Monday, October 31, 2011

Credit Rating Agencies And Their Effect On The Global Economy

From the European Central Bank headquarters to the halls of the Senate floor in the United States, debt, deficits, and austerity measures are all on the minds of leaders all over the world due to the ongoing world-wide recession. Many facets of the economic crisis have been examined, however, the role of credit rating agencies has been largely ignored, with their being little to no in-depth analysis of the role of rating agencies in relation to the global economic downturn nor their influence on the global economy at large. It seems that while rating agencies can be used to rate the creditworthiness of a nation, they now have undue influence on countries and are able to hold them hostage, thus an examination needs to take place of how they wield such influence on the world at large.

Sovereign Credit Ratings

Credit rating agencies came into being due to the creation of railroad industry. In the 19th century “the growing investing class [wanted] to have more information about the many new securities – especially railroad bonds – that were being issued and traded” [1] and thus credit rating agencies filled that need. In the middle of the 19th century, railroads began to raise capital via the market for private corporate bonds as banks and direct investors were unable to raise the capital needed to construct railroads. This growth in the sale of the different private bonds led to a need for there to be “better, cheaper and more readily available information about these debtors and debt securities,” thus Henry Varnum Poor responded by writing and publishing the Manual of the Railroads of the United States in 1868, containing the financial information of all major railroads companies and providing “an independent source of information on the business conditions of these corporate borrowers.” [2]

With John Moody issuing the first credit ratings in the US in 1909, the credit rating agency had come into its own. Usually the entire process of “shaping investor perceptions of corporate borrowers” was dealt with by banks as they would be putting their reputations on the line by lending to corporations. Thus, if a venture succeeded, the bank’s reputation would go up and if the venture proved a flop, the bank’s reputation would be damaged, making it harder for them to attract new clients. Essentially the creditworthiness of a corporation was certified to the public via the reputation of the bank they had borrowed the money from. Due to this, “the bank as creditor would become more involved in the business of the corporation and become an insider,” [3] yet bond investors would not have access to the same information that the banks did. Thus, rating agencies aided in a leveling of the playing field and improved the efficiency of capital markets.

However, in time rating agencies went from rating the bonds of railroads to rating the bonds of sovereign states. In the 1970s global bond markets were reviving, but the demand for bond ratings was slow to occur as most foreign governments didn’t feel the need to have their credit rated since most already had good credit and for those that didn’t, credit could be attained by other means. However, this changed in the ‘80s and ‘90s when countries with bad credit “found market conditions sufficiently favorable to issue debt in international credit markets.” [4] These governments frequently tapped into the American bond market which required credit ratings, thus, “the growth in demand for rating services [coincided] with a trend toward assignment of lower quality sovereign credit ratings.” [5] While this may have been good for investors as they would be able to now see if a nation was a financial risk, this ability to rate the credit of countries would give them the power to decide a countries economic fate.

Ratings and Economic Policies

Credit ratings, while they can be a potentially positive part of the financial industry, can also have a negative effect on the economic policy of countries. This is especially true for developing nations.

For countries that take out loans,
“a rating downgrade has negative effects on their access to credit and the cost of their borrowing.” [6] This could potentially force a government to have to borrow money at a higher interest rate and thus scale down its plans for economic development. The problem that this poses for developing nations is that the only way to increase their credit score is to follow the “orthodox policies [that focus] on the reduction of inflation and government budget deficits” [7] which is favored by such organizations as the IMF and the World Bank. The alternative, which would be to avoid a rating downgrade in the first place, is even worse as it could lead “borrowing countries [to] adopt policies that address the short-term concerns of portfolio investors, even when they are in conflict with long-term development needs.” [8]

This entire state of affairs is rather unfair to the Developing World as they are forced to take on large amounts of debt as they try to industrialize and modernize. This is largely caused due to the fact that they are victims of neocolonialism and that the major means of production are owned mainly by foreigners who don’t contribute much in terms of improving the long-term economic prospects of a country and getting them from under the weight of neocolonialism.

While rating agencies can have an effect on individual countries, they can also effect the global economic system at large as can be seen by their actions in the current global financial crisis.

Global Recession

As we all now know, the major reason for the near global economic collapse was due to a subprime mortgage lending bubble that occurred between the late ‘90s and 2007. The deep financial risk occurred due to the fact that financial corporations sold mortgages to families who could not pay them and used them to create collateralized debt obligations. This “encouraged subprime lending and led to the development of other financing structures, such as “structured investment vehicles” (SIVs), whereby a financial institution might sponsor the creation of an entity that bought tranches of the CDOs and financed its purchase by issuing short-term “asset-backed” commercial paper.” (ABCP) [9] Credit rating agencies came into play due to the fact that favorable ratings that the agencies gave allowed for high ABCP ratings. It is quite crucial to note that the ratings agencies gave were extremely important as they “had the force of law with respect to regulated financial institutions’ abilities and incentives (via capital requirements) to invest in bonds” and  due to their friendly relationship with corporate and government bond ratings, many rating agencies were able to influence “many bond purchasers— both regulated and non-regulated—[to] trust the agencies’ ratings on the mortgage-related securities, even (or, perhaps, especially) if the market yields on those securities were higher than on comparably rated corporate bonds.” [10] Thus, the rating agencies were crucial in the economic calamity due to the fact that they were able to influence bond purchasers to bank on, what were in essence, junk investments.

Corporations may have had an effect on the ratings they were given due to the fact that the higher the ratings were, the larger the profits would be. Thus, corporations “would be prepared to pressure the rating agencies, including threats to choose a different agency, to deliver those favorable ratings.” [11]

Eventually, when the house of cards that was precariously built upon high risk mortgage loans came tumbling down, the rating agencies were swift to pass judgement in the form of massive downgrades. These downgrades caused the rated securities to lose value in both the primary and secondary markets, quickening the pace of the economic downturn. However the downgrades revealed that the ratings system itself was quite flawed, being influenced by such things as “the drive for market share, pressure from investment banks to inflate ratings, inaccurate rating models, and inadequate rating and surveillance resources.” [12]

Evidence reveals that in the years leading up to the economic meltdown both Moody’s and S&P were quite aware of the increasing credit risks due to factors such as “higher risk  mortgage products, increasingly lax lending standards, poor quality loans, unsustainable housing  prices, and increasing mortgage fraud” [13], yet the agencies continued to ignore any and everyone’s- even their own- assessment on the risks and refused to adjust the credit ratings to accurately reflect the risk of the investments. Interestingly enough, “Moody’s and S&P began issuing public warnings about problems in the mortgage market as early as 2003, yet continued to issue inflated ratings for [mortgage] and CDO securities before abruptly reversing course in July 2007.” [14] This leads one to wonder why they would continue to give good ratings to mortgages that they knew were junk. The reason this occurred was due to the issuer-pays model under which the firm interested in profiting from a security is required to pay for the credit rating needed to sell the security. In addition to this, “it requires the credit rating agencies to obtain business from the very companies paying for their rating judgment” which results in “a system that creates strong incentives for the rating agencies to inflate their ratings to attract business, and for the issuers and arrangers of the securities to engage in ‘ratings shopping’ to obtain the highest ratings for their financial products.” [15] Thus, the rating agency is forced to give inflated ratings if they want to stay in business. The ratings agencies are partially to blame for the financial crisis, but it is also the very system at large that needs to be uprooted and replaced. This entire fiasco brings up the question: Can the rating agencies be regulated?

Regulation and the Revolving Door

There has been some arguments for reform for CRAs, among these are switching to an investor pays model and promoting competition among rating agencies, however, each of these proposed solutions have their own problems.

Some argue for moving from the issuer-pays model to “an ‘investor pays’ model in which rating agencies would earn fees from users of the rating information.” [16] While this may sound like a good solution, there are still problems as “ it would not eliminate conflicts of interest but instead shift them from issuers to investors” [17] as it would now be in the interest of rating agencies to attract business from the very investors who are paying for their rating judgement, resulting, once again, in inflated ratings.

The proposal to promote competition among rating agencies is quite problematic due to the fact that “size and market recognition may be higher barriers to entry than regulatory status, turning the credit rating industry into an oligopoly.” [18] In addition to this, promoting competition could potentially lower the quality of the ratings due to the fact that new entrants would most likely offer higher ratings or lower prices as to compete with the three large rating firms, thus reducing both the level of effort in ratings and their reliability.

While these proposals may seem good, one must keep in mind that they are only reforms, which only make certain amendments to the overall system rather than creating an entirely new one. None of these reforms deal with the revolving door that exists between the Securities and Exchange Commission (SEC), the government institution that is supposed to regulate the ratings agencies among other financial markets, and the rating agencies themselves.

In May of 2011, the Project On Government Oversight announced that after completing a study from 2006 to 2010, found some rather interesting facts concerning the revolving door, such as that the SEC  Office of Inspector General had “identified cases in which the revolving door appeared
to be a factor in staving off SEC enforcement actions and other types of SEC oversight, including cases involving Bear Stearns and the Stanford Ponzi scheme” and one empirical study “uncovered several significant and systematic biases in the SEC’s enforcement patterns and found indirect evidence to support the contention that ‘post-agency employment at higher salaries may operate as a quid pro quo in return for favorable regulatory treatment.’” [19] Yet while these actions were taking place and the role of rating agencies in causing the global recession were known by the US government, Congress and Obama did little to nothing to remedy the overall problem.

Due to the major problems that rating agencies have caused in the recent years, it may lead some to ask the question are rating agencies even needed. The fact of the matter is that they are needed, but they need to play a much less influential role in the financial system than they do now. Instead of enacting small reforms that do nothing to solve the overall problem, a completely new way of interaction between the ratings agencies and the financial markets needs to be enacted. In addition to this, the revolving door between the SEC and members of the financial sector needs to end immediately. Without these changes the rating agencies may very well lead the world down another dark economic alley in the future.


2: Ibid
3: Ibid
5: Ibid
7:  Ibid
8: Ibid
10: Ibid
11: Ibid
13: Ibid
14: Ibid
15: Ibid
17: Ibid
18: Ibid

Related Articles

Further Reading

Friday, October 21, 2011

The Pro-Palestinian Cause and Charges of Antisemitism

The Israel-Palestine conflict is quite a complex one. There are two peoples who both lay claim to the same land. The backers of both sides often have a large amount of emotional and political investment in their cause. However, the pro-Palestinian cause is often labeled antisemitic. While we live in a world where antisemitism still exists, to label the entire pro-Palestine cause as antisemitic is ludicrous as it distorts the meaning of the word antisemitic, shows the ignorance of those who label the pro-Palestine cause as such, and ignores the problems that certain Israeli policies have had on the Palestinians.

The word antisemitism is used so much when discussing the Israel-Palestine conflict that the meaning has become distorted, thus a the word itself must be defined. The word means “hostility toward or discrimination against Jews as a religious, ethnic, or racial group”. [1] Antisemitism is hatred or hostility towards the Jewish people, not being against certain Israeli government policies, thus when the pro-Palestinian cause is labeled antisemitic, the word is being distorted and used to negatively label political opponents rather than actual antisemitism.

Labeling the pro-Palestinian cause antisemitic actually shows the ignorance of the people who engage in such activity. Many define the state of Israel through the lens of it being a homeland for the Jewish people and subsequently see any attack on Israeli policy as an attack on Jews as a group. This is quite foolish as one must separate the government from its people. Criticizing the polices of a government is not criticizing an entire people. One is no more antisemitic for criticizing Israeli government policy than they are anti-American for criticizing American foreign policy.

In accusing those who stand up for Palestinian rights as antisemitic, supporters of Israel show that they cannot separate the Israeli government from the Israeli people and that they cannot see how certain Israeli policies not only harm Palestinians, but are also self-defeating to Israel. One example of this is Israel’s recent plan to build a new settlement consisting of 2,600 homes. [2] This, coupled with the fact that Israel is moving to legalize settlements in the West Bank [3],  is one of Israel’s self-defeating policies. By moving to legalize settlements on what is internationally recognized as Palestinian land, it does not aid in the move towards peace, nor does it make Israel safer. Rather, it exacerbates already strained tensions and emboldens Palestinians to violently resist Israel.

Israel’s policies often have negative effects on ordinary Palestinians. These negative effects on regular Palestinians would fit into the category of externalities, as the main goal is not to hurt ordinary Palestinians, but rather to lessen the power or influence of those who wish to do harm to Israel. Nonetheless, these policies still have negative effects on regular Palestinians. One such example in the blockade of the Gaza Strip, which has caused “Mass unemployment, extreme poverty and food price rises caused by shortages,” leaving “four in five Gazans dependent on humanitarian aid.” [4] While the reason for the blockade was to end Hamas rocket attacks and to decimate Gaza’s economy [5], the blockade took a major toll on the Gazan economy.

The pro-Palestinian cause is fighting for the people of Palestine. For their right to self-determination, to have a state, and to not be under occupation by the Israelis. That it not antisemitism. That is the right thing to do as it advocates a viable solution for both Israeli and Palestinians.



Forthcoming articles: Rating Agencies and Their Effect On The Global Economy and Israel, Palestine, and A Separate Peace.

Sunday, October 16, 2011

American Autumn (Poem)

Puppet strings being pulled by puppet masters
Bailouts of the "too big to fail"
Going into the pockets of CEOs
Whose ill-gotten gains, going into the hands of the few
Are used to ensure that they maintain their freedom
While enslaving the many
Police state apparatus being used to terrorize and oppress the
Very population they were sworn to protect
Fuses lit
Growing, spreading
People are tired
Tired of being taken for granted
Tired of being ignored
Tired of being used
They have finally woken up
There may be struggle ahead, but
They are a tide that cannot be turned back
The system must be dismantled
And another one created anew
One that is just
Is peaceful
Is compassionate
Is understanding
The American Autumn is here

Friday, October 14, 2011

Don’t Divide, UNITE! From Occupy Wall Street to Liberate the World by Andrew Gavin Marshall

This article was originally published on on 10/13/11

Having watched closely the development and rapid growth of the ‘Occupy’ movement from when it began on Wall Street in September to its current global scope, where on October 15th it is expected to erupt in hundreds of cities around the world, there are various concerns and issues which I feel the need to discuss in a little more detail.

First, there is the very real threat of having the movement co-opted, whether by philanthropic foundations, political parties, NGOs, union reps or more likely, an amalgamation of them all simultaneously. This threat is present and pervasive. For those who ignore the potential of co-optation, the result can only be for the movement to be made ineffective for true change.
However, there is another threat, more subtle, and yet, even more damaging than co-optation. This threat comes from not only the movement, but the wider population itself. In a word: division. While closely following the developments in regards to politicians, philanthropists, and long sold-out activist organizations aligning with the movement in order to assert their authority over it, I have been even more disturbed by many reports, voices, criticisms, and perspectives of the wider alternative media and ‘awakening’ population, particularly in the United States, but also elsewhere as the movement spreads. The easiest way for a movement to be co-opted is for the movement to first be divided against itself. So I would like to delve into a little more detailed observations on this issue.
What is the threat of co-optation?
I have written and spoken on this issue previously. I recently wrote an article entitled, “Against the Institution: A Warning for Occupy Wall Street,” in which I explained the methods through which co-optation takes place, as well as another article, “End the Fed… but don’t stop there!“, in which I expressed support for the development of the Occupy the Fed movement, but warned against such a narrow focus, and finally, I did an interview with Russia Today in which I warned about the potential for co-optation and methods to guard against it.
So, at the risk of repeating myself, I will just quickly summarize my points here.
Co-optation is the process whereby established, institutional powers join a movement with the intent to direct the movement into an area which is ‘safe’ for the institutional elite. The ‘institutional elite’ (or global and national elite, if you prefer), are those who own, direct, control, fund, and steer the various institutions and dominant ideologies of our world, including (but not limited to): corporations, international organizations, the State, education, psychiatry, the media, political parties, NGOs, philanthropic foundations, think tanks, the military, intelligence, central banks and private banks.
Principally, co-optation of social movements is made most effective through the efforts of philanthropic foundations. Foundations (most notably the Carnegie, Ford, and Rockefeller Foundations) were created in the early 20th century with a dual purpose: to create consensus among the elites (through the formation of ideology, think tanks, shaping the educational system, etc), and more importantly, the engineering of consent (also through education, as well as facilitating the rise of the consumer society, constructing ideology, organizing Non-governmental organizations – NGOs – and directing social movements). When money from a foundation enters a social movement, it has several effects. Often, the movement may start out as or be organically developing into a radical movement aimed at altering the actual social structure – or system – of which the philanthropists themselves sit atop. Philanthropic foundations were founded by and are still run by bankers, industrialists, the heads of universities, think tanks, and other social and cultural leaders.
When the money from a foundation enters a social movement, it begins to organize the movement. It removes the radical concepts (or demands) and begins to organize around what they consider “acceptable” demands, which are those which promote “reform” (not revolution), which can be enacted through legislation. The funding helps create activist organizations, NGOs, non-profits and lobbying groups. Those within the movement who promote the reformist and legalistic “demands” are then elevated into leadership positions through foundation funding. Those who are radical may even be tempted into such positions with the hope and promise of “making change.” Thus, the foundations ‘professionalize’ the movement. The leaders direct organizations, sit over large budgets, and have comfortable salaries. They are invited to international conferences of NGOs, corporations, international organizations, and governments. Their purpose is to “speak for the people” in such meetings, but by being professionalized in such a way, they are removed from the people. In fact, their new-found personal wealth, status, respect, and ‘inclusion’ into the global institutional structure makes them dependent upon that very structure and system for their own well-being and sense of self-worth. Thus, they will only pursue “reformist” and “legalistic” changes to the system, never radical or revolutionary, as they are now personally dependent upon that system. The foundations will integrate the movements with particular NGOs, other activist organizations, and particular political parties, which will then “take on the agenda” (albeit the heavily “reformist” agenda) of the movement, create legislation, and seek “change” from within the system.
Ultimately, the result is that the movement is made ineffective. Reforming the system is akin to rearranging the deck-chairs on the Titanic. However, while often creating seemingly benevolent changes, the effects are subtle, yet severe. By turning a potentially radical movement into a reformist co-opted movement, through the effective seclusion of the radical and revolutionary elements and ideas of the movement, the mass of the people behind it are mobilized behind the reformist agenda. As legislation is passed, “causes” promoted, political parties participating, and media attention growing, the movement loses its steam and becomes complacent. The legislation addresses their “demands,” and now that the “professional” and “organized” movement has taken up the cause, the people can go back to sleep and feel comfortable in that they were a part of some effort at “change.” However, by promoting change within the system, instead of creating a new social, political, and economic reality, the changes themselves are ineffective. This is because the fundamental problem, whether the issue is racism, economic exploitation, poverty, war, empire, austerity, tyranny, exclusion, discrimination, and political oppression, the problem rests in the ideas and institutions of power. If the institutional system itself is not addressed as THE problem, no alterations to that system will sufficiently address the particular concern of the activists and social movements.
I have begun a Facebook page to promote the issues and make others aware of the threat of co-optation. Please “like” the page, share ideas, issues, articles, videos, and concerns (as well as SOLUTIONS!) to help stop co-optation!
Solidarity or Co-optation?
In regards to the Occupy Movement, the unions in the United States and elsewhere began showing support and solidarity with the movement, marching with them, and speaking out in favour of their causes. One of the effects this has had has been for those on the right, or the more libertarian social movements, to demonize the Occupy movement, or for those critical of co-optation to decry the movement as “controlled.” Even in my warnings against co-optation, I have mentioned the threat from unions, which has led many on the left to criticize me.
Thus, I feel it is important to differentiate between solidarity and co-optation. Solidarity implies a type of social empathy, in seeing how the cause or struggles of one movement or people is the cause and struggle of your own movement or people. Solidarity is an incredibly important and necessary development, especially in the context of today’s globalized world. Solidarity allows for people the world over to understand and believe that the struggle of one person is the struggle of all people in all places, and indeed it is. Thus, solidarity, no matter with whom, should not be shunned. There is, however, a fine line between solidarity and co-optation.
Co-optation emerges when those who declare solidarity then begin to speak “for” the movement, assume leadership positions within the movement, promote their particular agendas as the agendas of the entire movement, and effectively steer it into directions which they desire. This process must be guarded against.
Now, on unions specifically, there are some things to keep in mind. Historically, as unions began to rapidly emerge in the 19th century in America, the entire century was marked with labour struggles, worker uprisings, protests, activists, and rebellion. At that time, especially in the latter half of the 19th century, the unions were largely organizing against the Robber Baron industrialists and bankers, such as JP Morgan, John D. Rockefeller, Harriman, Carnegie, Astor, and Vanderbilt. The protests and rebellions were often repressed brutally by state police or even the national guard, often demanded and paid for by those very industrialists and bankers. Interesting to note that the NYPD, which has been repressing the Occupy Wall Street movement, received a $4 million donation from JP Morgan Chase. Funny how some things never change.
At that time, the unions were incredibly radical, often socialist, communist, or anarchistic. They presented a major threat to the established power, and so the 20th century saw the development of new institutions and ideas to properly manage a disgruntled populace and radical social movements. It was in this context, in the early 20th century, in which the working class and lower classes were increasingly radical, and the middle class was increasingly anti-capitalist and distrustful of the banking and industrial elite, that we saw the emergence of philanthropic foundations and public relations. In turn, both the fields of public relations and the foundations helped facilitate the development of the ‘consumer culture’ in America, with the aim, as one banker with Lehman Brothers, Paul Mazer said, “We must shift America from a needs- to a desires-culture.” The bankers funded the entertainment industry, Hollywood, Times Square, advertising, and the development of department stores; the foundations helped create credit unions to allow middle class people to borrow in order to finance consumption, and public relations put a new face on corporate America and made consumption the past-time of the middle class. The aim was to separate the middle class from the working class, which were in the context of the late 19th and early 20th century, becoming dangerously close to uniting against the common enemy (the system itself).
The most influential political theorist of the era, Walter Lippmann (the Zbigniew Brzezinski of his era), articulated the need for the “engineering of consent” among the majority of people, so that society may be ordered and controlled from above, while the desires of the lower classes were created and amused by the true ruling powers. Edward Bernays, the “father of public relations,” wrote in his 1928 book, “Propaganda”:
The conscious and intelligent manipulation of the organized habits and opinions of the masses is an important element in democratic society. Those who manipulate this unseen mechanism of society constitute an invisible government which is the true ruling power of our country. …We are governed, our minds are molded, our tastes formed, our ideas suggested, largely by men we have never heard of. This is a logical result of the way in which our democratic society is organized. Vast numbers of human beings must cooperate in this manner if they are to live together as a smoothly functioning society. …In almost every act of our daily lives, whether in the sphere of politics or business, in our social conduct or our ethical thinking, we are dominated by the relatively small number of persons…who understand the mental processes and social patterns of the masses. It is they who pull the wires which control the public mind.
The elite, it can be said, were highly effective in dividing the working class and poor from the middle class. The middle class became dependent upon the system for a particular standard of living (defined by the ability to consume). Radical ideologies were then increasingly made irrelevant, demonized, and erased from the political consciousness. Any criticism of the system was then easily lopped into the category of the “Red Menace” of Communism, a boogeyman which still apparently exists for many right-leaning populations.
While the unions began as radical and indeed, revolutionary entities, this is not what they are today. The unions exist as they are, and are only able to be present in today’s institutional system, by having made the decisions to cooperate with big business and big government, and simply promote minor reforms and critiques to the system. They claim to speak for the workers of the world, but increasingly, especially since the emergence of the neoliberal era, they have come to consistently sell-out the workers. Throughout the Third World, as the neoliberal “Washington Consensus” was spread by the IMF and World Bank as a result of the 1980s debt crisis, union reps were bought off by government and business interests, made their pockets full while stabbing the workers in the back.
In regards to the Occupy Movement, solidarity with unions is not a bad thing. Here’s why: solidarity does not imply unions co-opting the movement (that must be prevented), but it does imply a solidarity with workers. Indeed, workers in America and around the world have suffered much more at the result of decisions and actions by banks, corporations, and governments than the middle class have. But solidarity with a growing and global movement is important, because so long as the movement remains grassroots, or seeks to promote its grassroots and radical potential, the movement can itself be an example for the workers and unions to return to their radical roots. Lead by example!
This seemingly reflexive impulse to simply denounce the entire movement the moment an organization, individual, or idea one does not agree with associates itself with the movement is the height of ignorance. Solidarity with workers and unions is important and necessary. But, if leadership in the movement develops (as it tends to with all social movements), let it develop organically from among the people, let it remain radical and revolutionary, and let it lead those it stands in solidarity with by showing them the way forward to grassroots, globalized, revolutionary social movements.
Destroyed From Within
This hits on another major issue, that of internal and external divisions. In this era, in the midst of the Technological Revolution providing more information and easier global communication than ever before in human history, people have the capacity to come together, to organize, unite, become activated and educated, and seek and promote change together, around the world. This is unprecedented in human history. A totally unique position for humanity to be in, and the greatest opportunity for true liberation humanity has ever had. Let’s not screw this up!
What I am referring to is that even for all the very real threats of institutional co-optation, we the people, seem to be doing a pretty good job of making the movement ineffective before the elite even have a chance to.
Unfortunately, one of the methods through which the movement is becoming divided is in regards to those who see a threat of co-optation. This is largely done through the alternative media and various social critics and activists. While keeping an eye out for the institutions and individuals commonly associated with co-optation, the moment that politicians, activist organizations, philanthropists orothers show “solidarity” with the movement, many critical observers simply denounce the movement as “co-opted,” as in: it’s a done deal, party’s over, it’s “controlled” and it’s all a conspiracy! Go home, give up, the end.
Here is why this is an awful position to take: it becomes a self-fulfilling prophecy. If one sees the sharks circling and yells, “It’s over, jump in the water and get it over with!” one may forget that there is still a paddle in the boat. There is still hope. But for the boat to get to shore, attention must be called to the sharks, and those who call attention to the risks, may help steer it best to safety. If those who see the risks inherent simply then jump off the boat, the others remain unaware of those risks, and the boat will likely sink amidst the swarm of sharks. Instead, the movement needs the critical voices, those who see and seek to avoid co-optation. These voices are needed to help mobilize the movement away from co-optation. After all, while the sharks may be circling, we have a much better chance together than alone.
So, to those who denounce the movement as already co-opted and controlled, I have this to say: is it not better to see the problems and make others aware so that they may be avoided, rather than denounce the entire movement, isolate yourself from it, and them from you? After all, once you segregate yourself from the movement, you segregate your ideas from the movement. The most unfortunate aspect of this is that in diversity, there is strength. Diversity of ideas and beliefs is a great thing. The power of uniting regardless of these diversities, and in fact, because of them, is the only way forward.
The elite are constantly engaged in attempting to establish consensus, work together, create common ideology, establish mutual interests, and implement coordinated action. This is their strength. And I am not talking about political parties, Republican and Democrat, they are a sideshow developed for popular consumption, just like Hollywood. The elite – the true rulers of our world – constantly and often effectively seek to establish consensus in ideas and action. Yet, we the people, tend to actively engineer divisions and segregation. This is our GREATEST weakness. The elite love this. They love it especially because it does not even require their active participation. We can do it all on our own!
Examples of this in regards to the Occupy movement are as follows: I have seen articles and comments, blogs and alternative news, critics and dissenters, who denounce or decry the movement because there are “socialists,” “communists,” “anarchists,” or that the movement is “anti-Capitalist,” and thus, a “communist conspiracy by bankers.” Because the movement does not articulate MY specific ideas, the movement is therefore irrelevant and controlled. The movement decries Wall Street, and not the Fed, therefore it is controlled and co-opted! The Fed is the problem, not Wall Street! … These are very common denunciations of the movement.
Well, for those who focus on the Federal Reserve: indeed, the Federal Reserve is one of the MAIN problems, and in fact, the global central banking system itself. However, I find myself confused by those who seem to have enough knowledge of the Fed to know that it “needs to go,” but then state that “Wall Street is not the problem.” My confusion is this: Wall Street owns the Fed. The Federal Reserve System, composed of 12 regional Fed banks, which are themselves private banks, the most powerful of which is the Federal Reserve Bank of New York, are controlled by the banks. The board of directors of the NY Fed includes Jamie Dimon, the CEO of JP Morgan Chase. JP Morgan Chase is one of the principal shareholders in the New York Fed, as are the other major Wall Street banks. Thus, Wall Street owns and runs the Fed for the benefit of the Wall Street banks. So, those who claim we should focus on the Fed and not Wall Street are missing the critical point: they are almost identical, represent the same interests, work to the same ends, and are so heavily integrated that we should be against both (not to mention all other institutions of power).
In fact, many of those who claim that the Fed is the problem and the movement is controlled had themselves for years been highly critical of Wall Street. Yet, it seems, that as soon as others are critical of the same institution, but articulate different philosophies, they are wrong, the movement is controlled, and they are protesting against the wrong things. This creates needless divisions. Instead, would it not be more effective to join the movement and seek to educate the mass of the movement about the Federal Reserve System, instead of denouncing them simply for not knowing? After all, by denouncing them, you segregate yourself and your ideas from the movement. Subsequently, you complain that the movement doesn’t share your ideas, and is therefore wrong and controlled. It’s a self-fulfilling prophecy.
It must be understood that the majority of the Occupy movement is made up of students and average people, hurt by the economic crisis, or disturbed by the declining social conditions, the political apathy to make change, and the general dissatisfaction with the status quo, These are reasonable things to make people active and motivated. Do not expect the majority of these people to be as ‘aware’ of the large plethora of issues at hand, or to understand the system as well as those who have made a living out of studying it. I have seen footage from the movement where protesters denounce Wall Street and in the same breath endorse Obama. It’s absurd, yes, Obama is a Wall Street product (much like a derivative!), but don’t denounce the entire movement as a result. Instead, should we not seek to educate, engage, and interact with those people in the hopes of enlarging their perspective? But then, it is always much easier to denounce, disregard, and dismiss than it is to engage, participate, and integrate. What we may not realize is that dismissal only segregates our ideas and analysis from the wider population.
This is an Opportunity! Don’t Ignore it, Take it!
All too often we miss the forest for the trees. We so easily segregate ourselves from one another, as opposed to uniting together. We see the superiority of our own ideas, and demonize all others. Passive observation is always so much easier than active participation. The notion that libertarians have nothing to learn from socialists is as absurd as the notion that socialists have nothing to learn from libertarians. Yet, both groups so often demonize one another, and always keep each other at a distance, segregated, divided, and thereby both sides of the spectrum become ineffective. Both demonize each other based upon false conceptualizations of each philosophy. Socialists, and for that matter, many on the left, identify libertarians with neoliberalism, and thus, as part of the problem, as the status quo itself. Libertarians, for their part, see socialists as absolute Marxist Communists and, many on the right as well, tend to associate socialism with Communist China, the Soviet Union, or North Korea, and therefore they see socialists as wanting to destroy all individuality and freedom in favour of the all-encompassing power of ‘the State.’ This division was not always present, and it’s time it is relegated to the dustbin of history. We cannot move forward lest we move forward together.
There is, however, a philosophy which is known almost paradoxically as “Libertarian Socialism.” One would find this an absurd oxymoron, but it is an actual philosophy. It is often interchangeable with the term “anarchism.” Anarchism itself is perhaps the most effectively demonized and dismissed political philosophy, as well as the most misunderstood, not to mention the one with the most potential to unite the masses of people. It is an incredibly diverse philosophy, not dogmatic or strict, but incredibly all encompassing. Anarchism is simply the belief in human freedom being the necessary condition for human happiness, and that it is institutions of authority which make humanity depraved, violent, corrupt, and controlled. Anarchists have presented the most authoritative critique of the state, as well as various institutions of power. It’s origins and developments can be found in ancient Chinese Taoism, and it emerged as a distinct philosophy organically in several different civilizations, eras, and ideas: in ancient China, Rome, Greece, early Christianity, Medieval Europe, and the word “anarchist” first was used to describe a philosophical position in the 19th century, with philosophers like William Godwin, Pierre-Joseph Proudhon, Mikhail Bakunin, Peter Kropotkin, Leo Tolstoy, and into the 20th century with theorists like Emma Goldman and many others. In fact, it was the anarchist philosopher, Bakunin, who presented the greatest challenge to Karl Marx at the First International, as Marx sought to (and ultimately did) have Bakunin and the anarchists sidelined and made irrelevant in the Socialist International. Bakunin, for his part, predicted that Marxism is too authoritarian, as it would use the state to establish a dictatorship, and that if ever attempted, it would establish a “Red bureaucracy” all the more tyrannical than the government it was supposed to replace. Of course, Bakunin was correct in predicting this, but we don’t commonly learn about philosophers or philosophies which are accurate, that might have the undesired side effect of educating us.
Instead, we hear the word “anarchism” and think of violence, lawlessness, chaos, disorder, and primitive nature. Anarchism is in fact about the triumph of individuality, and the necessity of community; that the individual is best supported through communal ties. The promotion of absolute freedom from all structures of authority, along with a stressing of individuality (and with it, ingenuity and creativity), as well as the importance of community and interaction, has allowed this philosophy to attract communists, socialists, liberals, conservatives, and libertarians. In fact, it has allowed for mutual cooperation across the spectrum, for anarchism does not sit upon the left/right paradigm, but rather upon the freedom/tyranny paradigm. It is able to remove socialism and communism from authoritarian elements (which promote the state), and is also able to remove libertarianism from its arch-capitalist concepts which promote corporations and banks at the behest of the rest. Anarchism is capable of mixing the ‘free market’ ideals of libertarians with the social principles of socialists.
I stress this point simply to press the idea that there is mutual ground upon which the left and right are able to unite, to come together, act together, and learn from one another. I comfortably place myself within the anarchist philosophy largely because it is not dogmatic. For many years, I struggled to define my own views: I was neither conservative nor liberal, I identified with many social principles of socialists, yet was attracted to the freedom-promoting ideals of libertarians. I felt that Marxist analysis had much to offer, but I had great distaste for its proffered solutions. Through my own individual research on a wide range of subjects, I came to see not capitalism as the problem, nor the state as the sole problem. The problem then, I found, was that I was expected to identify “one” cause of all problems, and therefore, take “one” stance, and offer “one solution.” I could not do this. I found interesting and indeed important ideas in a wide array of philosophies, theories, critiques and concepts, but could not adhere to “one.” Rather, I would seek to take the ideas I liked from each, remove those I didn’t, and throw them together to form my own perspective as a kind of “hodge podge” philosophy. The result, was that I tended to identify the concept of power centralization itself as the issue: the notion of ideas and institutions of power depriving individuals and the collective of humanity the power of self-determination. When I quite literally stumbled into some anarchist philosophy, I realized that this concept has been articulated for thousands of years, developed organically by many civilizations, cultures, religions, and individuals. Known as different things at different times, it all tended to fall under the umbrella of anarchism, and what a wide, all-encompassing umbrella it is. What other philosophy could you have such variations of ideas so as to include what are known as “anarcho-communists” and “anarcho-Capitalists,” and that they may have such common ground to stand upon?
Diversity is Strength
Do not fear different ideas, radical concepts, or foreign philosophies. Engage, learn, teach, debate, articulate, DE-segregate, include, interact, unify, energize, challenge yourself and others, develop and grow. We do not all need to have ONE opinion, ONE idea, ONE solution. All we need is ONE reason to unite, yet we all too often overlook that very blatant, obvious reason to find many reasons for which we can divide. All it takes is one reason to unite, very simple: we are all in this together. That’s it! All the rest is salad dressing. We are all in this little world together. You don’t have to like every idea or every other person, you don’t have to think the same or act the same or dress the same or believe the same, all you have to do is be aware that we are, all of us, here on this little planet together. That realization makes it necessary that we begin to find common ground to stand on. This does not mean we need to have ONE idea, for once we have one dogmatic concept, it becomes institutionalized and corrosive and destructive.
Diversity is strength.
It amazes me, how in doing my own research for several years now, I find myself feeling so secure, so determined and even stubborn on the ‘correctness’ or ‘righteousness’ of a particular idea or understanding I have come to embrace. And then… I do more research, discover more things, delve into more history, more philosophy, more ideas, more analysis… and suddenly, I have to challenge all my preconceived notions and beliefs. Suddenly, I have to refine all my “correct” ideas to become “more correct.” And then, like it says on your bottle of conditioner, “rinse, repeat.” The one thing I have come to stop being surprised by, is that I am constantly surprised. My own beliefs, ideas, understanding and philosophy is in a constant state of growth, as I am in a constant state of learning. And yet, every time I come to some new conclusion, it seems as if my mind says, “Well then, that’s it, I’ve got it… now I’m done… right?” And then, I happen across some new subject, some new idea, or issue… and “rinse, repeat.”
We must learn to all put aside our inherent biases, to engage with our own knowledge, but with the acceptance that we have more to learn from others. Because, we do! Whether or not you believe it, we do. And we won’t ever move forward in this world unless we move forward together. The elite know this. They have always known this since ancient times. That is why elites seek to divide and conquer. But the system that has developed up and around humanity for the several thousand years of our existence on this little planet has become so ingrained in the human conception of itself that we no longer require the elite to divide us, we do such a good and effective job of it ourselves!
Humanity must mature from its adolescent stage of development where we have authority figures telling us how to dress, what to think, where to go and what to do. It’s time humanity becomes an ‘adult.’ In short, we need to grow up! Put aside the petty differences which do us no good, find our common ground to stand on, and move forward together.
The funny thing is, once we are capable of doing that, the elite become a sideshow. When we do that, we realize that the elite are always a sideshow. They become totally irrelevant, archaic, and useless. To change the world, we must change our selves. The true revolution requires no seizure of power or usurpation of the state. The true revolution is a philosophical revolution, fought and won internally. The growing and developing global protest Occupy Movement is an important step in establishing global solidarity, in truly experiencing the ‘power’ of individuals when they come together, in understanding that we are all indeed, together.
If the movement becomes a truly effective engine for change, it will have to promote solidarity with all peoples and groups all over the world, it will not demand anything of institutions and power structures, but demand change only of itself, and as such, seek to forge cooperation, education, understanding, and actively create new ideas and a new social reality.
If it is to be truly effective, not only must it guard against institutional co-optation, but it must more so guard against internal divisions and segregation. Whether the movement isolates itself from others, or others isolate themselves from the movement, the effect is the same.
But always remember…
Diversity is Strength!