The Dark Side - Fritz the Cat

The Dark Side

To begin, I'd like to submit my version of the class struggle. The original version was set forth by Marx and Engels in their "Communist Manifesto" of 1848. In it, society stretching back to dim antiquity, is seen as divided in to two great classes: the owners of the means of production, that is, land, factories, raw material, etc. on one side; and faced across from them, the workers, who provide the labor that powers the means of production. Diametrically opposed and irreconcilable, they would inevitably engage in a great clash, in which the numerically superior workers, or proletariat, would overcome the owners, or bourgeoisie, and install a new form of government, socialism, in which the interests of the vast majority would predominate rather than that of the tiny minority.

This version of the class struggle dominated intellectual and especially academic thought right up to its 1989 debacle, when the USSR was repudiated by the very workers who supposedly controlled it, its most iconic moment coming in Berlin, when workers from both sides of the wall tore it down.

In my version of the class struggle, the workers are hardly the revolutionary protagonists Marx proclaimed, but rather nothing but pawns and worse, the prize to be won by the real protagonists in conflict: Old Money and New Money. Old Money has long held the reins of power, writing the laws, both secular and sacred, but most importantly the tax laws, which allow it to dominate society and profit accordingly. Old Money has reluctantly and bitterly, since modernity was introduced by the American and French Revolutions, had to face it opponent and sure executioner, the Middle Class, or more accurately, the Upper Middle Class(UMC). The ruling class versus the upper middle class, the true class struggle.  Lenin and Fidel Castro were both from the UMC, and both unemployed lawyers, seemingly an explosive combination of ingredients.  Perhaps we could call the old money ruling class, the One Percent, and the new money UMC, the 5%.

Once New Money has defeated OM, the 5% will no longer be bound together against a common enemy, and would begin fighting among themselves for domination of the new structure, as happens in every revolution, until the 5% is thinned out to the leanest, meanest, 1%. It will then proceed to remake its home country to ensure its continued dominate position as far into the future as possible, weakening its old foe by all possible means, the most formidable being the "reform" of the tax system. If this process is successful, the newly dominate economic interest will exploit its base, whatever that may be, and lead the country as a whole into a fresh expansionary phase, with more jobs for the workers and more taxes for the political class to spend. More campaign contributes for their supporters and the opponents of those who oppose  them, for it is the politicians who guard the system from abuse, and must sign off on major changes.

In my opinion, the US is just now entering into a new expansionary phase, OM Big Oil having just now re-established its domination by bringing the fracking revolution to the fore, and convincing the political class that this would feed more money into the system as a whole, more money than its NM competitor, finance capital, a.k.a. Neo-Liberalism, or globalization. Since NM made its move, in 2005, world capitalism has been holding its breath, afraid to invest in the losing side. Now that the contest has been settled, a world recovery should soon begin, with the US gaining the lion's share of the world's profits.

Some things will always be with us: death, taxes, poverty, and corruption. The US founding fathers, in their wisdom, realized the inevitability of corruption and allowed for it, making a virtue out of necessity by permitting and even encouraging the formation of factions, later called political parties. These parties would champion the interests of whoever paid them the most. The most tax revenue to spend, the biggest campaign contributions, the most lucrative speaking engagements, and the best paid jobs consulting and advising in the private sector, after learning which levers to pull in Washington.

By doing so, modern governments have proved the truth and fitness of the Golden Rule: Those with the gold rule. Election campaign has always been part of democracy, and they have always cost money. The economic interests behind the political parties are forced to put up or shut up. Either they give their party more money than the opposing economic interest gives to its party, or they are faced with the prospect of sucking the hind tit when it comes to government handouts. These economic interests can only give more money if they have more money, and they can only have more money if they earn more money. Earning a privileged place in the corridors of power is not a one-time thing, it is a constant battle. OM may want to rest, but it can't.

Obviously, OM has a leg-up in this game, having dominated the political process since they managed to claw their way to the top of the economic pyramid. But OM based on resources, i.e. oil or coal, eventually depletes these resources. OM based on transportation, i.e. canals, are eventually replaced by NM transportation innovations, i.e. trains  which are eventually replaced by trucks. OM based on finance capital seems to come and go, and come again. We will meet with finance capital later on, as neo-liberalism, and globalization.  OM gets tired, and stagnates, perhaps it isn't able to instill the enthusiasm of the old guard into the new generation.

The modern democratic world is designed for the peaceful transfer of economic and political power, thus ensuring a prosperous peace and avoiding ruinous civil wars, The US civil war was unarguably our introduction into modernity by this criteria. The confederacy's tobacco and cotton had long been the preeminent export and tax base of the country, thus enabling the south to write the laws that permitted and encouraged slavery. The new industrial wage labor explosion in the north, NM, promised much greater wealth if it could write the laws. So, by fair means and foul, the moral persuasion of the abolitionist movement if possible, or bribery if necessary, the votes were found to put the south on notice that their days were numbered. After the war the freed slaves with 200 year training in docility, poverty, and hard work, eventually made their way north, to become workers in the ever expanding industrial society.

Had the south played the political game and demanded compensation to free the slaves, property rights being sacred, they could have become part of the industrial revolution.  But an agricultural society with bound labor dies hard in the face of the promise of an industrial society with free labor. Witness Tsarist feudal Russia, wrestled into modernity by the upper middle class Lenin, with his promise of "land to the tiller" which later evolved into Stalin's "death to the Kulaks as a class", and the taxation to death of 20,000,000 peasants to fund the industrialization of Russia in one generation. The same story could be told of China.

Such as story could be told of Guatemala. The conquistadores were the original OM, and called themselves conservatives. Their cash crop was cochinilla, an insect-based dye. Any newcomer was forbidden entry into the cochinilla business and was inevitably forced to raise coffee as a cash crop. This group called themselves "liberals." In 1821 Guatemala declared its independence from Spain, and by 1830 the Conservatives dominated the Guatemalan state. Then the German chemical industry of the mid 1800's developed synthetic dyes, and by 1871 the liberal coffee interests produced more than twice the value of the conservative cochinilla business, And so the liberals easily put their man, Gen. Justo Rufino Barrios, in power. He immediately confiscated the landholdings of the Catholic Church, a pillar of conservative power. The indigenous communal land rights were suppressed, to the benefit of liberal coffee growers.

In 1893, President General Estrada Cabrera (1898-1920) transformed the liberal party from and elite of professionals and functionaries to one resting on liberal circles of the middle class. In 1934 debt peonage was abolished by president general Jorge Ubico Castenada. This undermined the power of the coffee growers in favor of the less competitive business interests looking for workers. Ubico also confiscated the holdings of the German coffee growers during WWII, some of whom were Nazi supporters.

The US had a strong economic interest in Guatemala since the time of Justo Rufino Barrios. Unable to raise money from the Guatemalan terratenientes, who had little interest in modernization, Barrios gave concessionary contracts to a US firm to build a railroad from the capital city to a new city on Caribbean coast, to be called Puerto Barrios. Subsidiaries of this railroad were the United Fruit Company (UFC), and the steamship line that hauled all of Guatemala's export goods to the US.

These vastly more profitable US companies could pay wages two to three times higher than those paid by the Guatemalan owned more traditional businesses, and so a wage-earning middle class began to develop as a base for the older middle class composed of professionals and high government functionaries. This middle class, anxious to modernize Guatemala, made its first move, led by the university students and professors of Guatemala City, by holding massive demonstrations to oust the dictator Ubico. Ubico has seen the handwriting on the wall, and lost his nerve when his old friend the dictator of El Salvador had been forced from office by union led demonstrations. When 300 of Guatemala's elite, many of them his good friends, signed a petition asking UIbico to step down, he did. This was Oct 20, 1944, still celebrated in Guatemala.

His replacement, Juan Jose Arevalo, had scant democratic credentials, as his party's forcible disruption of opposition political rallies had shown.  He had largely been schooled in Juan Peron's populism, having spent most of his adulthood in Argentina after winning a scholarship to study in that country. Like so many demagogues, he was a brilliant speaker, but devoid of any fundamental solutions to his country's problems. Indeed, his background from a family of small terratenientes, probably blinded him to the basic problem, pointed out by the Bank of International Reconstruction and Development in 1950, Guatemala's extreme inequality and racism. 2% of the populations owned 72% of the cultivable land and less than 1% of the land was under cultivation.  Of those who owned land, only 1/2 had  enough to support a family. The grand land owners rules in abstentia, and were only concerned with supporting their lifestyles. The terrateniente coffee producers required cheap, seasonal, unskilled labor, which lead to a poorly fed, uneducated, unhealthy workforce, which resulted in a stagnant economy.

Arevalo had two advantages, Ubico had paid off the foreign debt, and coffee prices rose throughout his 6 year term. His policies had benefitted the urban poor and the middle class. He promoted unionization of the industrial workers to develop the internal market. Two large unions developed, the Federation of Guatemalan Syndicates (FSG), and the Federation of Guatemalan Labor (CTG). Together, they represented various tens of thousands of effectively organized workers and urban office employees. But the FSG was corrupt, and the CTG was infiltrated by communists. Notable achievements of Arevalo's government were a work code and social security.

In 1944, the government administrated 130 grand fincas, that together with the fincas expropriated from Ubico and his generals, and the German community, amounted to 25% of Guatemala's coffee production. With good management, this could have been a source of revenue for the government and tens of thousands of workers. But Arevalo put his inept brother in charge, and he and his corrupt associates soon ran the business in to the ground, as recorded by all outside observers, including the World Bank.

Arevalo, Doctor of the Philosophy of Education, ran into a brick wall in his efforts to educate in the countryside. Only the least qualified teachers could be induced to teach in the countryside, and the indigenous fathers thought education a waste of time.  The children's work was needed at home.  It was there they learned the skills needed to survive.  In 1950 only 10% of Guatemala's indigenous children attended school.  Apart from the UFC, which had been unionized and paid top wages, the Guatemalan countryside had been almost untouched by Arevalo's presidency.

Although Arevalo had taken steps to modernize Gautemala, it was still dominated by feudal structures. He had co-opted the army officer corps though handsome pay increases, overseas study tours, and other perks. There was no civilian opposition to challenge or restrain him, Ubico's dictatorship having left Guatemala a political and intellectual desert. Guatemala, under Arevalo, was in fact a one-party dictatorship like Guatemala had always been.

As Arevalo's presidency neared its end, there were two military men of great power who seemed certain to participate in the presidential contest, Major Francisco Arana and Captain Jacobo Arbenz. The story surrounding these two men, Arana's death and  Arbenz's presidency, his controversial land reform, the UFC, and the US CIA intervention, is a complex and fascinating story, which will have to be put off, so I can get to the more modern Guatemalan history. Arevalo's and Arbenz's terms comprise what left liberal circles like to call the Guatemalan Spring.  That it was born in blood and treachery isn't taught in the courses they take.

History shows that the more rapid the change from a feudal agricultural society to an industrial one, the more blood that must be shed along the way. Just as Hitler required the decimation of Judaism in his drive to industrialize, and Stalin required the decimation of the Russian peasantry, so the Guatemalan state, and ultimately transnational capital, coveting the hardworking and docile Mayan population for its planned industrial maquiladora industry, required their presence in the city and not in the countryside where they had lived for thousands of years.

Let me be clear on this point, Thomas Paine declared that the tree of liberty must be watered with the blood of patriots and tyrants, that is its natural fertilizer. The industrial revolution has been watered with the blood of innocent peasants who turned the soil by hand, only trying to feed their families, sacrificed not in the ones and two, or hundreds or thousands, but in their tens of millions, sacrificial offerings to the current gods of progress and civilization on par with the ancient Aztecs or the Old Testament Moloch.  The logic of this system doesn't go back to Karl Marx or Adam Smith. They only described the opposite sides of the same coin. The logic goes back to Plato and Aristotle. Progress at all costs, and the devil take the hind most. As in a Greek tragedy, we are caught between two ethical imperatives, feed the hungry and thou shalt not kill. Mechanized agriculture feeds the world's billions as manual labor never could. One man with a machine can displace hundred or even thousands of manual laborers, and these displaced persons can be driven to the cities and taught to run machines that create profits for the rich, taxes for the government, consumer good for everyone, and improved industrial machines to renew the cycle.

The US had long trained and armed Guatemala's army, and following the Castro brothers successful Cuban Revolution in 1960 the US began training them in counter-insurgency warfare. Revolutionary insurgent warfare is where the guerrilla fighter, as Chairman Mao instructed "swam among the people like a fish in the sea", i.e. pretended to be a civilian while on a military mission, an act specifically prohibited by the Geneva War Conventions.  A bourgeoisie rule, the revolutionary would spit, but designed to protect civilians who suffered most in this kind of war. The inevitable result of an army's inability to distinguish a fighter from a civilian is to treat everyone the same. When faced with this situation, the Spanish Inquisition had the solution, "Kill them all, God will know his own." The classic response to guerrilla war is the scorched earth war, kill all, burn all, seize all. Over 200,000 Mayans died in the 30 years of armed conflict, and some millions were forced from their land and into the cities.

Recall that I earlier mentioned the US Army training the Guatemalan Army in counter-insurgency warfare. Pay close attention to the fact that while training someone to fight against an insurgency, you are inevitably training him to fight an insurgent war. That is, a government officer must know how an insurgent war is conducted in order to be able to counter it. Only men with ambition to advance go through the work and danger involved in training for and fighting a war. When Fidel and Raul Castro seized a whole country with only a few hundred men, the imagination of some of these officers was fired. An attempted army coup d'etat on November 13, 1960, less than a year after the Cuban Rev., led some 70 of the coup plotters, many of whom had received counter-insurgency training form the US Army Special Forces, to flee into exile in nearby countries and later re-infiltrate back into the Guatemalan mountains to attempt a re-creation of the Castro brothers' feat. This was the beginning of the 30 year Guatemalan internal conflict.

Guatemalan Old Money was in a rut. All it knew was that change is bad. But while in a small country like Guatemala, while the oligarchy may be able to prevent change within its borders, in the larger world they lacked that power. Coffee grows just about anywhere, all you need is cheap land and cheap labor. Same with bananas, cotton, cattle, and the rest of Old Money's cash cows. They are being produced everywhere is the world, increasing supply and decreasing profits. With less money to spread around governments go from liberal to authoritarian. People you used to buy off are now turning against you. Repression takes the place of conciliation, breeding more repression. The business climate deteriorates, and money starts leaving the country. The country gets poorer, instead of richer. No one is happy, not even Old Money. At some point, the tax base diminishes to the point where there is no money to pay the military police apparatus, and some kind of coup is inevitable. Dictators don't know how to create wealth, but they can hold the system together while the business class gets its act together.

Which brings us to globalization. The computer revolution and increasingly fast and cheap transportation has allowed industry to achieve economies of scale that are truly global. Capitalism's ever-present drive to decrease labor and other costs has led to the development of Guatemala, and other third world countries, as havens for low-cost labor for the manufacture, or mere assembly, of consumer goods for the US and increasingly, their own markets.

Groups such as the International Monetary Fund (IMF), the World Bank (WB), the World Trade Organization (WTO), the Group of Seven (G7), the Group of Twenty-Two (G22), the United Nations (UN), the European Union (EU), the Association of Southeast Asian Nations (ASEAN), North American Free Trade Association (NAFTA), Central American Free Trade Association (CAFTA),  the Association of Pacific Economic Cooperation (APEC), etc., makes the notion of nationalism problematic. In addition, these transnational, multinational trade groups have made it more difficult for small countries to play one country or bloc against the other, as happened during the Cold War period. On the other hand, large countries, such as the BRICs, have used the size of their markets as a bargaining chip to demand increased industrial development from the countries wishing to sell there. As bargaining increasingly becomes between transnational corporations and the host government, government to government foreign aid tends to diminish, and traditional elites are replaced by new elites with the skills needed to fit into a new transnational framework. Between 1978 and 1992, 70 countries undertook 556 stabilization and structural adjustment programs imposed by the WB and IMF.

Foreign capital flowed into Central America as part of the Central American common market during the 1960's and 1970's, integrating the area into the emergent global economy and creating a new capitalist faction opposed to the crony capitalism favored by the traditional elite. The new generation of elites, trained in business administration and economics in the US realized that they could not continue with the old agricultural export, military oligarchy, crony capitalist rule.

Rather, the new proto-elite realized that unless the old conservation elite were pushed aside the neo-liberal modern world would be aborted, or strangled in the crib, and the old guard realized that change meant the death of their way of life. On the one side the agro-export, monoculture paternalism of the old guard, on the other the wage labor, maquiladora industrial model, or the non-traditional agricultural model. In the middle were the poor, forced to do the fighting and dying by both sides, with the certain prospect of being underpaid and overworked no matter who won.

A modernization president, Vinicio Crezco won the election of 1985. All parties had promised not to undertake structural reform or tax reform. The new government favored non-traditional agro-exports. By 1987 this sector, along with other sectors favored by the government, sugar and cotton, had revived after a recession. 1987 tourist receipts tripled the 1986 receipts. Business's increased strength led it to confront government policies more directly. At the end of September the government published new tax laws, and business interests pushed public demonstrations and fomented a producer's strike. The army's loyalties were split, along with the news media's. All this destabilized the new government in 1988 and 1989. Business and government tried to reach an accommodation, but in February of 1988 the government broke off negotiation with the country's oldest and largest business group, the Council of Agriculture, Commerce, Industry, and Finance (CACIF), and signed a pact with the rival business group, the USAP, which included a 40% price hike on commercial and industrial electricity and a raise in wages, which met with encouragement by the US embassy and church groups. Military development projects received fresh funds, capital began leaving the country, and the US injected a $75 million loan to avert a liquidity crisis.

On May 9, the army attempted a coup. Repression and crime exploded, and the Minister of Human Rights resigned. In July, the price of coffee plummeted. Disbursement on a $120 million WB loan was frozen in July. In August, the money was devalued. Business began a tax strike. The government freed foreign exchange controls to gain a IMF loan. The guerrilla increased activity, and the government increased repression. The military's political war turned into a psychological war, and then into a dirty war, as assassinations increased against protest groups and common criminals.

Guatemala's good relations with the US under Reagan began to cool under Bush the elder, and pressure for peace talks increased, eventually leading to the peace talks in Oslo, Norway, in March 1990. Meanwhile, WB and IMF pressure led to neo-liberal stabilization measures that opened opportunities to new groups, especially finance capital, but that angered the agro-export sectors and undercut the military's development schemes in which the military would control sectors of the economy.

The neo-liberal model requires alterations in a nation's relationship with its citizens that are often painful and unwelcome. Most often they are imposed on a state in need of loans from the IMF or WB as a result of an international business recession affecting the price of a commodity or service that a nation exports, a drop in tax revenues, or an unexpected increase in government expenses, etc. Among the measures usually required by the international loan agents of a country in money troubles are trade liberalization, i.e., a reduction in tariffs or increasing access by first-world imports; fiscal austerity, i.e., decreasing the amount government spends; privatization of state-owned entities; labor market deregulation and flexibility; a roll-back of state intervention in the economy; a greater opening to transnational corporate investment; the elimination of price controls; export promotion, particularly of nontraditional items; and the establishment of  free-trade zones.

With the neo-liberal laws in place, non-traditional exports increase, funneling profits to that faction. While traditional exports such as coffee, cotton, bananas, beef, and sugar may increase in absolute value, their importance may decrease in relative value to the dynamic non-tradtional exports such as maquiladora production, tourism, and new nontraditional agro-export products, all of which are based on using a country's comparative advantage in cheap labor.

By 1995, conservative estimates placed the number or workers employed in the maquiladora industry at 235,000 for the 5 republics of Central America, including 80,000 in Guatemala. Maquiladora export earnings for the region as a whole amounted to $1 billion in 1996 out of the total regional receipts of some $7.7 billion. In Guatemala, 43% of the maquiladora plants in the enterprise zone were owned by local capital.

By early 1990 South Korea accounted for nearly 50% of all investment capital in the Guatemalan clothing maquiladora industry. The US Caribbean Basin Initiative allowed duty-free imports of these products. The South Korean government arranged for the air-freighting of entire factories to Guatemala, while Guatemala established free-trade zones, and the labor and tax laws necessary to insure a return on capital of up to 40% per year. The Guatemala clothing industry grew from 6 factories and 2,000 workers in 1984 to 250 plants employing over 50,000 in 1992. This is indicative of transnational state practice. This transfer of an industry from South Korea to Guatemala was required by the rise in the price of labor in South Korea, and was permitted by the similarity between the South Korea and the Guatemalan peasants: they are docile and they work hard. 75% of Guatemalan's clothing maquiladora workers are female, as they are more subservient than males, due to their patriarchal cultural upbringing.

A similar story could be told of the introduction of non-traditional agricultural exports in CA, with the additional complication that the NTAE's tend to displace farm crops for domestic consumption, rather than traditional agro-export crops. For instance, in Costa Rica, which has the area's most developed NTAE sector, food imports form the US went form 1,000 tons in 1974-75 to 235,000 tons in 1987-88, giving the US tremendous leverage when imposing structural adjustment programs and promoting capitalist agriculture.

Tourism is reportedly the largest industry in the world, having surpassed the oil industry in the 1980's. One estimate put the total economic value of the industry at $3.6 billion in 1996, or 10.6% of the gross global product, and calculated that tourism sustained more than 1 in 10 jobs around the world. Tourism is a labor intensive industry, attracting cheap, relatively unskilled labor as chambermaids, waiters, drivers, and so on, and made possible by the expanding labor pools of unemployed or marginalized worldwide. In the mid-1970's, 8% of all tourists were traveling from developed countries to the third world. This figure had jumped to 17% by the mid-80's, and 20% by the mid-90's.

Earlier I mentioned Karl Marx and Adam Smith.  Marx's socialism has seemingly had its day. Adam Smith, author of The Wealth of Nations, published 1776, and arguably the father of modern capitalism, is influential now as never before. According to Smith, the wealth of nations is composed of people and their ability to function competently in an industrial society. In his book, he formalized the division of labor, the basis of modern industry. In his day, industry was largely done by an individual craftsman with one or more apprentices who fabricated a product from start to finish, the apprentice becoming a master craftsman after learning the trade, often a matter of many years.

Smith's innovation was to divide the job into numerous small parts and assign each to an individual worker. This concept has revolutionized the world, as unskilled labor became the base of manufacturing, rather than skilled craftsmen.

With the digital revolution, communications around the world is virtually instantaneous, and the continued development of ever faster and more efficient transportation, i.e., jet aircraft and container cargo ships, together with product miniaturization, has allowed the division of labor to be practiced on a worldwide scale. Components of any item can efficiently be produced in several continents, and assembled in another, and consumed in another. As never before, competent low cost industrial workers are in demand. Subsistence farmers have, for the past 200 years, been forced off their land and into the cities to work in a factory, by any means necessary. I have the suspicion that CA revolutionary wars of the last 50 years are the result of subtle machinations of the already industrialized countries, the USA  par excellence, to foment the wars, with plausible deniability, that have driven so many working class and middle class people to seek safety and a better life in the developed world. The logic of progress at any cost and the devil take the hind most is here for the foreseeable future.

The wars of the ancient world were most often primarily for the capture of slaves, and secondarily for the extortion of tribute. Now it is to force workers to come voluntarily to the workplace. Tribute is disguised under contract laws that allow a rich country to despoil a poor country. Corruption is legitimized by calling it campaign contributions or speaker fees. Hilary Clinton was recently paid $400,000 for two speeches before a banker's group. New Money, finance capital, buying up the votes to overthrow Old Money, the petroleum industry.

Hopefully this brief overview of recent political and economic trends in the world will open you to a consideration of these propositions: Corruption is an integral and important part of every modern government; success in business is not only a product of hard work and talent, but also of a sector's ability to corrupt government; war in under developed countries is sometimes a result of manipulation of developed countries, for purposes of their own.

As mentioned earlier, the agriculture industrial jump is the great transformation of our age. Compared to that transformation, the New Money-Old Money jumps within the industrial age are mere hiccups,  a headwind for the declining sector and a tailwind for the advancing sector, which, if done right, pushed the whole of society forward.

Before the first spade was turned on the Erie Canal, my guess would be that the financial interests behind it had a guarantee in the form of a proposed tax law that would be passed, if and when said canal neared completion. I would guess that the overland cartage industry did what it could to stop, or at least slow things down. Various other canals were built, with a remarkable savings in the cost of transportation, and remarkable profits for those who made it happen. I feel that the story is the same for each major advance made. Before any substantial fortune is put to risk, an agreement is reached that if the new thing can be made to work as advertised, the government will make sure that it is profitable, often by guaranteeing it monopoly status.

Coming closer to our own time, let's look at some anecdotal evidence that I think may corroborate my story. Coming of age in the 60's as I did, I was very familiar with the culture of the so-called muscle car, which came straight form the factory with all the horsepower the market could bear. And just to make sure the boys of my ages were familiar with this product, the top 40 radio stations across the country were full of songs extolling their virtues. "My four-speed dual-quad, positraction 409," "Little GTO,you really turn me on, three dueces and a four-speed, and a 389?,  "I bought you a brand new Mustang in 1965, Mustang Sally". Memory fades, but the list was long.

Up until the 1973 Arab Oil Embargo, gas could be had in the 25-50 cent range, and no one paid a whole lot of attention to the 7-10 mile per gallon behemoths parked in every driveway. When the price of gas reached $1, and then $2 a gallon, people began buying Japanese cars that got 15-20 mpg. Eventually Japan dominated the US market, and Detroit began its descent into bankruptcy. The inattention and ossification of the Big Three US automakers was decried and bemoaned but still the gas-guzzlers came off the production line. What was going on? I was really confused when I read that Ford Motor Company owned a factory in Europe that produced a nice little fuel-efficient car that sold well in Europe, but that Ford could neither manufacture nor sell that car in the US, by law.

But the pieces were coming together. A key piece was the news the Exxon Mobile was, by far, the largest single tax-payer in America, paying some 20% of America's collective tax bill. But I had always thought the rich paid no taxes. I recalled reading a book in the 1970's about the New Money-Old Money struggle, its thesis being the New Money oil interests had just wrested control of the country out of the hands of the Old Money manufacturing interests. The book was The  Yankee and Cowboy War, by Carl Ogelsby.

But it was in reading Transnational Conflicts/Central America, Social Change, and Globalization, by William Robinson, source of much of the information in the earlier part of this paper, that I got my "a-ha" moment. If Big Oil was in control of the US government and its tax-writing apparatus, it would make sense for Detroit to make cars that got 7-10 mpg, for as long as anyone would buy them.  The government got its cut in the 10-15 cent tax on every gallon of gas sold, the road tax, used to build the roads that the cars drove on, while they burned the gas that made the profits that paid the tax. Everything intertwined to ensure Big Oil made the profits that kept everything going. One out of six jobs was linked to the auto industry in the 1960's. Those jobs all went to Japan, along with the Big Three auto makers? investment capital, all of them being major (30-40%) owners of all the Japanese car makers.  New money, Big Oil, driving old money, manufacturing, out of the country so that Big Oil has the unimpeded ability to ?reform? the economy as it sees fit, and so become the new Old Money.

The same bands that promoted muscle cars were catching the surf wave, and encouraging the youth of America to come to the only place with surf, California. California was, not coincidentally, going through an industrial boom, centered in LA, a major center of the surfer's cult, and home of 1 out of 5 US engineers at that time. It was their children who were surfing and driving the muscle cars, both pastimes being rather expensive, well beyond the means of anyone rolling in from the plains, and getting a job making war material for our misadventure in Vietnam.

I haven't followed music much since those days, but I do recall some ten years ago, when Sex in the City made such a big hit, and on TV two wild and crazy middle European immigrants were living in a Manhattan apartment that must have been at least 1,000 square feet, with good views of the skyline, on their combined minimum wages, working in a hardware store. I wondered who was behind that myth.

Who else but Wall Street, a promising contender to take away Big Oil's tax-writing monopoly. Behind every stock broker there are 1,000 minimum wage jobs serving his needs. In any event, every generation lives out its own illusions and learns, or doesn't learn, its own lessons. My generation went willingly to California, and unwillingly to Vietnam. This generation, I suspect, has gone willingly to NYC and unwillingly into debt peonage. I suspect most of the Occupy people wanted to be on the inside looking out, rather than on the outside looking in. I suspect that Wall Street was behind the Occupy movement, hoping to decrease the salaries it paid to its brokers, lawyers, etc. I suspect that the Democratic Party has been in a foul mood since Big Oil ousted manufacturing as the premier money earner, and so tax payer, and campaign contributor and speaker-fee generator, and the Republicans have been getting the seats on the board of directors, and the consultantships, and the lobbying jobs after they leave DC.

I suspect that this present economic crisis, created by the collapse of the housing market, is a result of the Democratic party force-feeding the banking industry loans that the banks really didn't want. Toxic loans, sub-prime and liar loans, Alt A, pretty much guaranteed to default during the first recession. Jimmy Carter decided everyone should have a home, whether he could afford it or not, and the banks went along because they knew the loans would eventually end up with Fannie Mae and Freddie Mac, two government supported enterprises, with their implicit government guarantee, and every Democratic president forced more loans into housing until buying a house was cheaper and easier than renting.

In my opinion, the Democratic Party is at the base of every banking crisis the US has passed through. I've looked for and found evidence proving, to my satisfaction, this theory. In my opinion, Old Money-New Money is the best way to look at DC I've found. I suspect the Republican Party has its own skeletons in the closet, that it tells its big donors in private what the score is, that neither party wants to admit that government guarantees private profits at tax payer's expense. Amazingly, I have nothing against the system, it seems like an excellent way to run things.

Predictions: it seems to me really strange how closely today's events are paralleling events of the 1930's Depression. This makes some sense if the US government, ruler of the whole world, is intentionally following a playbook that leads up to war. War, the continuation of politics by other means. The war looks to be with China, arguably the only contender to a New Money status. Quite possibly threats will persuade the Communist Party to back down, and allow China to become a player in the game whose rules we control. With a free press, freedom of opinion, open trade rules, and all the neo-liberal Washington consensus paraphernalia the US set up when it became the new Old Money, following WWII. This would be the end of what is left of Communism in China. Good riddance.

The EU was at one time a likely contender for the new money position, but the US induced recession of 2005 predictably threw that top-heavy, bureaucratic, welfare state into a tailspin it has yet to come out of. Only after implementing the neo-liberal Washington consensus restructuring measures will it be fit into its place within America, Inc.

On the home front, it seems that just within the past month or so (from Dec 2013), the Democratic Party has thrown in the towel on its attempt to push out Big Oil and push in Big Banks, The fracking revolution, only possible with US high technology, promises to lead to 10-15 years of stellar growth within the US economy. Manufacturing will come home for the cheap oil and newly competitive labor market.  After 30 years of government hostility, the blue collar labor movement is moribund, and the American worker is competitive again. Perhaps the US's best days are behind it. With the return of manufacturing, the Democratic Party should feel free to return to its old manufacturing home to promote a New Money prospect. When fracking runs dry, manufacturing could take up the top Old Money spot again.

This week, Congress passed the Volker Rule, which more or less reinstates the Glass-Stegall Rule, another 30's parallel. Both these rules prohibit banks from gambling on Wall Street with federally insured money. The Volker Rule is 900 pages of the 3,000 page Dodd-Frank Banking Reform. It won't be effective until 2015, but the handwriting is on the wall.  Republican revision have caused Barney Frank to take it to court, but that queen of tax writers has probably bedded his last pretty-boy banker, at least on the tax payer's dime. Corruption at its finest. I predict the next president of the US will be a staunch Republican with oil credentials. Maybe Dick Cheney will run. A warlord of the old school, with an intimate knowledge of Big Oil's wants and needs.

As we near the year's end, word comes that Max Baucas, (R Montana), head of the Senate Tax Reform Committee, has been offered the ambassadorship of China. His place on that committee will probably be taken by a Democrat from Louisiana, an oil state. What can this mean? Has Obama thrown in the towel, appeasing Big Oil by arranging to put someone under their thumb in as head tax writer, yet a Democrat, so not a complete loss?

And is it just a coincidence that talks have started on raising the federal gas tax for the first time in 20 years, and actually using the money to fix the highways, as Big Oil intended, instead of siphoning it off into mass transit.  Mass transit, a stake in the heart of Big Oil, but a billion dollar bond-writing, taxpayer insured, promised land for Wall Street. Cancel those high-speed trains from LA to San Fran, and from DC to NYC, red meat tossed into the deep blue heartlands. Use that money to finish the Keystone pipeline, taking Canadian tar sand oil down to Louisiana, putting the refineries back to work in the home state of the new tax writer, and putting the US back into the business of exporting value-added commodities, instead of neo-liberal financial instruments. Globalization will survive, if not thrive, as government largesse flows in other directions. Chris Dodd's $2.5 million per year lobbying fees will shrink, but I for one won't feel sorry for him. Obama's shift out of the Middle East and into the South China Sea makes sense, letting the Shi'a and Sunni work out their dynastic disputes among themselves, and letting India and China figure out how to keep the Straits of Hormuz open, while the Fifth Fleet makes sure China gets enough of the South China Sea oil to keep it off life support, but not enough to get fat and sassy.

Meanwhile, closer to home, Hugo Chavez's Bolivarian revolution fizzles to a grinding halt, and Mexico rewrites its constitution, so El Norte can once again start siphoning oil revenue, instead of the best and brightest, out of those two state supported dinosaurs. Will they ever learn to drill horizontally in 10,000 feet of water without US tutelage? Will they ever figure out that private corruption is much more efficient than state supported corruption? Who, but the US, could keep so many balls in the air at the same time, while eating from everyone else's lunch wagon? Give Washington, Jefferson, Hamilton and the rest of the Novus Ordo Seclorum crowd credit, progress at any cost and the devil take the hind most.  You'll never stop corruption so put it to work for you. They figured that out that while the French competition was cutting the heads off its best and brightest, probably egged on by Benjamin Franklin.

Perhaps the most devastating blow Wall Street could land on Big Oil would be the charge of fueling global warming. Coming from the other side, Big Oil would like to convince the independent voter than the US national debt is strangling not only the US's current prosperity, but its prosperity for generations yet to come, and that no bank should be too big to fail. Both positions are presented as life-and-death questions, and they are, for the 1% in control of the levers of power and the 5% trying to wrest them away. I don't have a dog in that fight. Both sides want me to go to work, pay taxes, and buy their product, whether it be a gas-guzzling SUV or an interest paying student loan or credit card. I say a pox on both their houses.

Obviously, this would be a very different world without oil and without banks. I depend on both, but I try not to be overly dependent on either. I can imagine a world without oil (or ultimately, machines), and I can imagine a world without banks (ultimately, money). What I can't imagine is how we would get there from where we are now, short of some cataclysmic apocalypse. Both those genies are already out of the bottle.

We are in the classic prisoner's dilemma of game theory, we either hang together or hang separately. Any country that eliminates oil or banks will find his lunch being eaten by those who don't. If we cooperated on a worldwide basis, we could throttle back on out consumption of natural resources to a level that is fashionably called sustainable. Good luck on that. We cooperate on the surface, and compete to the bone. Competition is voluntary, but all cooperation comes out of the barrel of a gun. Money trickles up, poverty trickles down. All power to the corrupt, and the devil take the hindmost. But I can't see a better way, given human nature. Socialism is for saints or slaves.


Fritz the Cat