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THE GOLDEN AGE OF WHITE COLLAR CRIME!

28 Feb

By Michael Hobbes, Huffpost.com

EDUCATE!

 

A Slow-Motion Looting

OVER THE LAST TWO YEARS, nearly every institution of American life has taken on the unmistakable stench of moral rot. Corporate behemoths like Boeing and Wells Fargo have traded blue-chip credibility for white-collar callousness. Elite universities are selling admission spots to the highest Hollywood bidder. Silicon Valley unicorns have revealed themselves as long cons (Theranos), venture-capital cremation devices (Uber, WeWork) or straightforward comic book supervillains (Facebook). Every week unearths a cabinet-level political scandal that would have defined any other presidency. From the blackouts in California to the bloated bonuses on Wall Street to the entire biography of Jeffrey Epstein, it is impossible to look around the country and not get the feeling that elites are slowly looting it.

And why wouldn’t they? The criminal justice system has given up all pretense that the crimes of the wealthy are worth taking seriously. In January 2019, white-collar prosecutions fell to their lowest level since researchers started tracking them in 1998. Even within the dwindling number of prosecutions, most are cases against low-level con artists and small-fry financial schemes. Since 2015, criminal penalties levied by the Justice Department have fallen from $3.6 billion to roughly $110 million. Illicit profits seized by the Securities and Exchange Commission have reportedly dropped by more than half. In 2018, a year when nearly 19,000 people were sentenced in federal court for drug crimes alone, prosecutors convicted just 37 corporate criminals who worked at firms with more than 50 employees.

With few exceptions, the only rich people America prosecutes anymore are those who victimize their fellow elites. Pharma frat boy Martin Shkreli, to pick just one example, wasn’t prosecuted for hiking the price of a drug used to treat HIV from $13.50 to $750 per pill. He went to prison for scamming investors in a hedge fund scheme years before. Meanwhile, in 2016, the CEO whose company experienced the deadliest mining disaster since 1970 served less than one year in prison and paid a fine of 1.4 percent of his salary and stock bonuses the previous year. Why? Because overseeing a company that ignores warnings and causes the deaths of workers, even 29 of them, is a misdemeanor.

Construction magnate Bruce Karatz provides an infuriating case study of how the criminal justice system treats wealthy defendants. In 2010, Karatz was convicted of failing to disclose in a financial statement that he had secretly “backdated” his stock options (think Biff with the Sports Almanac in “Back to the Future II”) to boost his pay by more than $6 million. Prior to his sentencing hearing, his lawyer submitted letters of support from former mayor of Los Angeles Richard Riordan and billionaire philanthropist Eli Broad. Prosecutors recommended six-and-a-half-years in prison; the judge gave Karatz five years’ probation and eight months of house arrest in his Bel Air mansion. After two years, the judge terminated the remainder of the sentence. Karatz later received a civic award from The Malibu Times for volunteer work he did to make a good impression for his sentencing hearing.

 

Tax evasion siphons10,000times more money out of the U.S. economy every year than bank robberies.SOURCE: FBI; IRS.

 

Country-club nepotism and Gilded Age avarice are nothing new in America, of course. But the rich are enjoying a golden age of impunity unprecedented in modern history. “American elites have become more brazen than they were even five years ago,” said Matthew Robinson, a professor at Appalachian State University and the author of several books on “elite deviance”— all the legal and illegal social harms caused by the wealthy.

Elite deviance has become the dark matter of American life, the invisible force around which the country’s most powerful legal and political systems have set their orbit. Four members of the Sackler family, the owners of Oxycontin maker Purdue Pharma, have retained the services of former SEC head Mary Jo White as their personal lawyer. Epstein’s dinner party guest lists included Harvard professors, billionaire philanthropists and members of political dynasties in at least two countries. In 2017, the pharmaceutical company Novartis spent about 14 percent of its annual lobbying budget on payments to a shell company controlled by ex-Trump lawyer Michael Cohen.

And this clubbiness has human costs. Tax evasion, to pick just one crime concentrated among the wealthy, already siphons up to 10,000 times more money out of the U.S. economy every year than bank robberies. In 2017, researchers estimated that fraud by America’s largest corporations cost Americans up to $360 billion annually between 1996 and 2004. That’s roughly two decades’ worth of street crime every single year. As the links between corporations and regulators become increasingly incestuous, the future will bring more crude-soaked coastlines, price-gouging corporate behemoths and Madoff-style Ponzi schemes. More hurdles to suing companies for poisoning their customers or letting bosses harass their employees. And more uniquely American catastrophes like the opioid crisis and the price of insulin.

Perhaps the greatest myth about white-collar crime is that Americans struggle to understand it—as if chemical companies toxifying rivers or insurance executives gouging their customers fail to stimulate our moral intuitions. In fact, surveys consistently show that the vast majority of the population considers white-collar crime more harmful than street crime and powerful offenders more odious than common criminals.

Those intuitions are correct: An entrenched, unfettered class of superpredators is wreaking havoc on American society. And in the process, they’ve broken the only systems capable of stopping them.

2An Increasingly Desperate Pantomime Of Legal Enforcement

EVERY YEAR, AT BRANDED COCKTAIL receptions and bloated buffet breakfasts, government agents spend two days hobnobbing with the tax-haven attorneys they spend the rest of the year investigating.

The Offshore Alert conference takes place in Miami each spring, in London each fall and in “key offshore jurisdictions” all year round. Officially, participants come to discuss “wealth creation, preservation and recovery.” Less officially, the tax lawyers come to learn what the feds will crack down on next year. The government investigators come to fish for future jobs. Imagine a yearly picnic where sheriffs give drug dealers tips on hiding baggies from pat-downs and leave with a new set of endorsements on LinkedIn.

In person, the conference is even more surreal than it sounds. From across a cologne-scented hotel lobby, I watched tanned attorneys fresh off flights from the Caribbean mingle with ashen IRS agents who bring business cards from Kinko’s because the agency won’t pay to get them printed anymore. I listened to officials from the FBI and SEC lay out enforcement priorities as cryptocurrency investors and Russian bankers took notes. At lunch, I talked “Game of Thrones” with a Senate advisor, a government auditor and a Bahamanian lawyer who later offered to set me up a shell corporation for $5,000.

“We killed a generation of agents,” said Arthur VanDesande, a former IRS investigator. “If you investigate mom and pop grocery stores for 20 years, you lose the ability to do Bernie Madoffs.”

The finance types were frosty during the day—an investor who appeared to be wearing monogrammed slacks wouldn’t tell me his first name—but they loosened up at the happy hours. An offshore tax advisor bragged that he could take his clients’ tax rates from 49 percent to 15 percent and complained that they were constantly pushing him to go lower. Another told me that most of his clients aren’t trying to hide money from the government but from their second or third wives. “The first one raised their kids so they feel like she’s entitled to something,” he explained. “It’s the trophy wives they want to lock out.”

Jack Albertson is a government investigator—that’s not his real name and he won’t let me get more specific about his job description—who has been coming to Offshore Alert for years. When I ask him how this cops-and-robbers conflagration even exists, he tells me I’m thinking about it the wrong way. He, like all the other investigators here, knows that many of the lawyers who attend are hiding their clients’ money sketchily or outright illegally. He even knows how they’re doing it. The tactics for hiding money from tax authorities are not particularly sophisticated and have barely changed in the last 50 years. Set up a shell company and buy an appreciating asset—Iowa farmland, a London apartment, a New York pizzeria, something common enough that it won’t attract attention.

Contrary to the “Catch Me If You Can” myth, Albertson said, solving financial crimes is not a cat-and-mouse game between cunning investigators and slippery con artists. Most of the time it is simply the blunt application of resources to a series of unimaginably tedious tasks. “Investigators can already crack almost any offshore account if they have enough time and money,” he said. “The problem is that they only get that for a few cases a year.”

Over the last four decades, the agencies responsible for investigating elite and white-collar crime—roughly speaking, the IRS, SEC, the Occupational Safety and Health Administration, the Environmental Protection Agency and FBI—have seen their enforcement divisions starved into irrelevance. More than a third of the FBI investigators who patrol Wall Street were reassigned between 2001 and 2008. Enforcement funding at the IRS has fallen by 23 percent over the last decade. And, worst of all, every time a scandal exposes the government’s inadequacy, Congress steps in to squeeze the regulators even harder.

The most instructive case of this deliberate stunting is the Consumer Product Safety Commission. Founded in 1972, the CPSC’s job is to make sure the things you buy won’t pierce, poison or burn you. In the 1980s, Ronald Reagan slashed its budget as part of his crusade against bureaucratic waste. In the 1990s, Clinton instructed the agency to produce more data as part of his push for government accountability. No matter which party was in power, every administration gave the CPSC more to do and less money to do it with. By 2007, it had shrunk from its initial 786 employees to just 420.

That same year, Mattel announced a recall of more than 1 million⁠ of its children’s toys that had been contaminated with lead paint. Despite the company’s sophisticated international operations and billions in revenues, it had never bothered to inspect the Chinese sub-contractors. By then, the CSPC had fewer than 100⁠ inspectors to monitor all imports to the United States. The Los Angeles-area ports where a chunk of the tainted toys arrived was overseen by a single part-time inspector.

Congress responded to the scandal by compounding the mistakes that had caused it. Lawmakers agreed to double the CPSC’s budget and increase its staff, but also obligated the agency to carry out dozens of new activities, including the creation of a public database to track safety hazards for every single product sold in the U.S.

The new mandate swallowed up all the agency’s new funding and more. Soon, the CPSC was dedicating nearly all of its time to lead abatement in children’s toys, neglecting millions of products that posed far greater risks to children, like flammable blankets or dangerous table saws. The product database filled up with unconfirmed complaints and spammy comments. Mattel, meanwhile, faced no consequences for manufacturing the lead-tainted toys beyond a $2.3 million fine—roughly 0.006 percent⁠ of its net income. According to Rena Steinzor, the author of “Why Not Jail? Industrial Disasters, Corporate Malfeasance, and Government Inaction,” the same cycle has repeated itself across every form of elite deviance, from tax compliance to financial regulation to environmental protection. In 2010, following a series of tax-haven scandals, the IRS set up a “wealth squad” to investigate the ultra-rich —but only staffed it with enough agents to perform 36 audits in its first two years.

After the Enron-led avalanche of corporate bankruptcies in the early 2000s, Congress gave the SEC enough funding to hire 200 new auditing staff. At the same time, however, lawmakers obligated the agency to review the filings of every publicly traded U.S. financial firm every three years—a mandate far larger than the agency’s new staffing levels. Then, after the financial crisis, it happened again: The Dodd-Frank act tasked the SEC with monitoring even more companies and trillions of new assets while increasing its enforcement staff by less than 10 percent.

This cycle has left America’s regulators with no choice but to engage in an increasingly desperate pantomime of white-collar law enforcement. On the outside, they report impressive performance statistics to avoid even more budget cuts. Behind the scenes, they’ve retreated to investigating only the defendants they know are guilty and the crimes they know where to find.

The primary beneficiaries of this shift are American elites. Rich people generate mountains of financial data. Millionaires can have over 100 bank accounts; billionaires’ tax returns run to 800 pages long. For people who earn most of their income from working (i.e. almost everyone), the IRS has an automatic system that compares individuals’ reports to the records submitted by their employers and banks. For the wealthy, who make much of their income from interest and investments, the agency has nothing to compare their reports against. The only way to tell if a rich person is cheating on their taxes is to sit down and go through them line by line.

 

 

“Let’s say you get a tip that some billionaire is hiding a bunch of money offshore and not paying taxes on it,” said Arthur VanDesande, who spent 25 years as a criminal investigator for the IRS. “And you manage to narrow the tax evasion down to 20 of his bank accounts. OK, now you have to prepare 20 subpoenas, get them signed by a judge and deliver them to the banks. But when you go to Bank of America, they say, ‘We don’t accept subpoenas at this location, you have to go to our authorized representative in Orlando.’ So then you go to Orlando and and you find out the money is linked to an offshore account. So then you have to write to the embassy…’”

Due to the IRS’ lean resources, VanDesande did most of this legwork himself. “You type your own shit, you make your own copies, you write every single affidavit. Sometimes you feel like, ‘I’m a senior-level person with a college degree. Why am I calling Wells Fargo and sitting on hold for 45 minutes?’”

Only some of this drudgery can be outsourced to lower-level staffers. White-collar cases involve understanding arcane laws, absorbing thousands of pages of documents, traversing international jurisdictions and coordinating a vast array of agencies from the Secret Service to the Post Office. They require investigators to be Jack Ryan, Magnum P.I. and Leslie Knope all at once. Even though auditing millionaires and billionaires is one of the most cost-effective government activities imaginable—an independent report estimated in 2014 that it yielded up to $4,545 in recovered revenue per hour of staff time—the IRS investigated the returns of just 3 percent of American millionaires in 2017.

In addition to reducing their caseload, America’s white-collar enforcement agencies have started prioritizing crimes they can prosecute in bulk. In 2017, the Department of Justice took on 889 prosecutions for identity theft (which, according to a 2010 survey, is estimated to cost individuals $371 out-of-pocket) and just 24 for antitrust violations. According to a ProPublica report, 43 percent of all tax filers audited by the IRS earn less than $56,000 per year. Roughly one in six of the SEC’s enforcement actions in fiscal 2019 were against financial firms for filing paperwork late—a six-fold increase since 2004.

Helen Richmond, a paralegal in a white-collar prosecutor’s office (that’s not her real name), said most of the defendants her office pursues are “either dumb or unlucky.” She’s worked on cases against money launderers who named stolen items on their wire transfers and fraudsters who sent emails with recipe-like details of their schemes. Criminals with even a scrap of sophistication, Richmond said, mostly avoid detection.

Another bargain-hunting strategy is to try cases in administrative proceedings rather than civil courts, an innovation that reduces hearings from months to hours. The downside, though, is that these cases largely play out in secret, resulting in fines rather than prison time and don’t compel defendants to testify, turn over evidence or admit guilt. In 2007, the SEC filed 60 percent of its settlements in civil courts. In 2015, that proportion was 17 percent. In 2014 and 2015, the agency didn’t file a settlement against a single U.S. Wall Street firm.

One of the most conspicuous aspects of white-collar cases is the doting, near-veterinary care with which judges try to prevent defendants from facing harsh punishment.

According to former OSHA assistant secretary David Michaels, these strategies are designed to achieve the all-consuming yet unstated goal of every regulation agency in America: Make yourself look more powerful than you are. The best way to do this is to focus on the cases that will yield the maximum deterrence for the lowest cost. At OSHA, Michaels said, “we would issue press releases announcing waves of random inspections so employers would look at their hazards. We never told them we only planned to do a few inspections.”

Similarly, the IRS has explicitly instructed agents to prioritize cases likely to generate headlines. (Ever wonder why so many B-list celebrities get busted for tax evasion?). Federal investigators go after media punching bags like Martin Shkreli, Martha Stewart and Fyre Festival scammer Billy McFarland to make the public think criminal prosecutions are routine. They’re not: In a case-by-case analysis of the 216 alleged large-scale corporate frauds discovered between 1996 and 2004, researchers found that the media uncovered twice as many as the SEC.

 

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And so, after decades of operating in survival mode, white-collar enforcement agencies are better at reporting success than producing it. In a 2016 study, a Georgetown University School of Law professor named Urska Velikonja discovered that while the SEC reported a steady rise in prosecutions between 2002 and 2014, most of the increase was statistical padding. When a trader was charged with fraud and then lost her license to trade securities, for example, the SEC logged the sanctions as two separate cases. When the agency was in danger of posting sluggish performance stats for the year, investigators filed dozens of slam-dunk cases in September to catch up. As Velikonja put it, “they’re engaging in their own version of accounting fraud.” (The SEC declined to comment.)

For the agents charged with cracking offshore tax schemes and protecting consumers from lead-painted Elmo collectibles, this charade is profoundly demoralizing. “We killed a generation of agents,” VanDesande said. “If you investigate mom and pop grocery stores for 20 years, you lose the ability to do Bernie Madoffs.”

VanDesande has spent months building cases only to have the DOJ toss them with little explanation. Richmond, the paralegal, tells me federal and state prosecutors have been playing hot potato with one of her cases for months because they can’t justify an expensive prosecution for a fraud that adds up to the low six digits. During his first year on the job, Lewis Winters, an SEC examiner (and another government employee who couldn’t use his real name), had an investigation of a shady CEO rejected by the agency’s enforcement division. Even though he had found plenty of violations, the crimes just weren’t … grand enough for the agency to pursue.

“It felt personal,’” Winters said. “Why did I spend three months examining this guy if enforcement just goes, ‘meh’?”

3Defining Deviance Downward

ENRON USED TO BE CONSIDERED the capstone to the Golden Age of white-collar prosecutions, a shining example of the system working like it’s supposed to. Weeks after the company filed America’s then-largest corporate bankruptcy, federal agents searched its headquarters and discovered a $63 billion game of three-card monte. Using an intricate network of off-the-books shell companies, Enron executives made loans look like income and debt look irrelevant. The year before the company collapsed, its leaders had falsified 96 percent of its net income and 105 percent of its cash flow.

Between 2002 and 2006, the FBI’s Enron Task Force filed charges against more than 30 architects of Enron’s fraud. Investigators discovered a “shred room” at the company’s financial auditor, Arthur Andersen, and convicted the company of obstruction of justice. Four Merrill Lynch bankers were found guilty of helping Enron falsify its financial returns by purchasing three Nigerian barges. Task force agents convinced the company’s chief financial officer to testify against his higher-ups by threatening to charge his wife with a felony. He flipped; they convicted her of a misdemeanor.

Eventually, after a five-year investigation, Enron founder Ken Lay and former CEO Jeffrey Skilling were convicted of securities fraud and a meal deal of lesser charges. Though Lay died at a rented mansion in Colorado shortly afterwards, Skilling got 24 years in prison. At the time, it was one of the longest white-collar sentences in U.S. history. Prosecutors called it a victory. Skilling’s lawyers called it just the beginning.

As soon as the nation turned its attention elsewhere, Skilling’s lawyers began quietly dismantling his sentence. They filed appeals objecting to the statutes used to convict him, the trial’s Houston location and the questionnaires filled out by potential jurors. In 2013, citing the “extraordinary resources” it had spent prosecuting and defending Skilling’s conviction, the Department of Justice agreed to cut ten years off Skilling’s sentence if he promised not to file any more appeals. He was released in February 2019 after serving less than half his original sentence.

The rest of the FBI’s victory has crumbled under the same blitzkrieg of high-priced lawyering. The Supreme Court overturned Arthur Andersen’s conviction in 2005. The convictions of three of the Merrill Lynch bankers were vacated after they convinced an appeals court that they were merely trying to “solidify business relationships” rather than acting for personal gain. In the end, just 18 people served prison sentences (by comparison, more than 500 served time for the savings and loan crisis of the 1980s and early 1990s). Fourteen of them served fewer than four years. Andrew Fastow, the mastermind of Enron’s network of shell companies, now makes his living lecturing business school students and fraud investigators about how he did it.

Nearly every high-profile corporate scandal has the same overlooked epilogue. The wealthy have always attempted to spend their way to lighter sentences, but in the last two decades, the American judicial system has become increasingly willing to let them.

 

12. Pacific Garbage Dump—Did You Really Think Your Plastic Was Being Recycled? | Project Censored

 

“We’ve seen a concerted effort to define deviance downward,” said Paul Leighton, a professor at Eastern Michigan University and the co-author of “The Rich Get Richer and the Poor Get Prison.” “We’ve made felonies into misdemeanors, misdemeanors into torts and torts into regulatory offenses.”

Honest services fraud, for example, is the subsection of mail and wire fraud that prohibits companies from lying to customers to get their business and CEOs from lying to investors after they’ve already been hired. Think of a mechanic telling you that your perfectly functional transmission is busted, then telling you it will cost $2,000 to fix it. He hasn’t defrauded you exactly—he really will replace your transmission—but he used his position of authority to scam you into paying for something you didn’t need.

Since 1909, prosecutors have used the honest services fraud provision to go after companies that lie to boost their stock price and politicians who give golfing buddies lucrative procurement contracts. District Court Judge Jed Rakoff, a former white collar prosecutor, once referred to the statute as “our Colt 45, our Louisville Slugger, our Cuisinart.”

But over the last three decades, the Supreme Court has taken the law apart piece by piece. In 1987, the Rehnquist Court ruled that the statute should never have been used to protect the so-called “right to honest services.” In 2010, the court restricted its application to public-sector bribery and kickbacks. From now on, the lying mechanic is breaking the law only if someone else is paying him to scam you.

Based on that ruling, several white collar criminals—including, wait for it, Jeffrey Skilling—had their sentences or convictions vacated. This year, two former Chris Christie underlings will tell the Supreme Court that orchestrating the “Bridgegate” conspiracy, in which they deliberately orchestrated traffic jams to get revenge on a Democratic mayor, is no longer illegal under the new, narrowed definition. If the Supreme Court agrees, the law will get even weaker.

There will never be a wake-up call for corporations; the justice system doesn’t do that anymore.

Other white collar statutes have suffered the same slow strangulation. In 2006, a district court judge reaffirmed the right of companies to pay the legal fees of their executives, effectively giving every C-suite defendant the same deep pockets as their corporate employer. Since 1996, the Supreme Court has consistently blocked plaintiffs from receiving punitive damages, arguing that large punishments deprive corporations of their due process rights. In 2016, the court ruled that federal bribery law only applies to politicians who traded official acts for personal benefit—the kind of immediate, explicit kickback that rarely happens outside of corporate HR training videos.

“Criminal law used to be more closely aligned to our moral intuitions,” said Will Thomas, a University of Michigan professor who studies corporate liability. “We still talk about it like it’s a guiding moral force, but it’s a much more administrative process now.”

Today, Thomas explained, judges are more willing to disregard the consequences of their rulings (like, say, an Enron-scale fraud going unpunished) in favor of resolving obscure procedural ambiguities. In 2017, for instance, a case against New York financier Benjamin Wey was dismissed after he successfully argued that the search warrant used to gather evidence against him was overly broad and vaguely worded.

The confounding thing about these challenges is that they often highlight real weaknesses in the criminal justice system. American law is a contradictory jungle of century-old statutes and arbitrary definitions. Lying to government investigators, for example, is prohibited by at least 215 separate laws, each with their own standard of proof. Mens rea, the concept of “guilty mind” central to establishing criminal liability, has more than 100 definitions across various statutes.

So of course wealthy defendants win cases by arguing that fraud statutes and insider trading rules are poorly written. They are. But so are the rest of the laws. (Numerous state anti-gang statutes, for example, define “gang” so imprecisely that they could apply to most sororities.) The only difference is that white-collar defendants have the ability to dispute every step of the process used to convict them—and a judicial system all too happy to oblige.

One of the most conspicuous aspects of white-collar cases is the doting, near-veterinary care with which judges try to prevent defendants from facing harsh punishment. In 2014, a Colorado judge ruled that two farm owners whose tainted cantaloupes caused a listeria outbreak and killed 33 people couldn’t be sent to prison because it would interfere with their ability to earn income for their families. As he announced a sentence of five years probation, the judge explained, “I must deliver both justice and mercy.”

 

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Here are 10 things you should know about socialism!

31 Jan

 

What do we mean when we talk about “socialism”? Here are ten things about its theory, practice, and potential that you need to know.

Over the last 200 years, socialism has spread across the world. In every country, it carries the lessons and scars of its particular history there. Conversely, each country’s socialism is shaped by the global history, rich tradition, and diverse interpretations of a movement that has been the world’s major critical response to capitalism as a system.

 

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1. Socialism is a yearning for something better than capitalism

Socialism represents the awareness of employees that their sufferings and limitations come less from their employers than from the capitalist system. That system prescribes incentives and options for both sides, and rewards and punishments for their behavioral “choices.” It generates their endless struggles and the employees’ realization that system change is the way out.

In Capital, Volume 1, Karl Marx defined a fundamental injustice—exploitation—located in capitalism’s core relationship between employer and employee. Exploitation, in Marx’s terms, describes the situation in which employees produce more value for employers than the value of wages paid to them. Capitalist exploitation shapes everything in capitalist societies. Yearning for a better society, socialists increasingly demand the end of exploitation and an alternative in which employees function as their own employer. Socialists want to be able to explore and develop their full potentials as individuals and members of society while contributing to its welfare and growth.

Karl Marx, date unknown. Photo from Bettmann/Getty Images.

Socialism is an economic system very different from capitalism, feudalism, and slavery. Each of the latter divided society into a dominant minority class (masters, lords, and employers) and a dominated majority (slaves, serfs, employees). When the majority recognized slavery and feudal systems as injustices, they eventually fell.

The majorities of the past fought hard to build a better system. Capitalism replaced slaves and serfs with employees, masters and lords with employers. It is no historical surprise that employees would end up yearning and fighting for something better. That something better is socialism, a system that doesn’t divide people, but rather makes work a democratic process where all employees have an equal say and together are their own employer.

 

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2. Socialism is not a single, unified theory

People spread socialism across the world, interpreting and implementing it in many different ways based on context. Socialists found capitalism to be a system that produced ever-deepening inequalities, recurring cycles of unemployment and depression, and the undermining of human efforts to build democratic politics and inclusive cultures. Socialists developed and debated solutions that varied from government regulations of capitalist economies to government itself owning and operating enterprises, to a transformation of enterprises (both private and government) from top-down hierarchies to democratic cooperatives.

Sometimes those debates produced splits among socialists. After the Russian Revolution of 1917, socialists supporting the post-revolutionary Soviet Union underscored their commitment to socialism that entailed the government owning and operating industries by adopting the new name “communist.” Those skeptical of Soviet-style socialism tended increasingly to favor state regulation of private capitalists. They kept the name “socialist” and often called themselves social democrats or democratic socialists. For the last century, the two groups debated the merits and flaws of the two alternative notions of socialism as embodied in examples of each (e.g. Soviet versus Scandinavian socialisms).

Early in the 21st century, an old strain of socialism resurfaced and surged. It focuses on transforming the inside of enterprises: from top-down hierarchies, where a capitalist or a state board of directors makes all the key enterprise decisions, to a worker cooperative, where all employees have equal, democratic rights to make those decisions, thereby becoming—collectively—their own employer.

 

3. The Soviet Union and China achieved state capitalism, not socialism

As leader of the Soviet Union, Lenin once said that socialism was a goal, not yet an achieved reality. The Soviet had, instead, achieved “state capitalism.” A socialist party had state power, and the state had become the industrial capitalist displacing the former private capitalists. The Soviet revolution had changed who the employer was; it had not ended the employer/employee relationship. Thus, it was—to a certain extent—capitalist.

Lenin’s successor, Stalin, declared that the Soviet Union had achieved socialism. In effect, he offered Soviet state capitalism as if it were the model for socialism worldwide. Socialism’s enemies have used this identification ever since to equate socialism with political dictatorship. Of course, this required obscuring or denying that (1) dictatorships have often existed in capitalist societies and (2) socialisms have often existed without dictatorships.

After initially copying the Soviet model, China changed its development strategy to embrace instead a state-supervised mix of state and private capitalism focused on exports. China’s powerful government would organize a basic deal with global capitalists, providing cheap labor, government support, and a growing domestic market. In exchange, foreign capitalists would partner with Chinese state or private capitalists, share technology, and integrate Chinese output into global wholesale and retail trade systems. China’s brand of socialism—a hybrid state capitalism that included both communist and social-democratic streams—proved it could grow faster over more years than any capitalist economy had ever done.

 

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4. The U.S., Soviet Union, and China have more in common than you think 

As capitalism emerged from feudalism in Europe in the 19th century, it advocated liberty, equality, fraternity, and democracy. When those promises failed to materialize, many became anti-capitalist and found their way to socialism.

Experiments in constructing post-capitalist, socialist systems in the 20th century (especially in the Soviet Union and China) eventually incurred similar criticisms. Those systems, critics held, had more in common with capitalism than partisans of either system understood.

Self-critical socialists produced a different narrative based on the failures common to both systems. The U.S. and Soviet Union, such socialists argue, represented private and state capitalisms. Their Cold War enmity was misconstrued on both sides as part of the century’s great struggle between capitalism and socialism. Thus, what collapsed in 1989 was Soviet State capitalism, not socialism. Moreover, what soared after 1989 was another kind of state capitalism in China.

 

5. Thank American socialists, communists, and unionists for the 1930s New Deal

FDR’s government raised the revenue necessary for Washington to fund massive, expensive increases in public services during the Depression of the 1930s. These included the Social Security system, the first federal unemployment compensation system, the first federal minimum wage, and a mass federal jobs program. FDR’s revenues came from taxing corporations and the rich more than ever before.

President Franklin D. Roosevelt, center, and his New Deal administration team on September 12, 1935. Photo by Keystone-France/Gamma-Keystone/Getty Images.

In response to this radical program, FDR was reelected three times. His radical programs were conceived and pushed politically from below by a coalition of communists, socialists, and labor unionists. He had not been a radical Democrat before his election.

Socialists obtained a new degree of social acceptance, stature, and support from FDR’s government. The wartime alliance of the U.S. with the Soviet Union strengthened that social acceptance and socialist influences.

 

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6. If 5 was news to you, that’s due to the massive U.S.-led global purge of socialists and communists after WWII

After its 1929 economic crash, capitalism was badly discredited. The unprecedented political power of a surging U.S. left enabled government intervention to redistribute wealth from corporations and the rich to average citizens. Private capitalists and the Republican Party responded with a commitment to undo the New Deal. The end of World War II and FDR’s death in 1945 provided the opportunity to destroy the New Deal coalition.

The strategy hinged on demonizing the coalition’s component groups, above all the communists and socialists. Anti-communism quickly became the strategic battering ram. Overnight, the Soviet Union went from wartime ally to an enemy whose agents aimed “to control the world.” That threat had to be contained, repelled, and eliminated.

U.S. domestic policy focused on anti-communism, reaching hysterical dimensions and the public campaigns of U.S. Sen. Joseph McCarthy. Communist Party leaders were arrested, imprisoned, and deported in a wave of anti-communism that quickly spread to socialist parties and to socialism in general. Hollywood actors, directors, screenwriters, musicians, and more were blacklisted and barred from working in the industry. McCarthy’s witch hunt ruined thousands of careers while ensuring that mass media, politicians, and academics would be unsympathetic, at least publicly, to socialism.

U.S. Sen. Joseph McCarthy led a campaign to put prominent government officials and others on trial for alleged “subversive activities” and Communist Party membership during the height of the Cold War. Photo by Corbis/Getty Images.

In other countries revolts from peasants and/or workers against oligarchs in business and/or politics often led the latter to seek U.S. assistance by labeling their challengers as “socialists” or “communists.” Examples include U.S. actions in Guatemala and Iran (1954), Cuba (1959-1961), Vietnam (1954-1975), South Africa (1945-1994), and Venezuela (since 1999). Sometimes the global anti-communism project took the form of regime change. In 1965-6 the mass killings of Indonesian communists cost the lives of between 500,000 to 3 million people.

Once the U.S.—as the world’s largest economy, most dominant political power, and most powerful military—committed itself to total anti-communism, its allies and most of the rest of the world followed suit.

 

7. Since socialism was capitalism’s critical shadow, it spread to those subjected by and opposed to capitalist colonialism 

In the first half of the 20th century, socialism spread through the rise of local movements against European colonialism in Asia and Africa, and the United States’ informal colonialism in Latin America. Colonized people seeking independence were inspired by and saw the possibility of alliances with workers fighting exploitation in the colonizing countries. These latter workers glimpsed similar possibilities from their side.

This helped create a global socialist tradition. The multiple interpretations of socialism that had evolved in capitalism’s centers thus spawned yet more and further-differentiated interpretations. Diverse streams within the anti-colonial and anti-imperialist tradition interacted with and enriched socialism.

 

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8. Fascism is a capitalist response to socialism

A fascist economic system is capitalist, but with a mixture of very heavy government influence. In fascism, the government reinforces, supports, and sustains private capitalist workplaces. It rigidly enforces the employer/employee dichotomy central to capitalist enterprises. Private capitalists support fascism when they fear losing their position as capitalist employers, especially during social upheavals.

Under fascism, there is a kind of mutually supportive merging of government and private workplaces. Fascist governments tend to “deregulate,” gutting worker protections won earlier by unions or socialist governments. They help private capitalists by destroying trade unions or replacing them with their own organizations which support, rather than challenge, private capitalists.

Frequently, fascism embraces nationalism to rally people to fascist economic objectives, often by using enhanced military expenditures and hostility toward immigrants or foreigners. Fascist governments influence foreign trade to help domestic capitalists sell goods abroad and block imports to help them sell their goods inside national boundaries.

Blackshirts, supporters of Benito Mussolini who founded the National Fascist Party, are about to set fire to portraits of Karl Marx and Vladimir Lenin in Italy in May 1921. Photo by Mondadori/Getty Images.

Usually, fascists repress socialism. In Europe’s major fascist systems—Spain under Franco, Germany under Hitler, and Italy under Mussolini—socialists and communists were arrested, imprisoned, and often tortured and killed.

A similarity between fascism and socialism seems to arise because both seek to strengthen government and its interventions in society. However, they do so in different ways and toward very different ends. Fascism seeks to use government to secure capitalism and national unity, defined often in terms of ethnic or religious purity. Socialism seeks to use government to end capitalism and substitute an alternative socialist economic system, defined traditionally in terms of state-owned and -operated workplaces, state economic planning, employment of dispossessed capitalists, workers’ political control, and internationalism.

 

9. Socialism has been, and still is, evolving

During the second half of the 20th century, socialism’s diversity of interpretations and proposals for change shrank to two alternative notions: 1.) moving from private to state-owned-and -operated workplaces and from market to centrally planned distributions of resources and products like the Soviet Union, or 2.) “welfare-state” governments regulating markets still comprised mostly of private capitalist firms, as in Scandinavia, and providing tax-funded socialized health care, higher education, and so on. As socialism returns to public discussion in the wake of capitalism’s crash in 2008, the first kind of socialism to gain mass attention has been that defined in terms of government-led social programs and wealth redistributions benefitting middle and lower income social groups.

The evolution and diversity of socialism were obscured. Socialists themselves struggled with the mixed results of the experiments in constructing socialist societies (in the Soviet Union, China, Cuba, Vietnam, etc.). To be sure, these socialist experiments achieved extraordinary economic growth. In the Global South, socialism arose virtually everywhere as the alternative development model to a capitalism weighed down by its colonialist history and its contemporary inequality, instability, relatively slower economic growth, and injustice.

Socialists also struggled with the emergence of central governments that used excessively concentrated economic power to achieve political dominance in undemocratic ways. They were affected by criticisms from other, emerging left-wing social movements, such as anti-racism, feminism, and environmentalism, and began to rethink how a socialist position should integrate the demands of such movements and make alliances.

 

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10. Worker co-ops are a key to socialism’s future

The focus of the capitalism-versus-socialism debate is now challenged by the changes within socialism. Who the employers are (private citizens or state officials) now matters less than what kind of relationship exists between employers and employees in the workplace. The role of the state is no longer the central issue in dispute.

A growing number of socialists stress that previous socialist experiments inadequately recognized and institutionalized democracy. These self-critical socialists focus on worker cooperatives as a means to institutionalize economic democracy within workplaces as the basis for political democracy. They reject master/slave, lord/serf, and employer/employee relationships because these all preclude real democracy and equality.

Homesteaders, relocated by the U.S. Resettlement Administration, a federal agency under the New Deal, working at a cooperative garment factory in Hightstown, New Jersey, in 1936. The U.S. Resettlement Administration relocated struggling families to provide work relief. Photo by Universal History Archive/Universal Images Group/Getty Images.

For the most part, 19th and 20th century socialisms downplayed democratized workplaces. But an emerging, 21st century socialism advocates for a change in the internal structure and organization of workplaces. The microeconomic transformation from the employer/employee organization to worker co-ops can ground a bottom-up economic democracy.

The new socialism’s difference from capitalism becomes less a matter of state versus private workplaces, or state planning versus private markets, and more a matter of democratic versus autocratic workplace organization. A new economy based on worker co-ops will find its own democratic way of structuring relationships among co-ops and society as a whole.

Worker co-ops are key to a new socialism’s goals. They criticize socialisms inherited from the past and add a concrete vision of what a more just and humane society would look like. With the new focus on workplace democratization, socialists are in a good position to contest the 21st century’s struggle of economic systems.

 

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Richard D. Wolff is Professor of Economics Emeritus, University of Massachusetts, Amherst, and a Visiting Professor in the Graduate Program in International Affairs of the New School University, NYC. He taught economics at Yale University, the City University of New York, and the University of Paris. Over the last 25 years, in collaboration with Stephen Resnick, he has developed a new approach to political economy that appears in several books co-authored by Resnick and Wolff and numerous articles by them separately and together. Professor Wolff’s weekly show, “Economic Update,” is syndicated on over 90 radio stations and goes to 55 million TV receivers via Free Speech TV and other networks.

 

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Trump is a Criminal, But the Democrats Belong to the Same Mafia

15 Jan

Glen Ford, BAR executive editor 09 Jan 2020

 

Trump is a Criminal, But the Democrats Belong to the Same Mafia

 

The Republicans and Democrats are united under the American imperial banner, and only differ on details of strategy to maintain Washington’s global domination.

None can be free of the scourge of war – the ultimate crime against humanity, from which all others flow – while the warmakers are in power in the Citadel of Capital.”

The grievously wronged Iranians have apparently fired a purposely harmless salvo of missiles into several U.S.-occupied bases in Iraq to avenge last Friday ’s U.S. drone assassination of Revolutionary Guards commander Qassi Suleimani. Although the Fars news agency  claimed, for Iranian popular consumption, that “at least 80 US armed personnel have been killed and around 200 others wounded,” American and other NATO forces in Iraq report no casualties, giving Trump an opportunity to claim victory and back off from further aggressions. Trump followed the Iranian lead, holding a press conference  to dance away from continued armed hostilities, on Wednesday.

Since there is no “peace party” with any influence on governance in the United States, a U.S. retreat from Armageddon is the most that the world can hope for, in the near term. Trump’s mafia-style hit on the revered Iranian general – yet another Nuremburg-level U.S. crime against peace and humanity, for which death by hanging is the historical punishment – seemed designed to set the stage for a reprise of George Bush’s 2003 “Shock and Awe” demonstration of U.S. imperial firepower, this time with an orange tinge.

“A U.S. retreat from Armageddon is the most that the world can hope for, in the near term.”

 

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Iranian national pride required a pantomimed military response, but the U.S. has provoked a far worse punishment by the Iraqis, on whose territory Suleimani was ambushed. The Iraqi parliament swiftly voted 170-0 to kick the 5,000 US troops out of their country, an exodus that would render Washington’s foothold in neighboring Syria untenable, thus sealing the fate of the remaining U.S.-backed al-Qaida “rebels” holed up in Idlib province and hastening the demise of ISIS forces currently shielded from Russian air attack by U.S. firepower. Donald Trump, who (correctly, but incoherently) charged Barack Obama with “founding ” ISIS, may well have fast-forwarded the definitive end of the U.S.-Islamic jihadist presence in Syria and Iraq.

Not that this was Trump’s intention. The Republicans and Democrats are united under the American imperial banner, and only differ on details of strategy to maintain Washington’s global domination. As BAR contributing editor Danny Haiphong writes, “There may be two political parties in the United States, but there is only one ruling class agenda.”

“Trump may well have fast-forwarded the definitive end of the U.S.-Islamic jihadist presence in Syria and Iraq.”

Yet there is a profound split in the U.S. ruling class – not about the necessity to preserve the empire, on which there is no debate among the rulers, but over how Washington should manage relations with its junior imperial partners in Europe and elsewhere, and over the modalities of One Percent governance within the United States. On foreign policy, the Democrats have since 2016 positioned themselves as the more aggressive War Party, constantly goading Trump to attack Russia and its Syrian ally and to “stand up” to North Korea, to prove he is not a “dupe” of Vladimir Putin. As the party of Barack Obama, the previous Super-Sanctioner of rebellious nations, the Democrats are vicious in maligning Venezuela. And as the party of Hillary Clinton (“We came, We saw, He died – Ha Ha Ha.”), the Democrats have killed hundreds of thousands in U.S.-directed and financed jihadist wars in Libya and Syria. They are the puppeteers and paymasters of terror on a scale that Donald Trump has yet to match, an orgy of sectarian beheadings, torture, rape and mass murder that Trump’s assassination of General Suleimani may inadvertently bring to a close, with U.S. ouster from the region.

 

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“The Democrats have killed hundreds of thousands in U.S.-directed and financed jihadist wars in Libya and Syria.”

At home, the Democrats have spent the last three years constructing a New Cold War censorship of the Left, starting with Black Agenda Report and other radical web sites targeted only weeks after the 2016 election. As Black Alliance for Peace  national organizer (and BAR editor) Ajamu Baraka writes, the Democratic “opposition,” including the Democrat-leaning corporate media, is not anti-war – it’s anti-Trump. The Democrats, like their corporate and banking masters, are determined to preserve the neoliberal economic order – the global Race to the Bottom in which U.S. workers compete with super-exploited workers in the developing world. The only difference is that the Democrats would “integrate” the management of this dwindling wage economy through a policy of racial and ethnic “diversity.” Same downward destination, but with multi-colored overseers. Same police occupation of Black communities, and same racialized gaps in earnings and wealth for the masses of Blacks and browns – but rewards aplenty for the misleadership classes of the oppressed, whose job is to keep the social peace while oligarchs swallow society whole, as senior columnist Margaret Kimberley explains in this issue of BAR. Most of the Congressional Black Caucus joined other Democrats in awarding Trump yet another record-breaking military budget. Seventy-five percent of the Black Caucus voted to make police a protected class and assault on cops a federal crime, in 2018. Eighty-percent of the Black Caucus voted to keep the Pentagon’s 1033 program funneling military weapons and gear to local police departments, five years ago – and the Caucus has become even more reactionary and treacherous, since then.

“The Democrats would ‘integrate’ the management of this dwindling wage economy through a policy of racial and ethnic ‘diversity.’”

 

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Although many of the issues have changed since Malcolm X’s day, Blacks remain locked into much the same power relationships as half a century ago. Malcolm’s “foxes” and “wolves” are still on the prowl:

“The white liberals are more dangerous than the conservatives; they lure the Negro, and as the Negro runs from the growling wolf, he flees into the open jaws of the ‘smiling’ fox. One is a wolf, the other is a fox. No matter what, they’ll both eat you.” — Malcolm X, 1963

There is one big difference in the political landscape, 57 years after Malcolm spoke those words. The “Black Misleadership Class” – a term coined at BAR and its predecessor, The Black Commentator – now plays a pivotal role in the electoral workings of the Democratic half of the corporate duopoly system of governance. As I explained, two years ago, the Black misleaders are:

“…those Black political forces that emerged at the end of the Sixties, eager to join the corporate and duopoly political (mostly Democrat) ranks, and to sell out the interests of the overwhelmingly working class Black masses in the process. It is both an actual and aspirational class, which ultimately sees its interests as tied to those of U.S. imperialism and its ruling circles. It seeks representation in the halls of corporate power, and dreads social transformation, which would upset the class’s carefully cultivated relationships with Power.”

“Malcolm’s ‘foxes’ and ‘wolves’ are still on the prowl.”

Blacks are still at the bottom, and racing deeper into the abyss. But an opportunistic sliver of the Black population has aligned with banksters and oligarchs in Democratic boardrooms. They join with corporate Democrats in screaming that Trump is the existential threat – not U.S. imperial wars, in which most Democrats are complicit; not the Race to the Bottom, which is as much a Democrat as Republican project; not the Mass Black Incarceration State, which is mainly enforced by urban Democratic regimes of all colors; and not capitalism, a system that was born, like the white settler United States, itself, in Native genocide and Black chattel slavery.

The Black Misleadership Class has no solidarity with anyone. They are hustlers, who have hijacked the aspirations of a proud, brave and independent-minded people – a people that have historically sought social justice and peace for not only themselves, but all mankind. That people needs a new party, with themselves in the leadership, a party that will Fight the Power. There is a world of allies out there, sharing the same aspirations. But none can be free of the scourge of war – the ultimate crime against humanity, from which all others flow – while the warmakers are in power in the Citadel of Capital.

 

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The key to unlock all of our chains is right here, in the belly of the beast.

Power to the People!

BAR executive editor Glen Ford can be contacted at Glen.Ford@BlackAgendaReport.com.

 

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