The Chamber

The Chamber

Donohue has also suggested that presumptive Democratic nominee Hillary Clinton would implement the TPP — a major chamber priority — despite her current position of opposing the agreement.

- The Intercept, Chamber of Commerce May Prefer Hillary Clinton to Donald Trump

By J.M. Hamilton (7-23-16)

The Reagan/Thatcher revolution has suffered some setbacks as of late.  Thirty-six years of neo-liberal/laissez faire economics has led to a massive revolt against the economic and political establishment.  How do we know?  We can see it at this year’s Republican convention, with the nomination of Mr. Donald Trump; we can see it in the Democratic platform, the most progressive document put forth by the Democratic party in decades.  Surely that document was not written by the establishment’s candidate, Madame Clinton; but rather, it was written and guided by the Sanders/Warren wing of the Democratic party. 

Even this year’s GOP platform calls for the return of Glass Steagall. 

And the revolt against crony capitalism, and the Ayn Rand school of economics isn’t limited to America.  Across the pond in Britain, the new Tory Prime Minister, Ms. Theresa May, sounds more like a progressive from the Labour party of old, than the reactionary Margaret Thatcher.  P.M. May replaced Mr. Cameron on the heels of a Brexit vote, that rocked the E.U. and the European establishment to its core.  Post Brexit vote, the European elite quickly decided there would be no more referendums.  Apparently, good government and democracy shouldn’t be left in the hands of the people.  All kinds of unsettling things are likely to happen when decisions are left in the hands of the 99%, who have suffered stagnating wages, record unemployment and underemployment, the evisceration of the middle class, and rising wage & wealth inequality.  The mood among citizens of Western democracies is rather nasty.

Demagogues on the right often attempt to distract voters from the failings of neo-liberal economic policies that have brought decay, ruin, and a lack of opportunity to voter’s lives – by blaming immigrants.  In America this is particularly ridiculous, as we are a nation of immigrants.  (However, there is something to be said for having some control over ones borders, as unlimited immigration is a threat to a nation’s social safety net, and citizen’s wages.)  While moderates and left of center candidates place blame on federal and state governments - co-opted and run by the billionaire class and for the billionaire class, the monopoly economy, and free trade agreements that benefit an elite few (aka crony capitalism).  That said, both Senator Sanders and Mr. Trump have both placed a considerable amount of blame on free trade agreements that have gutted America’s middle class, and a foreign policy establishment and military industrial complex (MIC) that has run completely off the rails.  The MIC, in particular, consumes extraordinary amounts of discretionary federal spending that could be better put to use on social services, college education, rebuilding America’s crumbling infrastructure, or paying down the national debt.  Under the current rigged system, as acknowledged by Messrs. Trump and Sanders, democracy is for sale to the highest bidder. 

In America, there is no greater example of the rigged economy than the largest lobbying/trade organization, The U.S. Chamber of Commerce, led by the septuagenarian, Mr. Thomas Donohue.  The U.S. Chamber (not to be confused w/ local chapters representing Main Street interests) is a two hundred-million-dollar lobbying juggernaut, and its influence and power over the three branches of American government is extraordinary.  

If there is a political revolt in this country, against the governing establishment, how much longer before there is a revolt against the economic order and the billionaires, who have rigged the rules in their favor?  The Chamber’s influence over a Wild West economic policy is unprecedented, and there is no greater representative of the Monopoly economy’s interests then the U.S. Chamber of Commerce.  A careful examination of the Chamber’s policies and positions, under the Donohue administration, illustrates exactly why America finds itself in the situation it’s in today: in a near revolutionary state w/ an outright revolt against the establishment.

Let’s go there, and review the Chamber’s positions & policies:

1)   Free Trade – There has been perhaps no greater threat to the interests of ordinary Americans than the free trade agreements negotiated over the last three decades (free trade is little more than tax, wage, & regulatory arbitrage).  These agreements have led to the export of millions of American jobs offshore, and hollowed out the middle class; and while it’s true that the payback has been a surfeit of inexpensive imports dumped in America, it’s hard to pay for these goods when one is unemployed or underemployed.   I wonder if Mr. Donohue sleeps well at night knowing that 20 to 25% of American children live in poverty?  Poverty often brought upon these children by Mr. Donohue and the Chamber’s advocacy for free trade agreements, and assorted policies that have brought ruin to this country’s middle class and its tax base.

2)  Deregulation – What’s more laissez faire than no rules or regulations, and who is a greater advocate of deregulation than the Chamber?  Whether its advocacy for the repeal of Glass Steagall, or a strong position against Dodd-Frank, the Chamber can be counted on to best represent Wall Street’s interests against the American people.  It is this advocacy – whether it be for the financialization of the economy (aka the debt driven economy), or the elimination of rules & regs surrounding swap and derivatives – that played a significant role in the 2008 calamity and economic collapse.  And when the Chamber's Wall Street contributors do write financial regulations for the U.S. Congress, it is often riddled w/ loopholes, deliberately vague, and so cumbersome, so as establish barriers to entry against competition.

3)  Corporate Tax Loopholes & Corporate Tax Avoidance -  Want to know the architect and defender of today’s corporate tax avoidance, and dodge, schemes?  You guessed it, the Chamber is a huge advocate of America’s corporate tax policy, where it’s widely known that the crème de la crème of the Fortune 500 - via a catalogue of loopholes & offshore havens - cut their effective tax rate down considerably or dodge paying taxes altogether.  As JMH has pointed out many times before, when the wealthy pay no taxes this means the middle class – and those least able to pay - have to pick up the slack, often via regressive tax structures.  As the U.S. is a consumer economy, higher taxes on the upper middle class, and the middle class, means lower consumer demand and lower aggregate spending, and in turn, economic stagnation.  All so that Mr. Donohue’s plutocratic donors can salt away billions upon billions more.  Supply side economics/Voodoo economics/Trickle- Down tax policies have failed America. 

4)  The Fear Card –  The Chamber loves to play this card, and it plays it often.  Want to motivate a congressperson or a senator to adopt the Chamber’s polices, threaten jobs loss.  And nobody plays this card better than Mr. Donohue and the Chamber.  If the Chambers supporters don’t get their way, Mr. Donohue is quick to state that it will result in the loss of jobs, and the government – be it federal or state – will be directly responsible.  Tax policy, deregulation, judicial rulings impacting commerce… the Chamber’s refrain is always the same:  any policy, regulation or ruling against the Chamber’s constituency will result in jobs loss.  The irony of course, is that the Chamber, since Reagan, has had its way with America and largely dictated American economic policy, and often to a ruinous end for many Americans, particularly in regards employment, depressed wages, and employment opportunity.  The Chamber’s free trade and pro-globalization policies alone have resulted in the export of millions of jobs offshore.

5)  K Street Lobbying – As mentioned, until Mr. Donohue came on board, the U.S. Chamber of Commerce was largely a trade association; but with his arrival, the Chamber has become the largest lobbying organization in America, w/ out-sized political influence over the government and the government’s pro-plutocratic policies.  Citizens United, McCutcheon, and now the latest ruling absolving a former VA governor of pay-to-play, these SCOTUS rulings have only served to make the Chamber’s lobbying power that much greater.  In short, no politician, no matter how venal or corrupt, thanks to SCOTUS is being held to account; and those few politicians who would like to honor democratic principles, and their constituency back home, are run over and rolled by the K Street machine.  In short, play ball with the Chamber & K Street, or the Chamber will finance and sponsor your opposition at the next election.

6)  Big Pharma – Some of the worst and most rapacious villains on the business stage today are no longer Wall Street executives, although they still get their fair share of attention, but rather, Big Pharma executives.  Messrs. Shkreli and Pearson (the latter of Valeant Pharmaceutical fame) has certainly gotten the bulk of the attention, but the fraud and habitual ripping off of Americans by many drug manufactures has become standard operating procedure.  Moreover, many of these corporations no longer plow a portion of their profits back into R&D, or the discovery of life saving medicines and therapies; but rather, financial engineering w/in the Pharma industry (aka stock buybacks, M&A, layoffs and pinks slips) is de rigueur.  Standing by Big Pharma’s side, as the price of medicine skyrockets many multiples over…. You guessed it, The Chamber of Commerce (and its Ayn Rand philosophy).  When progressives make the case for a single payer healthcare system, the primary blame for ever escalating medical costs within the private provider healthcare system is Big Pharma.  And Big Pharma’s champion is the Chamber.

7)  Privatization – Yup.  The Chamber is huge proponent of privatization.  Republicans, particularly the base, wonder why government never shrinks.  Democrats wonder why there is no money for infrastructure improvement or social spending for those in need.  The answer can largely be attributed to the privatization of our government, where military contractors, privatized prisons, and surveillance contractors lead to problems like war w/out end, mass incarceration, and a surveillance state run amuck.  It’s hard enough to roll back government when some faceless government bureaucracy, and its staff, are running the show, but when a private contractor takes over a government function forget about it.   Once privatization takes hold of an agency or government bureau, rolling back big government - no matter how redundant or insidious the program - means killing jobs, opportunity, and private enterprise.  And what tax-free organization – nonprofit – pushes privatization?  We already know the answer: The Chamber.

8)  The Monopoly Economy -  The Chamber's advocacy for the laissez faire economy, means that businesses - by divine right - may merge and acquire, infinitum.  Since Michael Milken invented the junk bond in the 80s, and w/ the advent of hyper-accommodative Federal Reserve policies, the number of mergers & acquisitions has soared in this country, so that the number of stock listings on American stock exchanges has been crushed.  Of course, JMH has written extensively about the harmful effects the monopoly economy has on consumers, opportunity, jobs, creativity, a diversity of products & services, investors, and the resulting collusion against clients and the public in the market place.  All that, and more:  Because monopolies charge monopolistic profits, which are a tax upon Americans' stagnating income.  Bottom line:  Not only are your stagnating wages stretched to pay Uncle Sam (because multinational corporations often dodge paying their fair share), but one’s paycheck is stretched thinner still to pay monopolies & oligopolies like Big Pharma, Big Oil, the Wall Street cartel, the Cable utility, and the Airline & Rental car cartels, etc., etc., etc.   Thank the Chamber and Mr. Donohue.

9)  Retrograde Industries -  The Chamber lobbies for some of the nastiest dead-end industries in the nation today.  Not only does the Chamber lobby for these industries, but it often takes positions for these industries that the industries themselves wouldn’t dare take (for fear of offending stockholders/investors).  Big Oil, Big Coal, Big Tobacco, Banking… you name it.   If it’s industry with a serious PR problem, often because said industry’s products and services are highly detrimental to the consumer and society at large – say firearms – these industries can count on the Chamber to be their champion.  In fact, the Chamber, and Mr. Donohue, goes out of its way push their cause.  As long as the money is there, seemingly no argument is too crazed or deranged (e.g. the Chamber still does not acknowledge climate change and fights vigorously anti-tobacco laws, rules & regs).  As for the social costs - the resulting blood bath caused by the firearms industry, the Wall Street bailouts, reduced life expectancy and higher medical costs associated with tobacco consumption – well, that’s not the Chamber’s concern.  The social costs are for the taxpayer and the U.S. government to pick up.  Just like when Mr. Jamie Dimon pays his employees a non-living wage to pad J.P. Morgan’s profits…  no worries, the government and the taxpayer will keep his employees alive, w/ food stamps for his tellers.

10)               Opaque -  Like the Elite themselves, and our government in the service of the elite, the Chamber is opaque.   We don’t know who funds it.  It’s a non-profit, so the Chamber doesn’t have to reveal who its contributors are.  However, we do know a few, like:  Bill & Melinda Gates; the Koch brothers; Karl Rove (aka Turd Blossom); and Steven Cohen (of Hedge Fund fame).  As mentioned above, the Chamber operating out of Washington takes a lot of unsavory positions… positions that favor certain industries, but which the industries themselves don’t want to be associated with for fear of alienating consumers & investors.  By making the Chamber fully transparent, along with its contributors, imagine how quickly some of the Chamber's more harmful positions might evaporate?  Like turning a bright light on in a pest or rodent infested kitchen in the middle of the night, those positions – as well as the Chamber’s support - might scatter rather quickly.

11)               Foreign Policy – Tied into the privatization position above, one reason that America might find itself perennially at war is that for every U.S. troop that goes into battle, there could be anywhere between one and three private contractors following said soldier.  Obviously, that’s a lot of contractors to feed, who are dependent upon endless war, which – along with the MIC -  might explain why America is unable to extricate itself from both Afghanistan and Iraq.  Mr. Donohue’s foreign policy adventures go beyond government privatization, however, and are often more direct.  Like when Mr. Putin invaded the Ukraine, and POTUS Obama launched economic sanctions against Russia in retaliation, Mr. Donohue was quick to support the Russian dictator (largely out of fear that said economic sanctions would screw up a large deal between the Russian government and Exxon Mobil).  You see, in Mr. Donohue’s world profits always come before human rights, questions of sovereignty, or concern for global citizens taking a stand against an oppressive authoritarian regime.  Undoubtedly, some of the multinationals that support the Chamber’s positions have relations with some of the world’s most egregious dictatorships (w/ some of the worst human rights records).  Undoubtedly.  And the Chamber can be counted on to represent these business interests with some of the most repugnant dictatorships on the planet.

Upon reviewing the aforementioned policies and positions, it can be easily argued that no other institution in America (save the money hungry Congress) has played a greater role in gutting the U.S. middle class than the U.S. Chamber of Commerce.  Mr. Donohue's reign coincided with the biggest financial collapse, since the great depression, and ever rising wage & wealth inequality; the policies the Chamber advocated played a very large role in these economic events.

The Chambers positions have become so untenable that some high profile members have quit supporting the non-profit.  Among them:  Apple, CVS, Nike, Pacific Gas & Electric, and Exelon.

Who’s next?  Given some of the Chamber’s more repugnant positions, how much longer before other members quit?  After all, who wants to be associated w/ an organization that is largely responsible for the death of the American dream and pillaging the country?

More to the point, there’s an anti-establishment backlash underway throughout the political world:  Republicans are throwing out the party elite for a presidential candidate who has never held office; Madame Hillary Clinton damn near lost her race against the U.S. Senator from Vermont, Mr. Bernie Sanders; and the, formerly, all powerful Mr. Ailes has been shown the door at Fox News, over allegations of sexual misconduct.  And we all know how the Brexit vote turned out.

With the establishment being purged, or forced to clean up its act, how much longer before Mr. Donohue is shown the door?  That is to say, there’s reasonable advocacy for one’s clients, and then there’s a mania bordering on the irresponsible and the negligent.

Copyright JM Hamilton Publishing 2016

Note to my readers:  JMH does enjoy a good cigar on occasion.  While I’m all for educating the public on the health risks associated with tobacco, and taxing same to pay for the social costs, your humble blogger does not call for tobacco’s outright ban.  Some sins must be permitted, as long as the public is educated on the risks going in.

Treaty of Versailles

Treaty of Versailles

Fair is foul and fouls is fair: Hover through the fog and filthy air.

-       Macbeth

By J.M. Hamilton (7-9-2016)

Ah history…. The actors and dancers may change over time, but the play and the song, largely, remain the same.  The tide goes in, and the tide goes out, and humans often seem uninterested in learning from past mistakes.  Only the elite, who all too often profit from the repetition of history’s mistakes, seem interested in both learning and exploiting same.

Such is the mistake of the Treaty of Versailles (TV), which closed out WWI, and we are rapidly approaching its centennial anniversary.  The treaty was signed June 28, 1919, and ended war between the Central & Allied powers, or the war between Germany & friends, versus England, France, America & friends.  TV is notable because there were, indeed, lessons learned, but it’s also notable because it stands as a monument for lessons not learned.

The Treaty’s lesson – war reparations, or the centuries old practice to the victors goes the spoils– was finally, buried and laid to rest (although I’m sure w/ time, some demagogue will attempt to bring back both practices).  While the lesson not learned is that any nation & its people suffering from a heavy debt burden – whether that debt be incurred in times of peace or war – must have a means to avail themselves to global/universal bankruptcy laws.  Failure to learn this latter lesson post-WWI, allowed for events to occur leading to WWII and the rise of Herr Adolph Hitler; failure to learn this latter lesson, has many real time parallels to the problems the United States and Western powers are facing today. 

Before we go there, a quick overview of TV, and the Treaty’s economic and political repercussion are in order.  Article 231 w/in the Treaty, otherwise known as the War Guilt clause, mandated that Germany pay war reparations, and these reparations could be paid back in commodities, gold, or currencies backed by gold.  The figure ultimately settled upon was 139 million gold marks (over half this figure, C Bonds, was said to be a fiction created to keep the Allied public sated).  One German politician stated that Article 231 amounted to nothing less than the enslavement of the German people, and no less a figure than Lord Keynes referred to the German war reparations as a “Carthaginian peace” (also a metaphor for enslavement).  Indeed, the French, in particular, wanted the reparations to be both punitive and economically exhausting, all the better to keep the Germans in check.  TV also held a hammer for enforcement of Article 231, and that was occupation of Germany’s Ruhr Valley – the center of Germany’s industrial might – by French troops in the event of default.  (There’s plenty of debate among economist, as to whether or not Germany could have actually paid the debt – through taxation, but needless to say the Treaty was not popular among the German people or its leadership.)  The Treaty also required Germany to disarm, and end German conscription.

Rather than raise taxes, the Weimar Republic went off the gold standard, and turned on the printing presses, and effectively attempted to inflate away or engage in the practice known as debt monetization.  Now, if you were a German politician in the know, a banker, or an industrialist, one could hedge against the hyper-inflation/devaluation that ensued by holding assets, commodities, or currencies other than the German mark.  But for the 99%, who were busy earning a living based upon marks, or who had their life savings in German marks, hyper-inflation and the devaluation of the German currency would wipe many out.  

The bottom line, the German public paid the price, not only for fighting the war, but the subsequent currency devaluation was carried on the backs of the public as well.   And the German industrialist, who cashed in on the war, were able to ride out the subsequent devaluation much better than the German public, per the usual.  Compounding Germany’s war reparations problem was the fact that Germany had largely financed the war, with the idea of making the French, English and Americans pay down Germany’s war debt, once it won the war.  As mentioned, the German worker bore the brunt of the mark’s devaluation with lower wages and lower purchasing power of those wages, and as mentioned entire life savings were wiped out.  (Interestingly in the emergency legislation recently passed by the U.S. Congress, it was agreed that Puerto Rico’s minimum wage would be allowed to drop.  Right out of the Robber Baron playbook).

As these things generally go, the wealthy got wealthier – particularly with German assets being sold at fire-sale prices – and the general German public got screwed.  By 1922, it was said to have taken 3,500 German marks to purchase one U.S. dollar.  Due to the uncertainty, currency devaluation, loss of purchasing power and diminished aggregate demand, a depression set in and unemployment was rampant.  A downward spiral ensued, and the German public lost faith in the mainstream political parties.  Instead the German public turned to extremist on the political left and the right, communist and authoritarian types (read Nazi Party).  The economy stalled, and for want of a stable currency, German exports and imports dried up.

America would eventually step in with both a Dawes plan and later a Young plan… these plans gave Germany additional loans to kick start the German economy, pay reparations with, and ultimately, extended the reparations payments as far out as 1988.  Just what any struggling country needs, more debt stacked upon existing debt:  the very definition of insanity, default, and kicking the can down the road (Today’s Greek citizens, and many nation’s along the Southern Periphery of Europe, would be very familiar with this concept).  The Dawes and Young plan was also characterized by foreign oversight over Germany’s finances; again, something indebted European nations, and Latin American nations are all too familiar with.  With the debt extension, in the mid to late 1920s, Germany was allowed breath again, and the economy actually improved.  It was not until 1929 and the Wall Street Stock Market Crash, setting off a worldwide global depression, that the German economy succumbed once again.  In the early ‘30s, Germany defaulted on war reparations payments, which resulted in the withdrawal of foreign investment, panic, German bank collapse & bank runs, and economic collapse.

Germany by now was an economic basket case, and perfectly ripe for a father figure/authoritarian type to take over.  That figure, Herr Hitler, rather than correctly blame the Prussian aristocracy, military leadership, bankers, and industrialist who led the nation to war and the resulting economic chaos, instead blamed the Europeans of Jewish patrimony.

As I indicated earlier in this piece, the world has since learned, post - WWII and the Holocaust - that war reparations are not a good thing; but the world and its leadership appears to have failed to learn that colossal amounts of debt – be that debt in the service of financed war, reparations, bank bailouts, or to pay for tax cuts for the wealthy – are equally dangerous things.

That is to say, holding a bankrupt country responsible for war debt can create as many economic and political problems, as holding a bankrupt country responsible for debt incurred by corrupt politicians in support of their efforts to retain power, provide patronage, or to bailout said politician’s banker friends.

Banks often cannot retain sovereign debt below a certain credit grade, or sovereign debt that has been defaulted upon…. So it is often sold to Vulture capitalist at pennies on the dollar, who utilize the U.S.government and its courts as a debt collector and to enforce payment, or to provide a bailout.  All this reaps Vulture capitalists billions and billions of dollars, for the connected truly an amazing return.

The irony in all this is that for every loan there are two, perhaps three counterparties, to the transaction:  the bank or financial underwriter; the government borrowing the money; and the rating agencies who are often owned by said bank or financial institution.  What we see again and again, in these default scenarios, is that the governments (the borrower) are almost always held to account, but the banks, the bank underwriters (the lender), and the bank owned rating agencies almost always escape unscathed (it certainly has played out that way, since the ’08 crash). 

That’s because the banks – throughout our Western democracies – often own the political class.

German children playing with banknotes.

Today the lessons of Weimar Germany surround us:

·      The world is awash in debt, much of which will never be repaid (global debt is a tremendous drag on the world economy);

·      The plutocracy has largely benefited from this debt, which has financed unnecessary wars and tax cuts for the well-to-do;

·      Debt monetization is reoccurring, as central banks have fired up the printing presses, once again;

·      Indebted countries are seeing their country’s finances and fiscal policy overseen by foreign powers and foreign governments;

·      U6 or unemployment & underemployment remain exceptionally high in heavily indebted nations, particularly among the youth, minorities and foreigners;

·      Political instability is on the rise, as is the rise of fascist and authoritarian parties throughout Europe;

·      Bank and banksters, per the usual, are not paying for lousy underwriting, but instead countries are being forced to pay down debt on the backs of the middle-class & poor, via fiscal austerity;

·       Indebted countries are being forced to take on more debt, in the service of existing debt; and

·       Minorities and foreigners are being scapegoated in Western Europe and America for a problem – too much debt (to finance tax cuts for the wealthy, patronage, bank bailouts, & war profiteers) – that was created by, and benefited, a ruling elite.

·      Unfortunately, unlike the Weimar era, today we have hundreds of trillions (notional value) in derivatives and swaps products that hang over global debt, very much like the Sword of Damocles.  These financial instruments of mass destruction will need to be unwound, if global public debt is to be written down.

The Ghosts of the Weimar Republic surround the global economy today: the Monopoly Economy, the Credit Card Economy.   If you listen carefully enough, they are whispering in our ear. 

Will we listen to their call?  

Will we avoid their fate, to be slaves to public debt that will never be repaid?  Will we avoid their fate, to be slaves to demagogues and politicians yelling for unlimited war?

Will the leaders of the world undertake a global write down of public debt, before a calamity ensues?

P.S.

History is full of twists and turns, and it is most interesting to note that what Germany could not accomplish militarily, via WW I & II, it has accomplished in relatively short order – post reunification.  And that is the German conquest and hegemonic control, economic & politically, over the E.U.  Our peace loving German brethren appear to have learned their lessons well, beware of foreign entanglements and Kriegsschulden.

Copyright JM Hamilton Publishing 2016