in the near-term show up in reduced GDP, but the end result will be undeniably positive.

Looking at the estate tax alone, it discourages the very saving that authors our economic advancement, but its existence is a windfall for the myriad estate planners and attorneys in possession of the skills necessary to help those with estates to avoid the tax. Abolishing the death tax would be a major boon for economic growth for it releasing those reliant on it into worthwhile professions, but for a time their adjustment would detract from GDP “growth.”

Considering the floating dollar itself, the utter chaos caused by the latter has created whole industries meant to soften the blow of a dollar without definition. The currency market alone is a $3 trillion per day exchange as myriad great minds are forced into facilitator roles as traders of needless uncertainty, as opposed to producers. We’d have to invent hedge funds if they didn’t exist, but their growing footprint can to a high degree be laid at the door of President Nixon’s fateful 1971 decision to sever the dollar’s link to gold.

Banks and investment banks on their own have growing compliance staffs in place to deal with all of the rules foisted on them. Abolishing what won’t work in the form of Dodd-Frank, not to mention the stabilization of the dollar such that it becomes the proverbial foot would release countless agile minds from facilitator roles, some who will cure cancer, some who will create the next Microsoft, and some who will render the hell that is commercial air travel to the dustbin of history through making private travel as common as cellphones.

But to achieve the above, there would have to be a “recession” that would drive down GDP early on, but boost it in staggering ways long-term. In a nation brimming with talent, too many of our best and brightest are serving as facilitators to the detriment of real economic growth.

Lastly, a powerful reduction in government spending would surely bring down GDP substantially. Governments can only create jobs and economic activity to the extent that they take from the private sector, so major spending cuts at first would bring great pain to sectors of the economy in and out of government, but wholly reliant on government largesse.

All of the above is true, but then it’s also true that government spending is almost tautologically about capital destruction, as opposed to wealth creation. If this is doubted, ask yourself if any company in the private sector could ever remain in business if it had lost money for decades, with decades more of losses ahead?

But assuming serious downsizing of the government, workers and the capital destroyed to keep them employed would quickly find other, market-driven uses in the private sector. Government spending presently looms large when it comes to boosting GDP, true austerity would as a result reduce nominal GDP substantially up front such that dim economists would scream “recession”, but the long-term and economy-soaring result of such a move would be profoundly good for us all.

The problem now is that so worshipful and fearful of GDP are economists and politicians that reducing regulations in a credible way, stabilizing the dollar and slashing the burden that is government is a distant object to many. It is at least partially because GDP remains the benchmark for our economic health. Let’s abolish it so that we can start growing again.

Small Co. Owners Say Regulations & Taxes NOT Killing Business

Sunday, September 4, 2011 by McClatchy

by Kevin G. Hall 

WASHINGTON — Politicians and business groups often blame excessive regulation and fear of higher taxes for tepid hiring in the economy. However, little evidence of that emerged when McClatchy canvassed a random sample of small business owners across the nation.

"Government regulations are not 'choking' our business, the hospitality business," Bernard Wolfson, the president of Hospitality Operations in Miami, told The Miami Herald. "In order to do business in today's environment, government regulations are necessary and we must deal with them. The health and safety of our guests depend on regulations. It is the government regulations that help keep things in order."

The U.S. Chamber of Commerce is among the most vocal critics of the Obama administration, blaming excessive regulation and the administration's overhaul of health care laws for creating an environment of uncertainty that's hampering job creation.

When it's asked what specific regulations harm small businesses _which account for about 65 percent of U.S. jobs — the Chamber of Commerce points to health care, banking and national labor. Yet all these issues weigh much more heavily on big corporations than on small business.

"When you look at regulations in many respects, what a lot of people don't take into account is their secondary impacts," said Giovanni Coratolo, the vice president of small business policy for the U.S. Chamber of Commerce. "They pay the price, regardless of whether they are primarily the recipient of the regulation or they are secondarily getting the impact of it. They pay the price in higher costs, whether it is fuel or health care or whether it's being able to find access to capital."

McClatchy reached out to owners of small businesses, many of them mom-and-pop operations, to find out whether they indeed were being choked by regulation, whether uncertainty over taxes affected their hiring plans and whether the health care overhaul was helping or hurting their business.

Their response was surprising.

None of the business owners complained about regulation in their particular industries, and most seemed to welcome it. Some pointed to the lack of regulation in mortgage lending as a principal cause of the financial crisis that brought about the Great Recession of 2007-09 and its grim aftermath.

Wolfson's firm is readying to open a Hampton Inn this year in Miami on land purchased from a condo developer during the housing downturn. His business could be in line for higher taxes if President Barack Obama allows the current, lower rates on the richest Americans to expire in 2012 and return to previous levels.

That didn't seem to bother Wolfson, who through his partnership declares profit and loss as a pass-through on his personal income taxes, as many small businesses do.

"Higher taxes are not good for business, but some of the loopholes and deductions should be looked at," he said.

The answer from Rick Douglas — the owner of Minit Maids, a cleaning service with 17 employees in Charlotte, N.C. — was more blunt.

"I think the rich have to be taxed, sorry," Douglas said. He added that he isn't facing a sea of new regulations but that he does struggle with an old issue, workers' compensation claims.
Douglas told The Charlotte Observer that he's hired more workers this year, citing pent-up demand from customers.

"My theory is that the people that do have jobs are working harder and they have less time to clean. People were holding back for such a long time, and then they started spending a little more," he said.

Then there's Rip Daniels. He owns four businesses in Gulfport, Miss.: real estate ventures, a radio station and a boutique hotel/bistro. He said his problem wasn't regulation.

"Absolutely, positively not. What is choking my business is insurance. What's choking all business is insurance. You cannot go into business, any business — small business or large business — unless you can afford insurance," he told Biloxi's Sun Herald.

Since 2008, Daniels has opened one business and expanded another, hiring as many as 15 people thanks to lower labor costs and an abundance of overqualified job candidates. He credits the federal stimulus effort with helping to keep some smaller firms afloat.

"It allowed those folks to spend and have money and pay for the essentials," said Daniels, whose business pays corporate taxes. He grudgingly supports closing some business tax deductions to reduce the federal budget deficit.

"Who wants to pay more? I certainly don't. I want to pay my fair share, and I do," Daniels said, adding that he wouldn't resist loophole closures to cut deficits.

For Zajic Appliance in south Sacramento, California's capital city, business also has picked up. The company hired two workers this year, bringing the total to 18, said Christopher Zajic, who manages the family business.

One odd reason for his improving business: sales of bank-owned properties in a city that's among those hardest hit by the housing crash. When these houses sell, he said, their new owners generally replace appliances.

California used some of its federal stimulus money to pay for a "Cash for Appliances" program last year, a rebate program for purchases of energy-efficient washing machines and refrigerators.

"It spiked sales," Zajic told The Sacramento Bee, adding that he thinks the effort simply compressed sales into a shorter time period rather than created new demand.

For many small businesses, their chief problem is an old one: navigating the bureaucracy of the Small Business Administration to secure government-backed loans.

"My biggest problem is the current status of the banking system and how it's being over-regulated," Dennis Sweeney, a co-owner of Summit Sportswear Inc., told The Kansas City Star. "I want to grow this business, and I'm using the same credit line that I've been using for five years."

Kansas City-based Summit, 20 years old, supplies college-licensed clothing to university bookstores in four Midwestern states. Sweeney hired his fourth employee in August. He's adding licenses to sell apparel to colleges in the Southeast and Atlantic region, but his company doesn't have inventory or other collateral that bankers usually want to secure loans.

And the small local banks Summit deals with frown on the red tape required for SBA loans, after a loan he got in 2008 took three months of nightmarish documentation.

"It was only $35,000," Sweeney said. "Our bank basically said it would never do that again."
Other small firms say their problem is simply a lack of customers.

"I think the business climate is so shaky that I would not want to undergo any expansion or outlay capital," said Andy Weingarten, who owns Almar Auto Repair in Charlotte. He's thinking about hiring one more mechanic.

Added Barry Grant, the regional president of Meritage Homes Corp., in California, "It starts with jobs. ... There's an awful lot of people sitting on the fence; they're waiting for a sign."

One reason hiring remains dampened is the prolonged slump in the housing sector, a driver of the pre-crisis economy. Meritage builds homes in California and six other states. It'll build fewer than 1,000 homes in the Golden State this year, well below the 2,500 annually it built during boom times.

Another cause of sagging demand for new houses, Grant told The Sacramento Bee, is the planned October change to loan limits in order for a homeowner to qualify for a federal government-insured home loan. It was boosted to as high as $769,000 in parts of the country during the financial crisis, but Republicans in Congress have pushed for a return to lower limits and less government involvement in the housing market.

In Sacramento County, the change would mean a new loan limit of $474,000 to qualify, well below the current $580,000. Around the nation, the loan-limit change has created uncertainty.

"Any uncertainty in the market makes people hold off," said Grant. "It builds a certain level of uncertainty."

Sometimes a small business's struggle has nothing to do with government at all.
Lynn Swager, a co-owner of Brass on Ivory in Edgewater, Md., sells, rents and repairs musical instruments. She faces a completely different sort of challenge.

"The thing that chokes us, believe or not, is the Internet. There are so many things that are accessible on the Internet that they can purchase for less than I can purchase from my distributor," Swager told McClatchy. "Everybody thinks the Internet is this great thing that is happening to the world, but it is really, I think, killing a lot of small business. People that we talk to that are no longer in business say the same thing exactly."

New Drugs, Same Mistakes

Congress Chooses Criminalization Over Regulation
By GRANT SMITH
Partisan bitterness has become a familiar feature of Capitol Hill politics. But given the recent debt debacle, it was little surprise that two committee rooms full of congressional lawmakers were giddy at the chance to sing bipartisan praises and wave through legislation that criminalizes possession and sale of "K2," "spice," "bath salts," and other synthetic drugs.

Despite growing consensus that there is an urgent need for a new direction in our nation's drug policies, and recognition from the Global Commission on Drug Policy and others that the 40 year old war on drugs is a resounding failure, many lawmakers are still shy to question the wisdom of proposals to criminalize more people and the drugs they use.

Synthetic drugs that imitate the effects of marijuana and other illegal drugs have been sensationalized since they first appeared on store shelves. Many people are attracted to these products because the drugs do not show up in drug tests and it was not a crime to use or sell them until recently.

Much controversy has centered on the marketing of these drugs as incense or other household products even though they are often consumed. Rather than step in to regulate synthetic drugs, impose age restrictions and product labeling requirements, the government did nothing until several tragic events involving young people received extensive media coverage.

State and federal lawmakers have forged ahead with proposals to ban synthetic drugs before scientists could better understand and evaluate the products for health risks and benefits. Empirical evidence has yet to surface that shows synthetic drugs pose a threat to public health that warrants criminalization.

Lawmakers have a long track record of passing ineffective laws, and its unwavering support for the war on drugs is no exception. Enforcement of marijuana prohibition, in particular, has wasted billions of dollars subjecting millions of American citizens to arrest for nonviolent drug law violations. Marijuana law violations make up half of all drug arrests annually.

And just as we have seen with marijuana, criminalizing synthetic drugs will cede control of the drugs to the criminal market. Our policy should enable the government to enforce strict regulations and controls on a legal market for synthetic drugs that monitors production, minimizes public harm and generates tax revenue.

Congress continues to vigorously fund and escalate the drug war even as Washington seeks to reduce federal spending. Enforcing a federal ban on synthetic drugs won't be cheap. Moreover, organizations such as the Heritage Foundation have cautioned against creating unnecessary federal crimes that inappropriately expand the reach of the federal government into local affairs. Since the vast majority of drug enforcement is carried out by state and local agencies, Congress is essentially passing the costs of this legislation on to them.

Commenting on synthetic drugs during a committee session this week, Sen. Dianne Feinstein (D-CA) remarked that "we are in a new era of drugs."

A new era calls for a new approach, and Congress has an opportunity here to provide for comprehensive drug education, rigorous scientific study to better understand what is in synthetic drugs, and a robust system of regulation and control of the synthetic drug market. Lawmakers need not look far for a successful model. The federal government's approach to dealing with tobacco has been enormously successful at reducing youth and adult tobacco use in recent decades and millions of people didn't have to be arrested and branded with criminal convictions to achieve success.

Lawmakers must put the brakes on this failed approach to drug policy, stop wasting taxpayer dollars and destroying people's lives.

There Is No Such Thing as a Free Market

by: Ha-Joon Chang, Bloomsbury Publishing
Tuesday 7 June 2011

23 Things They Don't Tell you About Capitalism

Thing 1: There is No Such Thing as a Free Market

What They Tell You

Markets need to be free. When the government interferes to dictate what market participants can or cannot do, resources cannot flow to their most efficient use. If people cannot do the things that they find most profitable, they lose the incentive to invest and innovate. Thus, if the government puts a cap on house rents, landlords lose the incentive to maintain their properties or build new ones. Or, if the government restricts the kinds of financial products that can be sold, two contracting parties that may both have benefited from innovative transactions that fulfil their idiosyncratic needs cannot reap the potential gains of free contract. People must be left ‘free to choose’, as the title of free-market visionary Milton Friedman’s famous book goes.

What They Don’t Tell You

The free market doesn’t exist. Every market has some rules and boundaries that restrict freedom of choice. A market looks free only because we so unconditionally accept its underlying restrictions that we fail to see them. How ‘free’ a market is cannot be objectively defined. It is a political definition. The usual claim by free-market economists that they are trying to defend the market from politically motivated interference by the government is false. Government is always involved and those free-marketeers are as politically motivated as anyone. Overcoming the myth that there is such a thing as an objectively defined ‘free market’ is the first step towards understanding capitalism.

Labour Ought to Be Free

In 1819 new legislation to regulate child labour, the Cotton Factories Regulation Act, was tabled in the British Parliament. The proposed regulation was incredibly ‘light touch’ by modern standards. It would ban the employment of young children – that is, those under the age of nine. Older children (aged between ten and sixteen) would still be allowed to work, but with their work- ing hours restricted to twelve per day (yes, they were really going soft on those kids). The new rules applied only to cotton factories, which were recognized to be exceptionally hazardous to workers’ health.

The proposal caused huge controversy. Opponents saw it as undermining the sanctity of freedom of contract and thus destroying the very foundation of the free market. In debating this legislation, some members of the House of Lords objected to it on the grounds that ‘labour ought to be free’. Their argument said: the children want (and need) to work, and the factory owners want to employ them; what is the problem?

Today, even the most ardent free-market proponents in Britain or other rich countries would not think of bringing child labour back as part of the market liberalization package that they so want. However, until the late nineteenth or the early twentieth century, when the first serious child labour regulations were introduced in Europe and North America, many respectable people judged child labour regulation to be against the principles of the free market.

Thus seen, the ‘freedom’ of a market is, like beauty, in the eyes of the beholder. If you believe that the right of children not to have to work is more important than the right of factory owners to be able to hire whoever they find most profitable, you will not see a ban on child labour as an infringement on the freedom of the labour market. If you believe the opposite, you will see an ‘unfree’ market, shackled by a misguided government regulation.

We don’t have to go back two centuries to see regulations we take for granted (and accept as the ‘ambient noise’ within the free market) that were seriously challenged as undermining the free market, when first introduced. When environmental regulations (e.g., regulations on car and factory emissions) appeared a few decades ago, they were opposed by many as seri- ous infringements on our freedom to choose. Their opponents asked: if people want to drive in more polluting cars or if factories find more polluting production methods more profitable, why should the government prevent them from making such choices? Today, most people accept these regulations as ‘natural’. They believe that actions that harm others, however unintentionally (such as pollution), need to be restricted. They also understand that it is sensible to make careful use of our energy resources, when many of them are non-renewable. They may believe that reducing human impact on climate change makes sense too.

If the same market can be perceived to have varying degrees of freedom by different people, there is really no objective way to define how free that market is. In other words, the free market is an illusion. If some markets look free, it is only because we so totally accept the regulations that are propping them up that they become invisible.

Piano Wires and Kungfu Masters

Like many people, as a child I was fascinated by all those gravity-defying kungfu masters in Hong Kong movies.

Like many kids, Conditions of trade are specified too. One of the things that surprised me when I first moved to Britain in the mid 1980s was that one could demand a full refund for a product one didn’t like, even if it wasn’t faulty. At the time, you just couldn’t do that in Korea, except in the most exclusive department stores. In Britain, the consumer’s right to change her mind was considered more important than the right of the seller to avoid the cost involved in returning unwanted (yet functional) products to the manufacturer. There are many other rules regulating various aspects of the exchange process: product liability, failure in delivery, loan default, and so on. In many countries, there are also necessary permissions for the location of sales outlets – such as restrictions on street-vending or zoning laws that ban commercial activities in residential areas.

Then there are price regulations. I am not talking here just about those highly visible phenomena such as rent controls or minimum wages that free-market economists love to hate.

Wages in rich countries are determined more by immigration control than anything else, including any minimum wage legislation. How is the immigration maximum determined? Not by the ‘free’ labour market, which, if left alone, will end up replacing 80–90 per cent of native workers with cheaper, and often more productive, immigrants. Immigration is largely settled by politics. So, if you have any residual doubt about the massive role that the government plays in the economy’s free market, then pause to reflect that all our wages are, at root, politically deter- mined (see Thing 3).

Following the 2008 financial crisis, the prices of loans (if you can get one or if you already have a variable rate loan) have become a lot lower in many countries thanks to the continuous slashing of interest rates. Was that because suddenly people didn’t want loans and the banks needed to lower their prices to shift them? No, it was the result of political decisions to boost demand by cutting interest rates. Even in normal times, interest rates are set in most countries by the central bank, which means that political considerations creep in. In other words, interest rates are also determined by politics.

If wages and interest rates are (to a significant extent) politically determined, then all the other prices are politically determined, as they affect all other prices.

Is Free Trade Fair?

We see a regulation when we don’t endorse the moral values behind it. The nineteenth-century high-tariff restriction on free trade by the US federal government outraged slave-owners, who at the same time saw nothing wrong with trading people in a free market. To those who believed that people can be owned, banning trade in slaves was objectionable in the same way as restricting trade in manufactured goods. Korean shopkeepers of the 1980s would probably have thought the requirement for ‘unconditional return’ to be an unfairly burdensome government regulation restricting market freedom.

This clash of values also lies behind the contemporary debate on free trade vs. fair trade. Many Americans believe that China is engaged in international trade that may be free but is not fair. In their view, by paying workers unacceptably low wages and making them work in inhumane conditions, China competes unfairly. The Chinese, in turn, can riposte that it is unacceptable that rich countries, while advocating free trade, try to impose artificial barriers to China’s exports by attempting to restrict the import of ‘sweatshop’ products. They find it unjust to be prevented from exploiting the only resource they have in greatest abundance – cheap labour.

Of course, the difficulty here is that there is no objective way to define ‘unacceptably low wages’ or ‘inhumane working conditions’. With the huge international gaps that exist in the level of economic development and living standards, it is natural that what is a starvation wage in the US is a handsome wage in China (the average being 10 per cent that of the US) and a fortune in India (the average being 2 per cent that of the US). Indeed, most fair-trade-minded Americans would not have bought things made by their own grandfathers, who worked extremely long hours under inhumane conditions. Until the beginning of the twenti- eth century, the average work week in the US was around sixty hours. At the time (in 1905, to be more precise), it was a country in which the Supreme Court declared unconstitutional a New York state law limiting the working days of bakers to ten hours, on the grounds that it ‘deprived the baker of the liberty of work- ing as long as he wished’.

Thus seen, the debate about fair trade is essentially about moral values and political decisions, and not economics in the usual sense. Even though it is about an economic issue, it is not some- thing economists with their technical tool kits are particularly well equipped to rule on.

All this does not mean that we need to take a relativist posi- tion and fail to criticize anyone because anything goes. We can (and I do) have a view on the acceptability of prevailing labour standards in China (or any other country, for that matter) and try to do something about it, without believing that those who have a different view are wrong in some absolute sense. Even though China cannot afford American wages or Swedish working conditions, it certainly can improve the wages and the working conditions of its workers. Indeed, many Chinese don’t accept the prevailing conditions and demand tougher regulations. But economic theory (at least free-market economics) cannot tell us what the ‘right’ wages and working conditions should be in China.

I Don't Think We Are in France Anymore

In July 2008, with the country’s financial system in meltdown, the US government poured $200 billion into Fannie Mae and Freddie Mac, the mortgage lenders, and nationalized them. On witnessing this, the Republican Senator Jim Bunning of Kentucky famously denounced the action as something that could only happen in a ‘socialist’ country like France.

France was bad enough, but on 19 September 2008, Senator Bunning’s beloved country was turned into the Evil Empire itself by his own party leader. According to the plan announced that day by President George W. Bush and subsequently named TARP (Troubled Asset Relief Program), the US government was to use at least $700 billion of taxpayers’ money to buy up the ‘toxic assets’ choking up the financial system.

President Bush, however, did not see things quite that way. He argued that, rather than being ‘socialist’, the plan was simply a continuation of the American system of free enterprise, which ‘rests on the conviction that the federal government should interfere in the market place only when necessary’. Only that, in his view, nationalizing a huge chunk of the financial sector was just one of those necessary things.

Mr Bush’s statement is, of course, an ultimate example of political double-speak – one of the biggest state interventions in human history is dressed up as another workaday market process. However, through these words Mr Bush exposed the flimsy foundation on which the myth of the free market stands. As the statement so clearly reveals, what is a necessary state intervention consistent with free-market capitalism is really a matter of opinion. There is no scientifically defined boundary for free market.

If there is nothing sacred about any particular market boundaries that happen to exist, an attempt to change them is as legitimate as the attempt to defend them. Indeed, the history of capitalism has been a constant struggle over the boundaries of the market.

A lot of the things that are outside the market today have been removed by political decision, rather than the market process itself – human beings, government jobs, electoral votes, legal decisions, university places or uncertified medicines. There are still attempts to buy at least some of these things illegally (bribing government officials, judges or voters) or legally (using expensive lawyers to win a lawsuit, donations to political parties, etc.), but, even though there have been movements in both directions, the trend has been towards less marketization.

For goods that are still traded, more regulations have been introduced over time. Compared even to a few decades ago, now we have much more stringent regulations on who can produce what (e.g., certificates for organic or fair-trade producers), how they can be produced (e.g., restrictions on pollution or carbon emissions), and how they can be sold (e.g., rules on product label- ling and on refunds).

Furthermore, reflecting its political nature, the process of re-drawing the boundaries of the market has sometimes been marked by violent conflicts. The Americans fought a civil war over free trade in slaves (although free trade in goods – or the tariffs issue – was also an important issue). The British govern- ment fought the Opium War against China to realize a free trade in opium. Regulations on free market in child labour were implemented only because of the struggles by social reformers, as I discussed earlier. Making free markets in government jobs or votes illegal has been met with stiff resistance by political parties who bought votes and dished out government jobs to reward loyalists. These practices came to an end only through a combi- nation of political activism, electoral reforms and changes in the rules regarding government hiring.

Recognizing that the boundaries of the market are ambiguous and cannot be determined in an objective way lets us realize that economics is not a science like physics or chemistry, but a polit- ical exercise. Free-market economists may want you to believe that the correct boundaries of the market can be scientifically determined, but this is incorrect. If the boundaries of what you are studying cannot be scientifically determined, what you are doing is not a science.

Thus seen, opposing a new regulation is saying that the status quo, however unjust from some people’s point of view, should not be changed. Saying that an existing regulation should be abol- ished is saying that the domain of the market should be expanded, which means that those who have money should be given more power in that area, as the market is run on one-dollar-one-vote principle.

So, when free-market economists say that a certain regulation should not be introduced because it would restrict the ‘freedom’ of a certain market, they are merely expressing a political opinion that they reject the rights that are to be defended by the proposed law. Their ideological cloak is to pretend that their politics is not really political, but rather is an objective economic truth, while other people’s politics is political. However, they are as politically motivated as their opponents.

Breaking away from the illusion of market objectivity is the first step towards understanding capitalism.

Stop Wall Street's Con Game

Wednesday, May 25, 2011 by YES! Magazine

by David Korten

 

Wikipedia defines a “confidence trick” as “an attempt to defraud a person or group by gaining their confidence. The victim is known as the mark, the trickster is called a confidence man, con man, confidence trickster, or con artist, and any accomplices are known as shills. Confidence men exploit human characteristics such as greed and dishonesty.”

Ever hear a business reporter on the evening business news say, “Today, investors drive up the price of commodities to create a hundred billion in new value,” or some such? Sounds great, almost implying we should offer thanks to these champions of the public good who are risking their fortunes to expand the pool of wealth to enrich us all. The reporter is manipulating the language to set us up as marks in the Wall Street con.

A more honest report might have said, “Today, hedge fund traders speculating with other people’s money walked away with multimillion dollar commissions for inflating the commodities bubble by a hundred billion dollars.” In a more honest world, the report would clearly distinguish between real investors creating real wealth through real investments and speculators creating phantom wealth with financial games. People who bet on the price of pieces of paper would be called “gamblers.” Those who hold the bets and distribute the winnings would be called “bookies.”

Boil it down to the basics and you see that Wall Street is in the business of operating four sophisticated, large-scale confidence games.

• Counterfeiting: Through financial bubbles and loan pyramids, it creates facsimiles of official money for private gain unrelated to anything of real value.

• Securities fraud: Selling shares in asset bubbles that are maintained solely by the constant inflow of new money is, in effect, a Ponzi scheme.

• Reverse insurance fraud: Insurance fraud, by common definition, occurs when the insured deceives the insurer. In reverse insurance fraud, the insurer deceives the insured. In Wall Street practice this involves collecting premiums to cover risks the insurer lacks adequate reserves to cover and then refusing to pay legitimate claims.

• Predatory lending: Using a combination of extortion, fraud, deceptive promises, and usury, predatory lenders lure the desperate into perpetual debt at exorbitant interest rates.
  

Because of Wall Street’s hold on lawmakers, these may all be perfectly legal, but phantom wealth is still phantom wealth, and these are all forms of theft. In three-card monte the dealer shuffles the cards so fast you can’t follow them, while talking even faster. Complex derivatives are a fast shuffle that makes it virtually impossible to follow the connection to any real value.

What makes the Wall Street con so much better for the dealers than a typical street con is that Wall Street dealers bet on their own game using other people’s money and then manipulate the market outcome in their own favor, rewarding themselves with huge bonuses when they win and taking billions in taxpayer bailouts when they lose.

Real financial reform would render unproductive speculation either illegal or unprofitable. Here are a few suggestions:

1. Prohibit selling, insuring, or borrowing against an asset not actually owned by the seller, and issuing any security not backed by a real asset—all common Wall Street practices.
2. Place strict limits on how much a financial institution can borrow in order to buy a property, and establish conservative reserve and capital requirements for institutions in the business of selling insurance of any kind.
3. Regulate bond-rating agencies and impose strict penalties for fraudulent ratings.
4. Impose a small financial-speculation tax of a penny on every $4 spent on the purchase and sale of financial instruments such as stocks, bonds, foreign currencies, and derivatives. This would have no consequential impact on real investors making long-term investments in real businesses and assets. But it would discourage short-term speculation and arbitraging.
5. End the obscure tax loophole that allows hedge fund managers to report their billion-dollar compensation packages as capital gains, taxed at only 15 percent.
6. Assess a 100 percent capital gains surcharge on profit from the sale of assets held less than an hour, 80 percent if held less than a week, and perhaps falling to 50 percent on assets held more than a week but less than six months. This would render most forms of speculation unprofitable, stabilize financial markets, and lengthen the investment horizon without penalizing real investors.
7. Eliminate debt slavery by raising the wages of working people and the taxes of the moneylenders.

Opponents will claim that such regulation and taxes will stifle financial innovation. Good. That is the intention. Wall Street’s financial innovations are mostly ever more sophisticated and deceptive forms of theft. They should be discouraged. Keep the casinos in Vegas. The need to rebuild financial institutions that meet our needs for basic financial services will be the subject of next week’s blog.

BP's Secret Deepwater Blowout, another one...

Tuesday 19 April 2011
by Greg Palast, Truthout and Buzzflash


Only 17 months before BP's Deepwater Horizon rig suffered a deadly blowout in the Gulf of Mexico, another BP deepwater oil platform also blew out.

You've heard and seen much about the Gulf disaster that killed 11 BP workers. If you have not heard about the earlier blowout, it's because BP has kept the full story under wraps. Nor did BP inform Congress or US safety regulators, and BP, along with its oil industry partners, have preferred to keep it that way.

The earlier blowout occurred in September 2008 on BP's Central Azeri platform in the Caspian Sea.

As one memo marked "secret" puts it, "Given the explosive potential, BP was quite fortunate to have been able to evacuate everyone safely and to prevent any gas ignition." The Caspian oil platform was a spark away from exploding, but luck was with the 211 rig workers.

It was eerily similar to the Gulf catastrophe as it involved BP's controversial "quick set" drilling cement.

The question we have to ask: If BP had laid out the true and full facts to Congress and regulators about the earlier blowout, would those 11 Gulf workers be alive today - and the Gulf Coast spared oil-spill poisons?

The bigger question is, why is there no clear law to require disclosure? If you bump into another car on the Los Angeles freeway, you have to report it. But there seems no clear requirement on corporations to report a disaster in which knowledge of it could save lives.

Five months prior to the Deepwater Horizon explosion, BP's Chief of Exploration in the Gulf, David Rainey, testified before Congress against increased safety regulation of its deepwater drilling operation. Despite the company's knowledge of the Caspian blowout a year earlier, the oil company's man told the Senate Energy Committee that BP's methods are, "both safe and protective of the environment."

Really? BP's quick-dry cement saves money, but other drillers find it too risky in deepwater. It was a key factor in the Caspian blowout. Would US regulators or Congress have permitted BP to continue to use this cement had they known? Would they have investigated before issuing permits to drill?

This is not about BP the industry Bad Boy. This is about a system that condones silence, the withholding of life-and-death information.

Even BP's oil company partners, including Chevron and Exxon, were kept in the dark. It is only through WikiLeaks that my own investigations team was able to confirm insider tips I had received about the Caspian blowout. In that same confidential memo mentioned earlier, the US Embassy in Azerbaijan complained, "At least some of BP's [Caspian] partners are similarly upset with BP's performance in this episode, as they claim BP has sought to limit information flow about this event even to its [Caspian] partners."

In defense of its behavior, BP told me it did in fact report the "gas release" to the regulators of Azerbaijan. That's small comfort. This former Soviet republic is a police state dictatorship propped up by the BP group's oil royalties. A public investigation was out of the question.

In December, I traveled to Baku, Azerbaijan's capital, to investigate BP and the blowout for British television. I was arrested, though, as a foreign reporter, quickly released. But my eye witnesses got the message and all were too afraid tell their stories on camera.

BP has, in fact, never admitted a blowout occurred, though when confronted by my network, did not deny it. At the time, BP told curious press that the workers had merely been evacuated as a "precaution" due to gas bubbles "in the area of" the drilling platform, implying a benign natural gas leak from a crack in the sea floor, not a life-threatening system failure.

In its 2009 report to the US Securities and Exchange Commission (SEC), BP inched closer to the full truth. Though not mentioning "blowout" or "cement," the company placed the leak "under" the platform.

This points to a cruel irony: the SEC requires full disclosure of events that might cause harm to the performance of BP's financial securities. But reporting on events that might harm humans? That's not so clear.

However, the solution is clear as could be. International corporations should be required to disclose events that threaten people and the environment, not just the price of their stock.

As radiation wafts across the Pacific from Japan, it is clear that threats to health and safety do not respect national borders. What happens in Fukushima or Baku affects lives and property in the USA.

"Regulation" has become a dirty word in US politics. Corporations have convinced the public to fear little bureaucrats with thick rulebooks. But let us remember why government began to regulate these creatures. As Andrew Jackson said, "Corporations have neither bodies to kick nor souls to damn."

Kicking and damning have no effect, but rules do. And after all, when international regulation protects profits, as in the case of patents and copyrights, corporate America is all for it.

Economic Entropy as Revolutionary Redistribution

Let the Free Market Eat the Rich!
by Jeremy Weiland
Anarchy and Distribution

Civil society has become so confused with the institution of the State that anarchists often find it difficult to extricate one from the other when positing a voluntary society. The effects of privilege permeate our culture, our infrastructure, our economic relationships, and our thinking. Therefore, the ability to describe a coherent and distinctive picture of a post-state, post-privilege world is crucial in that it throws contemporary constructs of privilege into stark relief. While disputes about proper means towards a stateless society abound in the anarchist milieu, the most striking distinctions can be discovered by examining the varied predictions of the likely ends of anarchism. Perhaps nothing sets these approaches apart and divides efforts more than competing visions of just property distribution.

A long running debate among anarchists, especially between the individualist and collectivist schools, centers around the justice of wealth disparities. Certainly the existence of the State serves to enrich particular interests at the expense of others, but in anarchy would the rich dominate society - just as they do with the State? Should private property be abolished altogether to force an egalitarian society into existence? Or will private property be the basis for a new, voluntary order where the wealth gap will no longer matter? Even if we could immediately switch off the institutions that forcibly manipulate society, many fear that the legacy of privilege and accumulated wealth could persist for some time, distorting markets and continuing the frustrate the balance of power between individuals.

Individualist anarchists have had a variety of responses to the problems of historical property and wealth maldistribution. Even anarcho-capitalists who see large scale social coordination as the natural direction of society have different views, such as Hans Hermann Hoppe's theory of a natural elite and Murray Rothbard's support of syndicalist takeover of State-supported corporations. On the other side of the coin, left-leaning individualists also entertain a variety of approaches: from agorist advocacy of revolutionary entrepreneurship as a leveling force to mutualists such as Benjamin Tucker and Kevin Carson speculating about the possible need for short term State sponsored redistribution and reform.

At the root of all these competing theories, the key question for anarchists remains: what does a stateless society look like? What exactly are we working towards? It is this difference of vision that divides the efforts of anarchists much more than purely strategic differences. Is a more ecumenical anarchism possible - one that can bring the schools together, at least for activist purposes, not by fighting over predictions and visions but by agreeing on the means by which a voluntary society is achieved?

In the midst of all this theorizing, it is easy to forget that anarchy is - anarchy becomes defined by - however humans naturally interact, not how we wish they would interact. In other words, true anarchy is an empirical reality, and we have only to discover it by removing privilege. Arguing over what it shall be and shall not be presumes we can dictate how humans interact, a positively authoritarian concept. Whatever human nature might be, any anarchism worth pursuing starts there, and the kernel of proportionality and balance that could inform this matter may be sought there as well. Given this approach to anarchism, what can human nature tell us about distributive justice?

In any statist society, those who benefit from the status quo rely first and foremost on the stability and security of the social order. How they achieve this defines politics as we experience it. The purpose of this essay is to demonstrate how large scale aggregations of wealth require an outside stabilizing force and defensive agency to maintain, and how in a free, dynamic market there are entropies that move imbalances back to equilibrium. There is also a proposed basis for a relative equilibrium among people once privileges are abolished. This investigation will identify two main institutions that arise from state intervention in capitalist society: corporations and personal estates.

The Modern Corporation

The modern corporation is a legal entity chartered by the State. Corporations benefit from an arsenal of privileges, such as fiat entity status, personhood and limited liability, which serve to set the rules of the market on terms favorable to corporate investors and managers. The trend has always been to correct any perceived problems with big business by large, top-down regulation, rather than to reexamine the legal constructs that give these institutions such outsized power in our society.

For instance, it is conceivable that a firm could argue effectively in front of a judge for certain of the rights of being a human citizen on a case by case basis, but current established law mandates a clumsy legal equivalence between living human beings and abstract organizations of people and assets (which is historically dubious). The benefit to big business, of course, is to regularize and simplify business legal proceedings, setting aside the legal advantages this gives corporations over individual humans. In the United States, for instance, the ability to exercise first and fourth amendment rights as if the firm were a human being results in corporate campaign contributions and protection from random inspections. It is interesting to see the framers' document limiting government prerogative used to defend not merely the rights of human beings but those of the government's own abstract inventions.

Yet while human rights are invoked, privileges granted by the State to corporations that no human can claim, such as limited liability, represent a fiat subsidy. Imagine the cost of privately insuring the value of the total market capitalization of the world's corporations! But the utility of the subsidy goes even further, because it allows investors to hire managers who have a legal mandate to pursue profits while maintaining a distance from the way the profits are pursued. Highly capitalized firms, who by their sheer size wield far more potential for harm than any single individual, essentially obfuscate the way decisions are made so that if third parties to the stockholder-manager relationship are harmed, stockholders cannot lose more than their investment.

The imbalance of responsibility this enables cannot be underestimated, for it goes to the very heart of corporate economic behavior. What would be different about business, socioeconomics, and politics if stockholders knew that their managers' activities would leave them fully liable for the actions of the corporation and could lose their savings, their car, their house? Limited liability and corporate personhood make possible a way of doing business in a far riskier way than normal people would. How do we know this? Because few people, anarchist or not, would limit the liability of regular human beings, knowing that it is the consequences of undesirable behavior such as violence or theft that helps prevent it.

In a free market, corporations would not be able to rely on the State for their very existence. Any ability to do business as an entity would come from the consent and cooperation of the market - customers, suppliers, contractors, service providers, banks, but most importantly management. Without a Securities and Exchange Commission and intrusive reporting requirements, oversight, and regulatory enforcement, it would be very hard to protect the shareholders at firms of any appreciable size and organizational complexity from outright fraud in a variety of ways. The well-understood legal relationships that govern so much capital finance and business activity would become much more ad hoc and peculiar. Shares in corporations would become even less uniform constructs from business to business, since their terms could vary wildly and they couldn't simply be traded as almost fungible commodities. Unpredictability and risk would skyrocket, which is a much more favorable environment for the small-time entrepreneur than the big, clumsy, bureaucratic corporation.

Think about the huge stabilizing effect of the federal government for making big business anything less than a total ripoff for investors right from the start. Think about the ways government regulation rationalizes markets to make them safe for large industries to exploit and oligopolize. Think about how much leeway the modern CEO is afforded to run the business in pursuit of short term gain, with stockholders often supporting them even as they engage in questionable activities. Enron's reckless destruction of shareholder value is hardly remarkable, when you think about the level of complexity in which they schemed and strategized - the fact that it doesn't happen more often is (until you check your tax bill and realize you're subsidizing the stability and security of others' investments!).

The Personal Estate

Obviously the most direct way in which people benefit from the institutional character of our statist society is through direct ownership. While there are few (if any) rich people who aren't heavily and diversely invested in corporate capitalism and share in its redistribution of wealth and special favors from the government, there are additional State provisions to benefit individuals. Unlike corporate privileges, those which govern the stability of personal estates arguably serve the interests of more modest individuals, especially the middle class. However, I intend to show that the rich benefit far more from fiat stability and socialized security than the rest of us.

The biggest subsidy enjoyed by the wealthy lies in government regulation of finance. By regulating banking through inspections, audits, and the centralized monetary maintenance practiced by the Federal Reserve System, depositors enjoy a level of stability in the system that is quite unrivaled in history. Of course, regular joes like you and I prefer our current experience to frequent crashes and bank runs, but there's a catch: we don't pay for this "service" in proportion to our deposits (or the interest we earn!). Instead, we help subsidize the regulation and maintenance of the financial system from which the elite depositors benefit disproportionately.

Rich depositors are more likely to invest in instruments and accounts which yield higher interests rates. Plus, they're more likely to earn a greater amount of their income directly from the interest on their deposits. The barriers to entry in banking prevent individuals from forming their own mutual banks and force them to rely on the aggregated wealth of big depositors at some level of the hierarchical financial establishment. And because the rich can afford to pay for maintenance of their wealth by managers, accountants, and brokers, they are more likely to anticipate and capitalize upon market shifts than us.

Keep in mind that central regulation and maintenance of markets, groomed and rationalized by the Federal Reserve System, the Federal Deposit Insurance Corporation, and other departments encourages the sort of investment patterns that count on steady profits and interest - phenomena much more likely to benefit the wealthy than those of us investing in 401-Ks and IRAs. By lowering risks, any entrepreneurial profit opportunities for the little guy that regulation kills translate into the stability of markets and the steadiness of investment income. Of course, that benefits those who've already accumulated capital much more than those of us who've yet to achieve our fortune.

However, the extent of State intervention to benefit the rich extends beyond finance into the very real area of asset security. The rich depend on the stability and predictability of systems that ensure and protect their title to their property, but again their benefit from these phenomena dwarfs ours. For example, they count on the government keeping a central repository of property titles to justify excluding others. This takes property off the market and thus raises the value of their property. While it is true that middle class homeowners benefit from these systems, it does not benefit them to nearly the degree it does the rich. Socializing the costs of kicking people off one's land necessarily favors those who have more land to guard.

Police patrols of moneyed neighborhoods provide an example of socialized security, where defense and sentry costs are not paid directly by the beneficiaries. Sure, many wealthy types hire security guards, but they would have to hire many more - and pay much higher insurance premiums - if it were not for public law enforcement at least helping to defend their property, nor the extensive, expensive system of socialized criminal investigation that makes it less likely property will stay stolen and criminals remain at large.

The Entropy of Aggregated Wealth

As I stated earlier, we may find the answer to the problem of persistent wealth imbalances in human nature. Two aspects of that nature are greed and envy. In a market without socialized regulation, stockholders are in constant danger of management and employees siphoning off profits and imperiling the long term viability of the business. Rich individuals face similar uncertainties of theft and fraud by those they employ to maintain and protect their assets. Because the lack of a State would force these costs to be internalized within the entity rather than externalized onto the public, it is highly likely that the costs of maintaining these outsized aggregations of wealth would begin to deplete it.

The balance of power between the rich and non-rich is key here. Direct plundering of wealth, though fraud or theft, threatens the rich in a crippling way. It raises their costs directly in proportion to their wealth, either through insurance costs, defense costs, or losses. They have to worry not just about outside threats, but also the threats posed by their servants, employees, and even their family members. Because the wealth is centralized around one individual or one management team, it is near impossible to find any fair way to distribute the responsibilities of stewardship without distributing the wealth itself. Having a lot of stuff becomes more trouble than it's worth.

Meanwhile, less rich people economize on these costs by banding together with other modest individuals to either hire outside defense (socializing protection on their own, voluntary terms) or by personally organizing to defend property (via institutions such as militias). Because the ratio of person to wealth is relatively greater, there are more interested individuals wiling to play a role in defense and maintenance of property. The distribution of the wealth over more people necessarily eases its protection. And since everybody has basically the same amount of stuff, nobody has an interest in taking advantage of, nor stealing from, others.

In fact, normal human greed suggests that there will always be an element of society that wishes to steal and cheat others. In anarchy, the wealthy offer themselves as easy targets to such criminals, because big estates are harder to defend and so invite more opportunities for plunder. Additionally, it is far more likely that wealthy estates will be targeted because, for instance, it is easier to steal a million dollars worth of cash or property from one location such as a bank or mansion than it is to rob a thousand or so common people. The larger the disparity in wealth, the more intensively the wealthy will be targeted by criminals.

On the other hand, normal people would necessarily be less likely to be targeted by the criminal, for a few reasons. First, since the ratio of human bodies to wealth in a modest community would be much greater, the deterrent effect would be insurmountable to all but the most stupid crooks. Second, once statist regulations and privileges stop making an honest living less of a bad deal, the criminal elements in a modest community are more likely to share in the legitimate wealth of the economy, easing their need to prey on their neighbors. Markets freed from dehumanizing, deracinated centralization imposed for corporate convenience would be fathomable, with plenty of opportunities for entrepreneurship. While by no means a utopia, a genuinely free market would ease the pressures on the lower and middle classes.

The Free Market as Egalitarian Equalizer

This phenomenon of disadvantaged rich and advantaged poor, brought about by the costs of estate and business management, suggests an interesting dynamic. It may be that in a free market there will exist a natural, mean personal wealth value, beyond which diminishing returns enter quickly, and below which one is extremely disposed towards enrichment. If this is true, then that means that normal, productive, and non-privileged people will tend to have similar estate values. This wide distribution of wealth will tend to reinforce bottom-up society and a balance of power unrivaled in history (except maybe in frontier experiences).

In a stateless society, institutions for business and personal organization must derive their permanence from their usefulness not just to an elite few, but from the respect of the entire community - customers, suppliers, neighbors, etc. An entity that can operate efficiently and deliver a steady stream of income, whether an estate or a corporate business, becomes less viable the larger it grows because internal transaction and maintenance costs start to skyrocket. This is a function not of wealth itself, but rather of the inherent difficulty in convincing those with less to honor and defend the property of those with more. The more people benefit from a body of wealth, the more people will support it.

Indeed, the State can be seen as a mechanism for acquiring the consent of the governed to sign onto a program of stabilization that is inherently artificial, precisely due to its disproportionate dividends to established elites. The State co-opts authentic community support or opposition and channels it into modes that are predictable and stable, establishing its institutional identity as indispensable mediator between the very interests in which it promotes opposition. But authentic community stability is no harder to realize in a genuine, stateless society where people participate only in voluntary organizations. Similarly, inauthentic, imposed stability usually benefits those who cannot maintain their position without outside help. Wealthy interests use the State as a way to marshal public support without yielding control or spreading the wealth, as it were.

A truly free market without subsidized security, regulation, and arbitration imposes costs on large scale aggregations of assets that quickly deplete them. I do not think they would be able to survive for very long without the State, even if "natural elites" exist or some form of social darwinism is proven correct, because natural hierarchies such as those would not need State intervention to maintain their cohesion. One can chalk this up to the fickle and often dark side of human nature, but it's a phenomenon that we cannot just wish away - indeed, we should see a place for these dynamics in the legitimate, bottom-up society.

This theory is not an ironclad prescription of how anarchy must emerge. It is merely a demonstration of how individualist and collectivist visions can both be served without compromising either's interests. Markets and egalitarian distribution of property and wealth are not necessarily mutually exclusive. Perhaps authentic libertarian means of genuinely free markets, taken to their logical conclusion, can effect far more egalitarian and redistributionist ends than we ever dreamed - not as a function of any central State, but rather as a result of its absence.

Why We Don't Let Foxes in the Henhouse

Regulatory Capture
By DAVID MACARAY

"The Commission is, or can be made, of great use to the railroads. It satisfies the popular clamor for government supervision of the railroads, while, at the same time, that supervision is almost entirely nominal.” [italics added]

—Richard Olney, U.S. Attorney General, referring to the ICC (Interstate Commerce Commission), circa 1889.

"If the government is to tell big business men how to run their business, then don't you see that big business men have to get closer to the government even than they are now? Don't you see that they must capture the government in order not to be restrained too much by it? Must capture the government? They have already captured it.” [italics added]

—Woodrow Wilson, 1913

Regulatory Capture is defined as the phenomenon where “….a regulatory agency created to act in the public interest instead advances the commercial or special interests that dominate the industry or sector it is charged with regulating. [It] is a form of government failure, as it can act as an encouragement for large firms to produce ‘negative externality.’ The agencies are called Captured Agencies.”

It’s common knowledge that tobacco companies once enlisted shady doctors to deny the link between smoking and lung cancer, that corporations hire ex-IRS employees to advise them on how to avoid paying taxes, that coal mine companies have put mining safety regulators on their payrolls to grease the skids, and that ex-congressmen drool at the prospect of becoming top-dollar lobbyists.

Therefore, it shouldn’t come as any great surprise that Wall Street investment firms continue to hire government financial regulators to help them game the system.

And it’s not simply a matter of hiring these ex-regulators to assist in circumventing federal law. As devious and sleazy as that practice has become, what’s even more alarming is the conflict-of-interest charges leveled against regulators accused of lying, falsifying data, and “looking the other way” as a condition of future employment. But again, why would that shock anyone?

The relationship between financial institutions and the agencies established to regulate them has become so ridiculously cozy, so maggoty, that the Securities and Exchange Commission (SEC) is now regarded as the Oversight Fairy’s notion of an elaborate prank. The list of SEC officials who have left the Commission for highly lucrative jobs in the private sector is long and impressive (Linda Thomsen, Richard Walker, Bob Khuzami, Arthur Levitt, Gary Lynch, et al).

So what’s the remedy? How can we maintain the integrity of the agencies? It can’t simply be a matter of paying higher salaries to these agency people, because corporations will always be able to offer more—just as the drug cartels will never be outbid by the Mexican government. It’s no contest.

What needs to be done is to impose time restraints on changing teams. We need to regulate the regulators. Anyone who wishes to take a regulatory job with a Civil Service agency (which—let’s not forget—offers decent wages and benefits) must not be allowed to work for a private company within that same industry for a period of, say, seven years after leaving.

If that seems too harsh, or if it violates one’s finely tuned libertarian sensibilities, then so be it. If you can’t handle these restrictions going in, don’t work for the government. The Peace Corps had a rule where ex-volunteers couldn’t engage in military intelligence for a period of five years following our leaving the host country. It was part of the Peace Corps charter.

When you take a federal job, you are, in principle, promising to serve the citizens of the United States. These jobs should not be used as a springboard to higher paying positions within the industry you’re regulating, nor should they result in the very citizens you were empowered to serve being taken advantage of by your change of allegiance. It’s a covenant that any enlightened fourth-grader would understand.

Why Another Financial Crash is Certain

How to Make $4 Trillion Vanish in a Flash
By MIKE WHITNEY

On August 9, 2007, an incident took place at a bank in France that touched-off a financial crisis that that would eventually wipe out more than $30 trillion in capital and thrust the world into the deepest slump since the Great Depression. The event was recounted in a speech by Pimco's managing director Paul McCulley, at the 19th Annual Hyman Minsky Conference on the State of the U.S. and World Economies. Here's an excerpt from McCulley's speech:

"If you have to pick a day for the Minsky Moment, it was August 9. And, actually, it didn’t happen here in the United States. It happened in France, when Paribas Bank (BNP) said that it could not value the toxic mortgage assets in three of its off-balance sheet vehicles, and that, therefore, the liability holders, who thought they could get out at any time, were frozen. I remember the day like my son’s birthday. And that happens every year. Because the unraveling started on that day. In fact, it was later that month that I actually coined the term “Shadow Banking System” at the Fed’s annual symposium in Jackson Hole.

“It was only my second year there. And I was in awe, and mainly listened for most of the three days. At the end....I stood up and (paraphrasing) said, ‘What’s going on is really simple. We’re having a run on the Shadow Banking System and the only question is how intensely it will self-feed as its assets and liabilities are put back onto the balance sheet of the conventional banking system.’”

BNP had been involved in credit intermediation, that is, it was exchanging bonds made up of mortgage-backed securities (MBS) for short-term loans in the repo market. It all sounds very complex, but it's no different than what banks do when they take deposits from customers and then invest the money in long-term assets. (aka--"maturity transformation") The only difference here was that these activities were not regulated, so no government agency was involved in determining the quality of the loans or making sure that the various financial institutions were sufficiently capitalized to cover potential losses. This lack of regulation turned out to have dire consequences for the global economy.

It took nearly a year from the time that subprime mortgages began to default en masse, until the secondary market (where these "toxic" bonds were traded) went into a nosedive. The problem was simple: No one knew whether the underlying mortgages were any good or not, so it became impossible to price the assets (MBS). This created, what Yale Professor Gary Gorton calls, the e coli problem. In other words, if even a small amount of meat is contaminated, millions of pounds of hamburger has to be recalled. That same rule applies to mortgage-backed securities. No one knew which MBS contained the bad loans, so the entire market froze and trillions of dollars in collateral began to fall in value.

Subprime was the spark that lit the fuse, but subprime wasn't big enough to bring down the whole financial system. That would take bigger ructions in the shadow banking system. Here's an excerpt from an article by Nomi Prins which explains how much money was involved:

"Between 2002 and early 2008, roughly $1.4 trillion worth of sub-prime loans were originated by now-fallen lenders like New Century Financial. If such loans were our only problem, the theoretical solution would have involved the government subsidizing these mortgages for the maximum cost of $1.4 trillion. However, according to Thomson Reuters, nearly $14 trillion worth of complex-securitized products were created, predominantly on top of them, precisely because leveraged funds abetted every step of their production and dispersion. Thus, at the height of federal payouts in July 2009, the government had put up $17.5 trillion to support Wall Street's pyramid Ponzi system, not $1.4 trillion." ("Shadow Banking", Nomi Prins, The American Prospect)

Shadow banking emerged so that large cash-heavy financial institutions would have a place to park their money short-term and get the best possible return. For example, let's say Intel is sitting on $25 billion in cash. It can deposit the money with a financial intermediary, such as Morgan Stanley, in exchange for collateral (aka MBS or ABS), and earn a decent return on its money. But if a problem arises and the quality of the collateral is called into question, then the banks (Morgan Stanley, in this case) are forced to take bigger and bigger haircuts which can send the system into a nosedive. That's what happened in the summer of 2007. Investors discovered that many of the subprimes were based on fraud, so billions of dollars were quickly withdrawn from money markets and commercial paper, and the Fed had to step in to keep the system from collapsing.

Regulations are put in place to see that the system runs smoothly and to protect the public from fraud. But banking without rules is more profitable, so industry leaders and lobbyists have tried to block the efforts at reform. And, they have largely succeeded. Dodd-Frank – the financial reform act -- is riddled with loopholes and doesn't really resolve the central issues of loan quality, additional capital, or risk retention. Banks are still free to issue bogus mortgages to unemployed applicants with bad credit, just as they were before the meltdown. And, they can still produce securitized debt instruments without retaining even a meager 5 per cent of the loan's value. (This issue is still being contested) Also, government agencies cannot force financial institutions to increase their capital even though a slight downturn in the market could wipe them out and cause severe damage to the rest of the system. Wall Street has prevailed on all counts and now the window for re-regulating the system has passed.

President Barack Obama understands the basic problem, but he also knows that he won't be reelected without Wall Street's help. That's why he promised to further reduce "burdensome" regulations in the Wall Street Journal just two weeks ago. His op-ed was intended to preempt the release of the Financial Crisis Inquiry Commission's (FCIC) report, which was expected to make recommendations for strengthening existing regulations. Obama torpedoed that effort by coming down on the side of big finance. Now, it's only a matter of time before another crash.

Here's an excerpt from a special report on shadow banking by the Federal Reserve Bank of New York:

"At the eve of the financial crisis, the volume of credit intermediated by the shadow banking system was close to $20 trillion, or nearly twice as large as the volume of credit intermediated by the traditional banking system at roughly $11 trillion. Today, the comparable figures are $16 and $13 trillion, respectively.....The weak-link nature of wholesale funding providers is not surprising when little capital is held against their asset portfolios and investors have zero tolerance for credit losses." ("Shadow Banking", Federal Reserve Bank of New York Staff Report)

So, between $4 to $7 trillion vanished in a flash after Lehman Brothers blew up. How many millions of jobs were lost because of inadequate regulation? How much was trimmed from output, productivity, and GDP? How many people are on now food stamps or living in homeless shelters or struggling through foreclosure because unregulated financial institutions were allowed to carry out credit intermediation without government supervision or oversight?

Ironically, the New York Fed doesn't even try to deny the source of the problem; deregulation. Here's what they say in the report: "Regulatory arbitrage was the root motivation for many shadow banks to exist."

What does that mean? It means that Wall Street knows that it's easier to make money by eliminating the rules....the very rules that protect the public from the predation of avaricious speculators.

The only way to fix the system is to regulate all financial institutions that act like banks. No exceptions.