by Ron Baiman
Dear Mr. Kerry:
I'm not going to harass you about the evils of capitalism or
try to win you over to the premise that there can be no real political
democracy without economic democracy, though I firmly believe
in both the evils of the former and the promise of the latter.
I will save it for another day and another time as I want to focus
on current world macroeconomic mismanagement that poses
an immediate near term threat to the livelihoods and life prospects
of all humans (including capitalists) on this planet.
I'm not referring to the growing U.S. federal budget deficit,
though this clearly cannot be ignored indefinitely. I'm not even
referring to the shameful and disastrous Bush war in Iraq, though
this has clearly got to stop and be turned around. The cause of
my concern is deeper, more systemic, and will be more difficult
to address than either of these. It is also an important factor
underlying both the federal budgetary unraveling and the increased
global threats and tensions.
The imminent threat is the grossly out of balance, and teetering
on the verge of collapse, world trade system, with the U.S. economy
at its core. Let me stress, this is not an academic issue. In
the 20th Century, both WWI and WWII can be related to international
economic collapse. Today, the catastrophic failures of the market
fundamentalism underlying the "New World Order," or
more aptly "Neo-liberal Globalization," have now reached
a boiling point. The hopelessness and despair that this system
has inspired around the world can no longer be glossed over. It
has fostered a resurgence of hatred and victimization on both
sides of the global divide.
Simply put, we can no longer pretend that "free trade"
in goods and capital can run itself on autopilot. Though the
few and the powerful have reaped obscene rewards, the system as
a whole has undermined whole economies and now threatens to drive
the global economy, including that of the U.S., over a cliff.
Why is this the case and what must be done?
Broadly speaking there are two layers of macroeconomic policy
that any political economic system must deal with. First, at the
most general level there is the aggregate demand problem. The
economy needs to grow at a fast enough rate to absorb new workers
and offset productivity increases. As John Maynard Keynes noted
many years ago, this has been the central problem of capitalist
market economies at least since the 1930s. Second, as has become
increasing clear in the current "recovery" and has been
increasingly obvious in the U.S. since at least the mid-1970s,
is the distribution problem. Economic growth has to translate
into new jobs and wide spread income growth as productivity rises.
My remarks will address both of these fundamental levels of
macro policy but will primarily deal with the first: the aggregate
As Cambridge University macroeconomist Wynne Godley and his
collaborator Alex Izurieta have emphasized, a simple macroeconomic
identity lies at the root of any understanding of national aggregate
demand. This identity states simply that over any given period
of time total spending is equal to total income. In its simplest
form, we have: National Income = private spending + government
spending + net spending of the rest of the world.
But the fact that in the aggregate income is equal to expenditure
does not necessarily imply that for any given sector in particular
its spending is equal to its income. In other words, excesses
of expenditure over income of any given sector (dis-saving) are
likely, but these have to be matched, up to the last penny, by
excesses of income over expenditure of the rest (saving). Thus,
the above identity can be as well written in the form of financial
balances of the main sectors of the economy. Generally: Government
deficit = Private sector balance external balance.
Furthermore, an excess of spending over income of any sector
is matched, at the end of the day, by an identical excess of income
over spending of all sectors that make up the entire (macro)economy.
Conversely, an excess of income over spending of any one sector
implies an equivalent rise in its net acquisition of financial
assets, which are in turn financial liabilities for the rest of
the sectors considered at once. Thus, the above identity, after
considering that a 'trade deficit' is an excess of income of the
rest-of-the-world over its spending of our goods, can be as well
written as: Trade Deficit = Government Deficit + Private Sector
At its most basic level, these three major sources of aggregate
demand (the foreign trade surplus or exports minus imports; the
government deficit or government spending minus taxes; and the
private sector (household and business) deficit or consumption
and investment minus labor and capital income) interact in a symmetric
way to their financial (im)balances. Furthermore, financial (im)balances
relative to income flows have to stay within certain limits if
debts are not to grow excessively.
A precursory look at the evolution of these three sources of
aggregate demand reveals that in the postwar period the U.S. has
had three major types of macroeconomic policy regimes.
From the end of the WWII to the early 1970s we had a "golden
age" period of balanced growth. This period was characterized
by a fairly stable and rapid growth employment, output and income
that led to fast growing and widely shared increases in living
standards. During this time, the private, government, and international
trade, sectors were more or less in balance with a modest private
surplus generally offset by a modest government deficit.
As is widely known, this prosperous high-growth "Keynesian"
era slowed down and appeared to unravel by the mid-1970s as the
economy went through a bout of inflation and two major recessions
until about 1982. This was a period that also saw the demise of
the Bretton Woods international trade and finance accords that
had provided for stable exchange rates and balanced and rapidly
growing international trade since 1945. In the "post
Bretton Woods" period there have been two major macroeconomic
policy regimes in the U.S.
From about 1983 to 1992 macroeconomic policy followed a "Reaganomics"
"government and trade twin deficits" path, as the Reagan
tax cuts, high interest rates, and an overvalued dollar (induced
by Federal Reserve Chairman Paul Volcker's tight money policy)
led to growing U.S. international trade deficits and increasing
federal budget deficits for the first time in the postwar period.
Aggregate demand was maintained by offsetting the growing trade
deficit with the large and expanding federal budget deficit that
had been caused by a combination of Reagan's massive military
build-up and federal large tax cuts mostly for the wealthy.
The policy regime worked to restore economic growth though of
an uneven and unequal variety. From an aggregate demand perspective
this was clearly not a sustainable policy stance as neither the
government or trade deficits could increase indefinitely. Indeed,
toward the end the period efforts were made to get both deficits
under control, and though progress was made, it came at the expense
of aggregate demand growth with the onset of a recession in the
In reaction, in the following 1992-2000 period the macroeconomic
policy regime switched to a radically new "Rubinomics"
(after Clinton Secretary of the Treasurer Robert Rubin) "private
sector/international trade twin deficits" stance. This period
of tight fiscal policy (curbs on government spending relative
to tax collection) and loose monetary policy (easy credit and
declining interest rates) was the opposite of the Reaganomics
pattern of loose fiscal and tight monetary policy.
However, both the Reaganomics and Rubinomics "free trade"
regimes shared the same central and overwhelming aggregate demand
problem: a growing U.S. international trade deficit with the rest
of world that reached about 4% of GDP by 2000. Though, during
the Rubinomics period the U.S. foreign trade deficit was offset
by a private, rather than public, sector deficit. As you know
by the end of the 1990s the federal government deficit declined
to the point of reaching a surplus by 2000. In the 1990s aggregate
demand thus became entirely dependent on private sector deficit
spending. Indeed private sector (and especially household) debt
reached a record of over 5% of GDP at the end of the period.
From 2001-2004 the U.S. (and world) macroeconomic imminent
train wreck continued to unfold. In aggregate we appear to be
back in a "Reaganomics" "twin public/trade deficits"
aggregate demand configuration. The overall private sector was
back to a deficit of only about 0.4% of GDP by 2003 Q3 due to
corporate surpluses even as household debt continues its unsustainable
increase. However, as the external deficit continues to increase
(to a record 5% of GDP or $525 billion in 2003), the aggregate
demand identity implies that an offsetting injection has to again
come from the public sector. This is exactly what has happened.
The Bush administration has presided over one of the most massive
and unsustainable federal deficit spending binges in post war
In short, in the last 30 years we have not yet found a sustainable
solution to the growing and ultimately infeasible world trade
imbalance. Instead, we have tried to postpone the inevitable massive
readjustment through the use of public or private deficit spending.
The U.S. economy has been functioning as the world's "buyer
of last resort" for more than two decades now. Such a pattern
is no more than saying that our own institutions (public and private
sectors) have been spending relentlessly, and in doing so have
been accumulating hazardous levels of debt. What is more, since
global demand was driven by unrelenting spending (and borrowing!)
of U.S. sectors, there has been little incentive for the rest
of the world to add to net demand by increasing their absorption
demand. This is not sustainable and we may be reaching the end
of the run. May I submit that ideology, in particular of the "free
trade" and "free market" Neo-liberal variety, is
an important part of the problem both on the international and
the domestic macroeconomic policy fronts?
Mr. Kerry, is it not clear that world cannot be sustained by
a "race to the bottom" policy regime structured to deflate
world and national aggregate demand? This, after all was Keynes'
major concern at Bretton Woods, a concern that was only partially
addressed by the compromise accord that, in any case, collapsed
30 years later. Is it not clear that depending on largely unregulated
"free trade" to rebalance and reflate the world economy
is a misguided and dangerous illusion that only serves to perpetuate
a regime of global low-wage production and high-price accumulation
of government and household debt for the benefit of a elite class
of property owners? Is it not clear that mutually beneficial trade
between countries with vastly unequal wage, environmental, and
social costs, cannot be directed by "free market" forces?
And most important to the policy direction that you seem to be
going in, is it not clear that cutting the federal budget deficit
without cutting the trade deficit will simply throw the economy
back into recession?
Mr. Kerry, I appeal to you to not turn away from the major
challenge of the 21st Century: the reconstruction of a sustainable
This needs to include a "global Marshall plan" for
the poorest developing countries and a new and viable international
trade and capital flow accord. The later needs to include "solidarity
trade" policies that force countries to raise their standards,
or face equalizing tariffs. The revenue from these tariffs then
needs to be redirected back to low-wage countries of origin to
be used to raise their labor, environmental and social standards
Though the dollar will undoubtedly fall this will not be adequate
to rebalance world trade, especially with countries such as China
that have become so dependent on exports to the U.S. No conceivable
dollar decline can make up for the huge production cost disparities
that are currently driving "north-south" trade. At a
minimum, policies to require enforcement of labor standards and
minimum wages, and advanced country reflation, must be at the
heart of any rebalancing of world trade. This requires taking
on the U.S. and global private financial interests that have been
so successful at creating the current Neo-liberal world economy
that works against the many for the benefit of the few.
I have not addressed the second macroeconomic policy layer
dealing with how macroeconomic growth should be allocated and
distributed, as this I think is much clearer and more obvious,
at least to the politically progressive. Suffice it to say that
though Bush has correctly applied a massive short-term stimulus
to pull the economy out of recession, the income allocation (and
job generation numbers) resulting from this huge federal largess
are obscenely unfair and inadequate. For example, a recent Economic
Policy Institute analysis indicates that after seven quarters
of recovery labor has only a 40% share of the increased output,
the lowest in post-war history and far below the 75% average at
this point in a post war "recovery". Moreover, the two
layers of macroeconomic policy (aggregate demand and distribution)
are clearly linked as a unequal distribution leads to unsustainable
debt (as opposed to income) driven consumption. One measure of
the degree of imbalance in the U.S. economy alone is the astounding
(and astoundingly under reported) finding of a comprehensive and
in-depth study of U.S. tax returns that shows that 94% of the
growth in total income from 1973 to 1998 in the United States
went to the top 1% of taxpayers!
This, Mr. Kerry, is the major macroeconomic problem of the
day. I hope that you will be called upon to address this. My fear
is that you and the Democratic Party policy making elite do not
recognize the seriousness of the problem or the decisive and radical
measures that will be needed to confront it. Please prove me wrong!
I can think of no other more urgently necessary political economic
challenge of such great underlying importance. This central and
systemic failing is also clearly an important factor underlying
related current world problems of disease, poverty, crime, ignorance,
Author's Note: the whole approach of this essay follows the
work of Godley and Izurieta, both currently at the Cambridge Endowment
for Research in Finance (CERF) at the University of Cambridge,
U.K. Both were previously at the Levy Institute of Bard College
in the U.S. Their numerous papers and publications on this issue
can be accessed via the web sites of either of these institutions:
www.levy.org. See also "The
U.S. Economy: Weaknesses of the 'Strong' Recovery" in Banca
Nazionale del Lavoro Quarterly Review, June, 2004.
by Jorge Mújica
As the regular legislative session approaches in México,
the issue of Mexicans voting from abroad in 2006 turns hotter,
but migrants have started to move in other ways, not willing to
wait for Congress!
So far, 15 initiatives for the vote from abroad have been presented
to Congress, most of them in the lower House. All the three main
political parties, Institutional Revolution (PRI), National Action
(PAN), and Democratic Revolution (PRD), have presented initiatives.
The oldest one is from 1998, and the newest is only a few weeks
This last one, introduced to Congress on June 15, was supposed
to be the one that ended the discussion and result in a political
agreement between the three parties. It was anything but.
Three and a half years after taking office as President of
México, Vicente Fox finally did what he had promised all
along his campaign trail, which included the United States, and
in his further trips to this country. He presented Congress with
an initiative that would allow Mexicans abroad to cast their vote
in the next Presidential election.
But his initiative, far from what migrants requested from him,
did not recover the best of the older 14 initiatives. Rather short,
it even went back in time to the first initiative presented in
1998, which limited Mexicans abroad to vote for president and
no other branch of government. Since 2001, migrants have consistently
requested to "be voted for," meaning to elect Congressman
and Senators that represent them in Congress. On December 3rd,
2000, a delegation of migrants delivered to Vicente Fox their
own initiative, which includes the representation in both chambers
Fox's initiative calls for a very limited vote. First, because
is limited to vote only for president, second because it extends
this right only to Mexicans living abroad who already have a voter's
registration card, or that obtain it before December of 2005.
Unlike other countries, due to the shaky history of electoral
fraud, México's voter cards are a most sophisticated credential.
The card includes 13 security measures, and it takes about two
months to process. It includes a photograph, a magnetic strip,
a fingerprint, and it has sophisticated holograms.
Mexicans who migrated legally into the United States after
1999 are likely to have such a prized credential. Before that
year, the credential did no exist yet, so all Mexicans abroad
for more than 5 years never got it.
Also, those migrants crossing the border undocumented lack
the credential, since migrant's smugglers do not allow anyone
to carry a single document across.
Obviously, the measure would benefit those Mexicans abroad
traveling at the time of the election, plus the members of Consulates
and embassies, students and the like, all of whom have no problem
getting an electoral credential. But Mexican migrants, especially
those without documents in the United States, would have to travel
twice to Mexico, once to request the credential, another time
to claim it. Frankly, we do not believe any undocumented migrant
would cross the desert twice to do so.
Thus, from the possibly 10-12 million voters abroad, the presidential
initiative would allow only about half a million to cast their
vote in 2006.
Fox's initiative also restricts campaigning abroad, out of
the fear that "U.S. consortiums would influence the Mexicans'
vote and Mexico's autonomy would be compromised." Candidates
could not have any kind of public meeting abroad, nor any campaign
ads could be broadcast outside México, never mind if half
a dozen pre-candidates for the Mexican presidency in 2006 are
already campaigning in the United States. One clear example is
Manuel Ángel Núñez Soto, Governor of the
state of Hidalgo, which presented himself before the delegates
at the League of United Latin American Citizens, LULAC, at their
National Convention. While John Kerry promised immigrants a path
for full citizenship in the first 100 days of his government,
Núñez Soto backed President's Bush program for temporary
As of the middle of July, all initiatives are being discussed
by a special commission set up by Congress to solve the issue.
So far, their only agreement is that migrants have the right to
vote, and little else. The discussion seems at an impasse, and
often derives to the "how," pointing out at all of the
possible flaws when voting from abroad.
From "intelligent ballots," to the Internet, mail
and regular voting places, the discussion is going nowhere fast.
Every possible method has flaws, either the cost or the "reliability"
of the system, and the flaws are the perfect excuse to postpone
the agreement and the decision.
In the end, it is expected that the two largest political parties,
PRI and PAN, will decide on a formula that does not scare away
their leaderships. The PRD will vote along under the argument
that it has fought so long for these rights that it would be unthinkable
to vote against it. Some migrants will be able to vote, their
rights will be regulated and eventually exercised, and their participation
will not be significantly enough as to decide who wins the presidency.
Both PRI and PAN won't have anything to fear, and everybody will
be happy. Except, of course, the migrants themselves.
At the last state election in Zacatecas, which reportedly has
about 50 percent of its population living in the United States,
four migrants were elected to government. Two as State Representatives,
and two as mayors of their hometowns. One belongs to the PRI,
one to the PAN, and two to the PRD.
The most famous one, Efraín Bermúdez, dubbed
"El Rey del Tomate" (the Tomato King), since he got
rich after creating a machine to crop tomatos in the United States,
ran for the second time after losing his first election not in
the polling places but to the Election Court in 2000. Another
one, Manuel de la Cruz, also lost his Congressman position in
the Election Court in 2003. Together, though they belong to different
parties, they lobbied for the "Migrants' Law," a State
Constitutional Amendment in Zacatecas, which made an obligation
for all parties competing in an election to present women and
migrants in key candidacies.
Michoacán's Governor Lázaro Cárdenas,
who presented the first initiative in Congress for the vote abroad
while Congressman in 1998, tried the same kind of law in his State,
only to see it blocked by the PRI's State Representatives. This
month in Chicago, Cardenas publicly announced that regardless
of the law, his party, the PRD, will have at least two migrant
candidates for the 2005 State election, and that he hopes other
parties follow the example.
So, while President Fox and the political parties are pondering
whether the right to vote from abroad might "endanger México's
autonomy" and whether "U.S. corporations might influence"
the migrant's vote, they are already running, and so far, they
are winning in this marathon.
Editor's Note: Jorge Mújica is a leader in the International
Coalition of Mexicans Abroad in Chicago. For earlier chapters
in the struggle of Mexican migrants to win the right to vote,
see New Ground 90,
New Ground 89, New Ground 88, New
Ground 85 and New
compiled by Bob Roman
HERE Local 1 marked the one year anniversary of their strike
against the Congress Plaza Hotel (see New
Ground 89) with a monster picket line in front of the
hotel on the afternoon of June 15. Well over a thousand people
from a broad cross section of the Chicago labor movement nearly
encircled the building. Pickets were accompanied by two huge inflated
rats as statements on the management's attitude. The picket was
accompanied by some ritual civil disobedience (blocking Michigan
Avenue) and a creative infiltration of the hotel to drop a three
story banner demanding justice from a window. News reports said
15 people were arrested.
Chicago DSA supported the picket by publicizing the event by
a postcard mailing, email alert and a web listing. I counted nearly
two dozen Chicago DSA members on the line though, as usual, we
were invisible as a group.
About a month later, UNITE and HERE held a joint convention
in Chicago to formalize a merger between the two unions. The delegates
took time off to rally across the street from the hotel, bringing
some 1500 demonstrators to remind hotel management that without
justice there'll be no peace.
For photos of the June 15 picket, go to http://www.chicagodsa.org/c040615.html.
June 19 was chosen as a national day of action to protest the
growing gap in health insurance coverage. According to a recent
Families USA report, some 81 million people were without health
insurance for some or all of 2002 - 2003. This includes 3.5 million
people in Illinois. The rally's program was designed to educate
attendees in detail about the problems of the uninsured and to
provide quotable salacious factoids for the mass media. More than
a thousand people attended the rally on a truly beautiful late
Spring day in Lincoln Park.
SEIU's Central States organization provided the organizational
center, but the rally was endorsed by a wide cross section of
Chicago unions and community groups, including Chicago DSA. Speakers
included Rev. Jesse Jackson, Sr., Representative Jan Schakowsky,
State Senator Miguel del Valle, former Vermont Governor Howard
Dean. Health care consumers from inside and outside the labor
movement provided testimony that illustrated the plight of the
un and under insured, including one person who was jailed as a
result of an unpaid hospital bill. Debtors' prisons, anyone? Master
of Ceremony duties were shared by SEIU's Carole Travis, Dr. Quentin
Young and Chicago Federation of Labor President Dennis Gannon.
Chicago DSA supported the rally by publicizing the event through
a targeted postcard mailing, email alert and a web listing. We
also contributed $150 toward expenses and distributed some 200
DSA buttons that demand universal health care at the rally. For
photos of the rally, go to http://www.chicagodsa.org/hd040619.html.
The Health Care Justice Act, HB2268 (see New
Ground 94) was accepted by the Illinois House as amended
by the Senate. It was sent to Governor Blagojevich on June 24
for his signature. At press time, the Governor had taken no action,
and the Campaign for Better
Health Care was urging folks to call him (312.814.2121) to
demand his signature on the bill.
Massachusetts has joined Illinois in passing a health care
justice act mandating the formulation of a universal health care
plan on a state level.
An international conference on the various national struggles
against corporate globalization will be held at the DePaul University
Lincoln Park campus on August 5 through 8 (see
the ad on page 5). Among the speakers expected at the conference
will be: Penelope Duggan, International Viewpoint, Paris;
Boris Kagarlitsky, Institute of Globalization, Moscow; Jie-Hyun
Lim, historian, Hanyang University, Korea; Jean-Pierre Page, trade
Chicago DSA has endorsed the conference and will be cosponsoring
a panel with News
& Letters entitled "Beyond Anti-Globalization:
the Humanism of Marx as Grounds for a New Society." The panel
will be Friday, 8/6, 2:00 PM , Room TBA. Panelists Peter Hudis
(co-editor of The Power of Negativity and The Rosa Luxemburg
Reader), Kevin Michaels (contributor to News & Letters),
Marilyn Nissim-Sabat (professor emeritus of philosophy at Lewis
University), and Makalani Adisa (a Chicago activist) will address
these questions: Is the anti-globalization movement sufficient
to ensure justice for all workers? How deep must the uprooting
of globalized capitalism be to bring about a new, truly human
society? Since the Seattle protests, two theoretical works have
sparked discussion and debate in the left, taking very different
approaches to the questions of anti-globalization and revolution.
Both Empire by Michael Hardt and Antonio Negri and The
Power of Negativity by Raya Dunayevskaya seek radical alternatives
to the current social order. The Power of Negativity addresses
on the importance of philosophy, dialectics, and humanism in Marx's
works to envision a new society. Empire takes up a new
force of revolution, the multitude, which must confront and overcome
Empire through practical experimentation.
DSA has created a members only, moderated email discussion
list, "dsamember". The purpose of the dsamember list
is to further the work and practices of DSA. Therefore dsamember
is not a general political discussion or chat list. The prime
topics for discussion are DSA strategy and tactics, program, ideology
and practices. A wide variety of opinions and proposals are expected
and encouraged, but the moderator has been instructed to not tolerate
rude or abusive behavior, or personal attacks on one participant
As the list is open only to DSA members, you must request an
invitation by sending an email to email@example.com.
Your request must include your real name as well as your email
handle so that we may check your membership status. Only current
DSA members may participate in the list. Checking eligibility
can take time, especially if there are many requests to process,
so please be patient.
Cook County is among the many governmental bodies that has
a Living Wage Ordinance (see New
Ground 60) that mandates some of its vendors to pay rather
more than the minimum wage. There is a new proposal to expand
the scope of which vendors are covered by Ordinance and to raise
the minimum to $9.43 an hour with health insurance or $10.68 an
hour, without health insurance. As this issue of New Ground
went to press, Commissioner Roberto Maldonado held a press conference
prior to the County Board's July 13 meeting to pressure the Board
to take up the issue.
When you didn't come to the Deb's dinner I knew something was
wrong and meant to call you. Then I saw the obituary and knew
that it was too late.
You were such a steady hand. Always there when we needed help.
A rock of Oak Park. I can't believe that you've gone to that "pie
in the sky" with Joe Powers and all the other good comrades
in the struggle to make this world a better place.
From the torture training at the "School of the Americas"
to the disastrous war in Iraq, you saw what was coming and tried
to stop it.
We will do our best to continue your efforts as you would want.
Goodbye, Alex. May you finally rest in peace.
Co-Chair Greater Oak Park Democratic Socialists of America
DSA member (among other affiliations) Betty Willhoite was awarded
the Jewish Council on Urban Affairs'
"Courageous Voices" award at their annual meeting on
June 3rd. The Cook County Board passed a resolution thanking Betty
Willhoite for her work at their June meeting.
Bob Breving was honoree and roastee at DePaul
University's Labor Education Center's annual fundraising dinner
on June 18th, it also being the occasion of his retirement. Roastmaster
Jack Metzgar kept him evenly cooked.
Ed Sadlowski was elected to the Board of the Illinois
Labor History Society and to the Board of the Eugene
V. Debs Foundation.
DSA member Marc Loveless is running as the Green
Party candidate for the Illinois 14th District against Democrat
Harry Osterman. No Republicans are in the race. Two objections
are pending against Loveless' ballot status.