Monday, February 28, 2011

Doom and gloom

The Cooking the Books column from the February 2011 issue of the Socialist Standard

In November David Segal of the New York Times interviewed a number of economists to see what ideas they had about how to get out of the current slump (See here).

His opening words were “we are not going to shop our way out of this mess”. Which is true enough since capitalism is not a system geared to meeting consumer demand but one driven by capital accumulation out of profits. Consumer demand merely reflects capital accumulation. If capital accumulation stalls, as at present, so does consumer demand. Consumer demand can only increase if capital accumulation does; it can’t wag the dog.

The silliest suggestion came from Professor James K Galbraith who proposed paying unemployed workers their full social security benefits when they reached 62 which, he claimed, would create jobs because “they would have 22.5 percent more purchasing power than they would if forced to wait until the age when full Social Security benefits kick in”. But where would the money to do this come from? Only by transferring it from somewhere else in the economy, but this wouldn’t increase overall demand. Since he was also recorded as saying that “we’re likely to see a situation that makes people angry and miserable for years” he didn’t seem particularly convinced that his proposal would be adopted.

Professor Gar Alperovitz saw the way-out as via more employee-owned enterprises. “If the economy and the government don’t have an answer to the problem,” he said, “people are forced to try social enterprise.” But such enterprises – small businesses such as laundries – are not going to generate enough investment to get capital accumulation going again. In fact they survive largely by paying lower wages and accepting lower profits than a business normally would. Most will probably eventually go bust anyway.

Others realised that only something that would stimulate capital investment might work. Someone suggested investing in “green energy initiatives” but wasn’t too convinced that this would happen as, not being profitable in the short run, it would require government subsidies to get started. Someone else suggested that as the average age of the population was rising there would be more demand for medical treatment and that this could generate investment in technological breakthroughs in this field.

A mad marketeer from the Cato Institute pointed out, correctly as it happens, that “time was a key ingredient to a recovery”. Yes, time for the slump to create the conditions for a slow recovery, through unemployment exerting a downward pressure on wages and spare capital exerting a downward pressure on interest rates, both of which help to restore the rate of profit. He, however, looked forward gleefully to another consequence: governments cutting their spending to lower taxes on profits. “I think,” he said, “we also have a bubble in the labor market for state and government employees and over the next two years we might see as many as one million of these employees lose their jobs.”

Professor Andrew Caplin saw the answer in a growing inequality of wealth and income providing jobs for “the poor and middle class to cater to the economy’s biggest winners” servicing them as cooks, nutritionists and financial advisers. "Professor Caplin worries,” reported Segal, “that this concept might be caricatured as ‘cater to the rich’.” As well he might, but, given capitalism, he was on the right track. Increased inequality – a shift in favour of property-incomes – is a necessary, though not a sufficient, condition for a resumption of capital accumulation and, when it eventually does, will lead to a further increase in inequality.

That‘s all capitalism has to offer – periods of pain alternating with periods of increased inequality. It‘s not so much economists as the system they study, capitalism, that‘s dismal.

Ghana – can oil make a difference? (2011)

From the February 2011 issue of the Socialist Standard

Who fill benefit from the discovery of offshore oil in Ghana?


The fanfare and euphoria that greeted the discovery of oil in Ghana is not only based on the assumption that it will help boost the not-so-healthy economy of this poor nation but more fundamental though unvoiced factors also account for the uproar. The dismal reality of the actions of the global oil magnates in African countries is one such factor. They act in brazen defiance of the norms of civility and dignity of the local populations. The humiliating treatment meted out to Liberia’s Charles Taylor due, in part, to his refusal to do business with Dick Cheney’s Halliburton is a prime illustration of such corporate arrogance. But more importantly, the expectation of Western oil companies to make their super-profits is also a cause of the excitement.

The debates
When the actual pumping started in mid-December, the world media was replete with all sorts of stories about Ghana hitting the jackpot. As discussions on the issue livened up attracting comments and analyses from Ghana and especially the BBC and RFI, the Squealers of the Ghanaian government got down to work. Amidst all this confounding hullabaloo, the spokespersons rebuffed the claims of the ‘prophets of doom’ that Ghana will go the way of Nigeria, Angola, etc, where the oil wealth has become a curse rather than a blessing. They claimed that stringent measures have been put in place to forestall the intolerable prospect of corruption, mayhem, kidnappings and killings that Nigerians have to contend with all these years on account of the petro-dollars.

However, it soon came to light that as of the time the Squealers were frantically trying to convince the doubting Thomases to drop the deep-seated cynicism that makes them attribute negative theories to the project, the legislature had not even deliberated on the matter in parliament yet. Not that parliamentary approval is of any relevance here since, generally, laws passed under this money-dominated economic system are either in favour of the rich and powerful or against the poor. But the fact that it had not yet been done suggests that, contrary to government claims, no precautionary had been taken against the possibility of Ghana going the way of Nigeria, Angola and co. Or, even more seriously, that the Western companies rushed the Ghanaian authorities into having the drilling started without ensuring that adequate protective legal instruments are duly concluded. This creates the impression that, contrary to what the Ghanaian authorities claim, the investors are, and this is obvious, the senior partners of the whole enterprise.

Then, later, some concerned Ghanaian observers intimated that even before the drilling got started, Ghanaian policy-makers were already using the anticipated oil proceeds as collateral to contract loans from abroad. An ominous beginning if the insinuation is well-founded.

Production relations
The development of modern industry, brought about by the profit-oriented economic system, makes it necessary for the production of wealth to be socialised. This means that the point of production is not the individual factory, goldmine, oilfield, etc but it is society. It follows therefore that those who control society are the ones who effectively control the use of the wealth produced. It is neither those who do the hard labour nor those who manage the workplace, i.e. the factory, goldmine or oilfield.

As the state is the recognised controlling body of any society, it is an undeniable fact that whoever controls the state, whether directly or indirectly, is the de facto controller of society and, by extension, the wealth produced.

It is also common knowledge that the political leadership in Africa, and indeed in all former colonies, have, to a large extent, the same tastes and lifestyles as the ruling elite of the former colonialists. The two groups share the same consciousness. Both work towards the preservation of the status quo – the exploitative relations of production – as it is the guarantor of their luxurious, albeit parasitic, lifestyle.

The so-called New World Order being vigorously pursued by these leaders in the West and their “experts” and advisers is nothing but an attempt at intensifying the exploitation of the world’s resources in the interests of the Western big business community whose interests Western governments serve. This insignificant minority of multi-billionaires control the wealth and political leadership of the West by virtue of their ownership of the means of production and distribution of wealth – land, factories, railways, the media, communication networks etc.

The states and governments of the former colonies are under the complete control of the Western powers and if any of these poor countries shows the slightest sign of attempting to resist Western domination, such a country is brutally forced to ‘cooperate’. That is in conformity with the near-invariable practice of the powers that be. There are too many examples of this state of affairs to need any mention here. Thus the whole of society and its resources are effectively controlled by the rich minority and they alone determine what to produce and how to use the wealth thereof.

Consequently, governments of the peripheral countries, who also represent their local business community, will, in accord with inherited convention, leave no stone unturned in enticing Western multinational corporations to come and invest in their countries. They do so with the hope that the local money-owners may get the chance to pick some crumbs falling from the sanguinary table of the foreign investors.

To facilitate foreign investment, the governments are ordered to create an ‘enabling environment’, an expression which is a euphemism for holding down the ordinary citizenry for the investors to mercilessly exploit them by way of cheap labour.

The Ghanaian reality
In Ghana, those at the helm of affairs, in routine fashion, fail to realise that not all are fools. Gold, bauxite, manganese, diamonds, cocoa, timber, just to name a few, have been produced since time immemorial. If ever any ordinary citizen benefited from the proceeds of these resources by way of, maybe public conveniences, untarred roads, ill-equipped health centres, few schools or some such tokens of basic necessities, then it was an unintended necessity.

That an overwhelming majority of Ghanaians have been wallowing in abject poverty whist a few cabal of the old boy network live in stinking affluence tells a lot. Though information on how the national cake is distributed is deliberately made unavailable or at best scanty, yet it is not entirely unknown. The several coups d’états, firing squads, commissions of enquiry etc are open pointers as to how the cake is shared.

Today, oil is being pumped and, in this world of money-based economy, exploitation cannot be avoided since production is carried out for the sake of making profits. It would be a contradiction to have a money-based system without profit. If investors will not make a profit, they will keep their money, but if they will realise a profit, they are going to do so at the expense of the worker and the host country. Then their collaborators in the form of local politicians and business people will be given the task of using sophistry to cover up the truth. Since the Ghanaian masses are effectively excluded from the decision-making process, except for the periodic elections during which time they are hoodwinked into voting for which bunch of looters to come and rob them, they are left helpless.

Corporate journalism
Those who could have saved the situation are the journalists who, at least, are able to glean into the corridors of power and have an idea of what is going on in there. Now, it is received opinion that Ghana is one of the few countries in Africa where press freedom has developed to a stage that is almost ineradicable. It is therefore expected, and observers of the Ghanaian oil scenario have concurred with this, that the vibrant press will serve as an uncompromising watchdog over the operations of those involved in the business. It is thus claimed that the eagle-eyed vigilance of the ubiquitous journalists will put fear into officials who may try to get involved in any financial misconduct. But the snag is the kind of journalism that is practised in Ghana and, indeed elsewhere in this profit-oriented world.

Corporate journalism is stunted journalism. The media houses operate to make a profit, just like the oil companies pumping the oil. And since the process of making profits necessarily entails shady deals, graft and unconventional methods, the media personnel cannot but play the game according to the rules. And that, exactly, is their stock in trade.

However, it is not to be discounted that there are individual journalists who may profess genuine intent in their work. But corporate media as an institution is an indispensable cog in the profit-making machine and hence works in accordance with the odious practices of the system. And that is precisely why they refer to themselves as the fourth estate of the exploitative ruling class.

Not surprisingly, the media coverage is appallingly terrible. It would not be an overstatement to say that over ninety percent of media activities is devoted to three trivial issues.:


  • 1 Entertainment – to divert attention from real issues of official theft, but not to genuinely satisfy people’s spiritual needs.
  • 2 Advertisements – to promote the consumption of worthless or fancy goods.
  • 3 Misinformation – to keep the masses ignorant.


  • An instructive case of such disinformation was seen on New Year’s Day when BBC’s Network Africa was summing up the important events of the past year – 2010. It was written by Elizabeth Ohene, a former BBC journalist and also a former minister in the previous government in Ghana. She wrote that she was surprised to learn that Ghana had just been promoted from a least developed country to a ‘middle income’ one. Who did it and why?

    All said and done, Ghana may not go through the kind of physical violence and killings that is the lot of Nigeria today. However, it will surely experience the other aspect of what is happening in oil-rich Nigeria. The oil corporations will siphon off more than the lion’s share of the proceeds from Ghana. Then the political and business leadership will stash away as much as they can. And finally, the ordinary citizens, like their counterparts in Nigeria, will continue to live below the needless but inescapable poverty line.
    Suhuyini