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M.A. Nystrom

M.A. Nystrom

M.A. Nystrom is a private investor and consultant currently living near Boston. He earned his MBA from the University of Washington with a specialty in…

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Social Cycles, Depression and Revolution (Part II)

It's not dark yet, but it's getting there... - Bob Dylan

Last week I gave you the good news, that after we make our way through the current political and economic mess that we find ourselves in, we will emerge into a new golden age. This week, the bad news: Before we get there, we will likely have to first undergo at least a depression, and certainly a revolution before we arrive. The brighter world will not come of its own accord; it will wait patiently until we collectively decide to create it. Until then, Batra predicts that "real wages and family income will continue to fall, while poverty will rise. The rich will keep getting richer and the poor getting poorer; similarly, the middle class will continue to shrink." For many, the motivation for real, fundamental change will only come from the depths of depression.

Before continuing with Dr. Batra's theory, let's take a look at two recent news articles that set the stage and concretely depict the points he makes:

The first, from today's New York Times, informs us that the nation's income gap widened significantly in 2005 to levels unseen since 1928 - the year before the start of the great depression. According to the story, the top 300,000 Americans collectively own as much wealth as the bottom 150 million. While the top 1% of the population got an average raise of $139,000 in 2005, the bottom 90% of workers saw their incomes fall by $172. These are times that try men's souls.

Since these are abstracted numbers, it can be difficult to fully appreciate their meaning. But this second article should make things perfectly clear: Circuit City is firing 3,400 of its hourly sales floor workers, and will rehire either them or new workers at a lower hourly rate. Just so you understand the context, this is a company that is headed by a CEO -- Phillip Schoonover -- who raked in $8.5 million dollars last year. The company itself made a profit of $162 million, though it lost money in the most recent quarter. Apparently this is how Schoonover can justify his brilliant fire/rehire-cheaper scheme. According to the article, the average sales worker now makes $10-11 per hour, or about $21,000 per year, while a new worker would only make about $8.00, or $16,000 per year. That is below the poverty level for a family of four, or even three, so forget about trying to raise a family on that kind of a salary. Schoonover, on the other hand, makes about 530 times the average grunt worker's pay, and in today's climate, he'll likely get a bonus for his great idea.

But as Batra points out in this and other books, these are precisely the kinds of conditions -- extreme wealth concentration and inequality -- that lead to depressions, for they weaken the overall capitalist system. With such minimal incomes, the only way for workers such as those at the new and improved Circuit City to continue to consume (the great "engine of global economic growth") is by taking on increased levels of consumer debt. But there are limits to how much debt such poorly paid workers can take on.

To make sense of these stories in a larger context, let's take a look at the global economy through Dr. Batra's eyes. Batra asserts that the entire world economy has been colonized by the American Global Business Empire. The acquisitors have taken the reigns of power in both business and government and, motivated by unbrided and unchecked greed, are taking increasingly aggressive action to consolidate their power. As a result, members of the other three classes - both in the US and abroad - are being pushed increasingly into the laborer class, simply trying to make a living in the acquisitor dominated world. (for defintions of these terms, please see Part I)

The American Global Business Empire

Using Rome and Britain as examples of previous empires, Batra has identified four traits of imperial rule, three of which he claims apply to the US:

1) Empires are created through military force
2) The ruling nation can and does extract cheap labor from it colonies
3) The empire's colonies run trade surpluses that raise the living standards of the rulers
4) The language, culture and institutions of the victor spreads across the imperial territories

Batra believes that only the last three apply to the US. He excludes the first, claiming that the US does not seek to colonize other nations militarily. This is something Chalmers Johnson, in his excellent book Nemeis, the Last Days of the American Republic, disagrees with completely, and in fact makes an excellent case for. I'll have a review of Nemesis in the coming weeks. (Sign up to be notified when it is up).

America's cheap colonial labor comes from two sources: First, immigrant labor - both legal and illegal - which expands the US labor pool, and keeps a lid on domestic wages. Illegal immigration offers tremendous benefits to big business at the expense of the laboring class. Since today's government works for business and not for the people, we hear tough talk about illegal immigration from the government but see very little action to control it.

The second source of America's cheap colonial labor comes from multinational corporations that employ and subcontract hundreds of thousands of workers around the globe at local wages which are a fraction of what they would be in the US. Products produced by this cheap labor are then imported to the US, further depressing domestic wages while generating exorbitant profits for the multinationals and exceptionally high incomes for their executives. Look again at the case of Circuit City: You would be hard pressed to find anything in the store made in the US, and yet the company made a profit of $162 million last year. However, when profits do falter, it is not the managers who take responsibility by lowering their own salaries; instead they squeeze the laborers further by cutting their wages. While such moves are routinely justified because they "benefit consumers," at some point they become more harmful to the overall economy than helpful.

Like Britain and Rome before it, the US receives nearly free goods from its colonial empire. Rome and Britain did it through taxation and forced "tributes," while the US does it more cleverly by controlling and printing the world's senior fiat currency. This allows the US -- unlike any other nation -- to run persistent trade deficits (import surpluses) without suffering currency depreciations or raising interest rates. As Bernanke has reminded us, we have a technology called a printing press, and we put it to very good use. America's colony nations such as China, Japan and Taiwan pay huge "tributes" to the US in the form of massive treasury bond purchases. These tributes ensure market access to the Imperial center for the colony's manufactured goods, while also helping to stabilize the empire's fiat currency.

Finally, US culture, values, food, entertainment -- but most importantly business ideologies -- have infiltrated the world. This is clear enough from the surface. It is hard not to notice that the western suit and tie have become the de facto standard uniform for conducting business everywhere from Shanghai to Mumbai. But the realities run deeper. The business world is dominated by ideas hatched from the minds of economists and professors at elite American business schools, then sanctioned by official US government policy. The policies can be summed up in a single word: "tricklism."

Tricklism gained its foothold in the US in the early 1980's thanks to Reagan's budget director David Stockman, who was just recently indicted for fraud. Tricklism, Batra explains, is the notion "whereby prosperity is supposed to seep, drop by drop, from the top to the bottom." Thanks to Stockman, tricklism is now practiced worldwide by nations both rich and poor, and is portrayed as the quickest means to economic success. But the real objective of tricklism, Batra contends, is to keep wages as low as possible while maximizing CEO incomes.

Unfortunately, tricklism results in full time salaries of only $16,000 per year -- as the Circuit City example shows -- for workers at even highly profitable companies. This causes consumer demand to fall short of supply, for how much can a worker on a $16,000 salary afford to consume? The only way s/he can is by going into debt. This is where the acquisitors really get busy -- offering the kind of help that people should run from rather than take. The same class of intellectual acquisitors that came up with tricklism are only more than happy to provide a solution the problem of depressed demand that they created. That solution is called consumer credit, and it further enriches the acquisitor class while slowly bleeding the life from the laborer class, one interest payment at a time. Because this ideology dominates not only American business, but international business as well, global poverty has skyrocketed over the past 25 years along with tricklism.

In spite of the dazzlingly and overwhelmingly positive mainstream media (MSM) spin, that as Mish puts it, creates the "myth ... that jobs are plentiful, the economy is geared for growth, and capital spending will pick up where real estate left off," the facts tell a different and rather grim story. Poverty is not only a third world phenomenon. Because of decisions by people like Philip Schoonover, poverty is afflicting more and more people in the industrialized nations in Europe, Asia and of course here in the US. The 2.4 million families that will face foreclosure due to the policies of tricklism only further emphasize this point.

The Twin Bubbles of Oil and Housing

While the recent Circuit City story gives a clear example of the handiwork of the acquisitor class, in his book Batra cites the twin bubbles of oil and housing as evidence of tricklism. In the 1970's oil prices skyrocketed due to the collusion of OPEC. Today, he asserts, they have skyrocketed due to supply restrictions by the "five bullies" -- the five oil companies which he says control 60% of global refinery output: Exxon-Mobil, Chevron-Texaco, BP-Amoco-Arco, Royal Dutch-Shell, and Conoco-Phillips,. Just one look at the names of the five bullies should tell you most of what you need to know. Each of these mammoth corporations was formed by the merger of already powerful, highly profitable companies. This, combined with 2,600 mergers in the oil industry since the early 90's, has led to a concentrated industry that colludes to keep supplies tight and prices high.

Meanwhile, the pro-oil/pro-business national administration has allowed the consolidations to take place, with the Justice Department declining to enforce anti-trust laws. Friends in the big-business-controlled MSM put the blame for high oil and gas prices on OPEC, China's growth, conflict in the middle east, peak oil, etc -- anywhere but on the lack of refining capacity that the exorbitantly profitable five bullies refuse to build. High oil prices mean a silent transfer of wealth from all of us to the few of them. In 2006, the combined profits of the "five bullies" came to $120 billion.

Company (Symbol) 2006 Profits
Exxon-Mobil (XOM) $40,000,000,000
Chevron-Texaco (CVX) $17,000,000,000
BP-Amoco-Arco(BP) $22,000,000,000
Royal Dutch-Shell (RDS'A) $25,000,000,000
Conoco-Phillips (COP) $16,000,000,000
Total $120,000,000,000
Note: Figures rounded to nearest billion; source: Marketwatch

This is the essence of tricklism in action: A little bit from you, and a little bit from me, and a little bit from 300 million other Americans every week at the gas pump adds up to $120 billion dollars in the hands of five corporations. Take some time to think about this the next time you're filling up your tank.

The second bubble Batra cites is the housing bubble, which was artificially created by the acquisitors at the Federal Reserve. Like the oil bubble, the housing bubble is another wealth transfer scheme -- a little bit at a time -- from the pockets of the many into the bank accounts of the few. As wages stagnated, housing prices rose, leading owners to use their home value appreciation as to make up for their stagnating wages. They just borrowed the difference, allowing bankers to pocket lucrative fees and capture a recurring income stream in the form of future interest payments. New Century Financial made $416 million dollars in 2005 on a rising market, and now it's all but bankrupt.

As Batra sees it, the artificially created twin bubbles allow the elite acquisitors to surreptitiously transfer wealth from the masses to their own pockets via various, mostly invisible schemes. As a result, the acquisitors now have just about everything locked up, and have managed to hypnotize the majority of the people into thinking that the current system is just, good and the way things should be. Through their near total control of cultural institutions and the MSM, the message of supermaterialism is emphasized and magnified. The benefits of wealth are flaunted while the tragedies of poverty -- as well as its true causes -- are hidden and ignored. To this I say, thank God for the internet!

Just because the acquisitors have things locked up at the moment does not mean that their reign will last forever. No class can retain its grip on power forever. All bubbles pop, including artificially induced supply-side bubbles like the oil bubble. The housing bubble is already running its course - see New Century. As a result of the popping, things will continue to get worse before they get better. However, the point Batra makes is that things "out there" will not change until we as individuals make personal decisions that things must change, and then take decisive action to overthrow the current reign of money-rule. When angry individuals coalesce into a mass movement that cannot be ignored, real changes can take place quickly and society can be reorganized. This is called a revolution.

But it will likely take more pain for a critical mass of people to reach that conclusion. For now, most people still think there is a chance to "get ahead," not realizing the game is rigged against them (starting with the Federal Reserve itself). Official government corruption -- which Batra defines as the government enacting policies that enrich the powerful while impoverishing the poor and middle class -- will have to get worse before the people come to see things for what they truly are. Batra cites Katrina as one example of the extreme disconnect between powerful government legislators and the people they rule over: "The legislators, spoiled by copious corporate money and junkets, wallowing in luxury, couldn't imagine that the poor had no cars [with which to escape New Orleans]."

But unless we decide collectively to change now, we will have to endure more Katrinas, more Circuit City-type events, and millions more foreclosures before people take action to change. It is one thing to read about such things online. It is another to hear about them directly from friends or relatives who are victims. But it takes on an entirely different meaning when you fall victim to such malfeasance yourself. It is only once affected personally that the long fuse of a patient people burns down and they are ready to take direct, explosive action, as our Founding Fathers did 231 years ago. A people can only be pushed so far. The seeds of destruction of the current system are being sown with the daily injustices of tricklism.

But a depression, Batra contends, in not necessary for change:

With growing poverty and a vanishing middle class, overwhelming CEO greed and ruthlessness, mounting official corruption and incompetence and above all the demoralizing war in Iraq, voters could become furious enough to bring an end to the rule of money in society. Thus a depression need not be a precondition to the coming revolution. Economic and political reforms can come about without such a catastrophe.

It is important to note that in the 1970's, Batra wrote a book called The Downfall of Capitalism and Communism. One down, one to go. In this current book, he concludes:

All of the symptoms that I expected to see before the start of an anti-acquisitive rebellion are now here. I anticipated many social and economic cancers, such as abysmal wages, growing poverty, rising homelessness, educational decline, family breakdown and loose morals. They are all here, so revolution cannot be very far away.

But revolution he contends, need not be violent nor bloody:

In a democracy, power and responsibility ultimately rest with the people...Don't think of yourself as a Republican or Democrat; think of yourself as a victim of the misrule of acquisitors, because whatever you dislike today in society stems from the excessive greed and materialism of the acquisitive class.

The book is excellent and provocative, one that I feel I have not done proper justice to with this review. So much material in the book I have left untouched, as Batra covers a lot of ground. I do not agree with all of his assertions nor all of his conclusions, but I do appreciate his unique and unconventional perspective which helped me to stretch my understanding and see the world from a new and different angle. If the ideas covered here are interesting to you, you will certainly find much more of interest that I have not covered here.

Comments and questions are welcome here. I'll do my best to answer any questions readers might have about the book.

See Part I of this review here


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