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Renegade Economists Podcast 213

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Author Christopher Ketcham hits the forces of Monopoly Capitalism with an overview of how the market system became a host for greed.

www.realestate4ransom.com

Host Karl Fitzgerald: out of the 25 largest cities in America, New York is the most unequal for income distribution. If it were a nation it would come in at the 15th worst amongst 134 countries ranked by extremes of wealth and poverty – a banana republic without the death squads – so writes today’s special guest Christopher Ketcham. He’s a regular writer in Orion magazine.

Yes, today’s special guest is Christopher Ketcham – the next up and comer behind Matt Taibbi in terms of investigative journalism within the world of monopoly capitalism we are enduring. He writes for Vanity Fair, Harpers and GQ and is currently writing a book about secession movements in the north east of the (United) States. He really rose to prominence with an article called The Reign of the 1%’ers that buzzed around the internet in the lead up to Occupy Wall Street and thereafter and he’s also got another couple of killers called “The New Dog in Town” and the “Curse of Bigness”. I encourage you to find them on the Orion website.

I started off by asking Christopher about the writing process and what is the most rewarding facet of it?

C.K: I tend to prefer hate mail because then you know you’ve actually woken people up and sparked a nerve and done some sort of trouble making out there. I mean this article for Orion – the Reign of the One Percenters was written almost entirely for my daughter who’s 16 and for whom, I think the, future is quite bleak given the current situation – given the control that the 1%, the very rich, the oligarchy has over her fate, and my fate and the fate of the political economy. So the satisfaction I had in that article was really just writing a down and dirty polemic against the oligarchy.

And the article opens with her – she and I are taking this tour through the Wall Street area back in the summer of 2010 and I just decided “alright Leah (her name is Leah) – Leah lets take a tour and look at the various institutions of socio-pathology that really run this city”. So we walked by the AIG building, the Goldman Sachs building, or at least its ancillary headquarters in the Wall St area because you know a lot of these big corporations, these big investor banking firms have moved out. There not based entirely in Wall Street. They’re up in the Avenue of the Americas, they’re in New Jersey but there is still enough concentration down there. For example Bank of New York Mellon at 1 Wall St., Duetsche Bank at 60 Wall St., so we took the big tour and, walked by the NYSE, walked by the Federal Reserve where the criminality starts. I was trying to give her a sense as a 15 year old, I was trying to give her a sense of who really runs New York and who is behind the money power that really runs things in this country and, you know, generally, world wide.

K.F: and did she have a filter that she could empathise with what you were discussing. Did she study economics or history or any of those frontiers at school?

C.K: not really – the best part was that we started coming up with all sorts of really venomous invective for the various characters we were seeing. We were just engaged in open satire of the Wall Streeter’s who we were observing, the almost charactertures of wealth and privilege. So it was more a matter of satire and fun than of deep learning – if you will. But she has in her school studied the French revolution, the Russian revolution and the American revolution and understood that where there’s too much wealth concentrated in too few hands that you will have the people rising up and guillotining the very rich.

K.F: its amazing though that during a time when everyone’s after the elusive dollar it seems that very few are studying it (economics) as part of the syllabus at high school and I just wonder whether maybe out of this growing association with inequality there will be a pushback at high school for more kids to study some form of economics that is based on reality.

C.K: well the whole field of economics, what’s called neo-classical economics today is based on un-reality. It is based on the idea that there is no free lunch in any economic system. That for example the financier, the hedge funder, the usurious banker all contribute to society in some fashion, some productive fashion, whereas classical economists – old school progressive economists – throughout late 18th century and throughout the 19th century understood that there were all kinds of free lunch to be had in capitalism and the point of a progressive society was to enact laws that prevented those people from parasitically benefiting from society or from the capitalist system.

So what we have today is we have an economics curriculum in the high schools and in universities – more in universities than in high schools – that basically teaches that parasitism is A ok – parasitism is the way to go. And that’s why you have all those business schools, the major business schools in the United States, producing all these kids who want to go straight to Wall Street to make a billion bucks doing nothing. Basically,you know, pressing a couple of buttons and enjoying incredible profits while actually adding no productivity to society or producing no real goods or services.

K.F: And in Christopher Ketcham’s landmark article – the Reign of the One Percenters he writes “the 1%’er in his Wall Street tower creates value by tapping on keyboards and punching in algorithms. He makes money playing with money – manipulating abstractions. He manufactures and chases after financial bubbles and then pricks them. He speculates on mortgages, car loans, credit card debt, the price of gas that keeps the real economy moving, the price of food that keeps the labor pool alive, always hedging his bets so that he comes out ahead whether society wins or loses.” And that was a killer line for me – I said, right, I’ve got to get this man on the show. So let’s go back to the interview with Christopher Ketcham.

C.K: so if we were to adjust, to transform the way economics was taught I think it would go a long way towards changing the viewpoint of the younger generations in terms of how they see Wall Street, how they see big capital, big corporations, etcetera, etcetera.

K.F: and so much of this modern era is talking as if we have reached new levels of economic discovery and what you’re really telling us there is that 100 years ago our forefathers knew a lot more and were keeping an eye on what you have termed as the Gilded Age. Could you perhaps take us a step back in time to that era and what was learnt in the 1800s?

C.K: well what happened after the civil war in the United States is that there had been enormous increases in government spending and enormous expansion of the industrial plant – infrastructure was expanded – and at the same time you had the failure of the regulatory apparatus to keep up with technological increases or technological innovations and innovations in finance and banking. So the industrial infrastructure and the transportation infrastructure of the United States was captured by monopoly corporations.

Corporations themselves were under the law given all the rights and privileges of the citizen, under the fiction of corporate personhood, and so you had this monopoly power of big money over the political economy of the United States which accrued more and more wealth into the hands of the few who were then able to determine economic policy from top to bottom in the United States. Corporations were acting as states, as governments, as private governments that were liberated from public government. So the Gilded Age was really about the hijacking of the country by private corporations and by the very wealthy.

So what happened in response? The progressive era rises up. You have the populist movement in response. You have the campaign for the mayoralty of New York by Henry George in 1886 who was one of the earliest of the progressive voices. You have the Populist party of 1892 and 1896 vying for the presidency as a 3rd party. You have all of these populist, progressive movements rising up saying “no – we have to reign in the power of the monopolist, reign in the power of the corporation, reign in the power of the very few – the oligarchy – and free the market place so that it will be a level playing field. So that we can all compete freely” and they called this radical republicanism; they called it democratic capitalism.

This lead to some amelioration of the problems of corporatism – the graduated income tax for example. The corporate regulatory apparatus was put in place with the interstate commerce commission, and with various anti-trust acts – the Sherman anti-trust act, the Clayton anti-trust act, etc, etc, and this was all through the period let’s say, 1890 – 1914/1920.

You have huge, aggressive, disruptive labor movements rising up with the Industrial Workers of the World, with the Congress of Industrial Organizations in the 1920s and the 1930s that seek to basically say “alright big, corporate America we’re going to disrupt your operations until you play fair”. And so these disruptions lead to the reforms of the New Deal – you have social security put in place, you have all sorts of systems put in place to protect the citizen against the depredations of corporations.

And then what happens? Well you have a period between 1945 and roughly 1975 where the country is the most equal its ever been. The incomes equal out, more or less, the very rich are heavily taxed. There is still a growing and continuing trend during that period towards increasing size in corporations, towards corporatism – the marriage of big government and big corporate power – but there are regulations in place that prevent corporations from going whole hog and just becoming savagely predatory in the market place.

All that ends with the election of Ronald Reagan in 1980 when you have the beginning of a long period of deregulation which basically means that the government steps into the marketplace and regulates the marketplace to benefit corporations against the interests of the citizenry. And this is a period, and rather this is a trend that continues irrespective of Republican or Democratic administrations. It begins with Ronald Reagan but it really accelerates under Bill Clinton – the great traitor to the Democratic Party, well to the old school, democratic, populist, roots – the populist, labor roots of the Democratic Party.

Bill Clinton was the corporate whore par excellence in the Democratic Party. Under Bill Clinton there were more mergers than ever in the history of the country. That is you had larger and larger corporations establishing larger and larger monopoly control over markets and the political economy. You had skyrocketing income inequality that begins under Bill Clinton and then of course the trend continues apace under George Bush, George W. Bush and now under Barrack Obama. So we are now in a new Gilded Age in a sense that we have returned, we have regressed to the point we have lost a 100 years of political, economic, progressive thought in action. That is we have dismantled all of those various apparatuses that had been put in place by the progressive movement to reign in the power of private, corporate governments.

K.F: and so what are some of the frontiers of monopoly you are seeing develop now? Where are the so called entrepreneurs pushing this control of independence, that’s essentially what’s been locked up is our ability to look after ourselves and our community on each and every front and we’re told that this monopolistic power is a good thing. Are there any new developments that are things people should be looking out for? We’ve seen our DNA’s start to be privatized – we’ve got all sorts of issues going on with electro magnetic spectrum, and pharmaceutical buy-ups of indigenous plants around the world are going full steam ahead. I just wonder over there in America, are there any new whisperings about that we should be looking out for?

C.K: Google. Google is one of the most dangerous monopolists out there because Google is increasingly securing its place as the gatekeeper and possibly the toll keeper for the internet. I mean when people go on the internet where do they go? They go to Google.

Google becomes an informational gateway and just take the monopoly that I think is developing in email … in email systems like Gmail for example. At OWS I’ll go around, I’ll be interviewing people and I’ll ask “so what’s your email?” and I’d say that 75-85% of all the people – these activists, these protestors – radical dissidents who are operating at OWS and participating in the marches etc, etc – they’re all on Gmail. Well, Gmail, it’s known that you have no privacy on Gmail and Google can read your email, can read the contents of your email at anytime.

The emails that you write and receive through Gmail are all in the end the property of Google. They sit in the Cloud in some remote computing location and you don’t actually download them to a computer where you can hold on to them and consider them yours, consider them your private data. So that’s an interesting monopoly that’s developing.

Amazon is also a huge monopolistic power on the internet which is exercising nefarious power over the marketplace and then all the various elements that you mentioned earlier whether it be GMO’s, whether it be crops, whether it be seeds, the patenting of genes, you name it, corporatism has run amuck.

Corporatism is a wild, rabid, predatory creature that is savaging the planet with its bloody jaws and something has to be done.

K.F: do you think following this extended recession/ depressionary period – will property bubbles be seen as a dangerous thing or are they just going to run onto the next bubble as can be imagined with these poor economic policies. Are they trying to enforce this lost decade? Is this what you’re seeing? Because from down here in Australia we’re still doing okay in our economy but were seeing all of these bail-outs as policies extending the recessionary forces and to think that austerity is the way forward I just don’t know how much pain they’re trying to inflict on the 99%.

C.K: well the way forward is to destroy the banks. The way forward is a debt jubilee. The way forward is to end the control of private institutions over money supply. The way forward is to create public banking systems to control our currency through the public – not through debt backed money. And barring that, barring a truly revolutionary transformation of our monetary system, we will continue to have bubbles because that is all we produce now in the west. We produce bubbles and that is how our economy survives. It survives entirely on leveraged investments … that then drive up asset prices… and so then you have more people leveraging themselves in order to buy more assets. So this is what you saw in the internet bubble of the late 1990s, that’s what you saw in the bubble that followed – the housing bubble of 2001-2008, so we will be seeking as many bubbles as possible.

You don’t know how many people I’ve talked to that say housing prices have to go back up – …. they have to go back up as “it’s the only way I’ll survive, all my money is tied up in property – all my money is tied up in the idea.” And these are people are good old Americans – middle class Americans – who invested in housing and considered it to be their means of retirement.

They say “I need this house to go up in value in order for me to survive”. Well for it to go up in value to the extent that they want, to the extent that they need to survive, they need another bubble, they need another housing bubble. So everyone’s implicated. Everyone’s tied up in this monstrous system. And the only way to end the monstrous system is for a calamitous transformation of that system and that would be very bad. That would be chaotic. And yet sometime you’ve got to have some chaos in society. Sometime you’ve got to have upheaval. We need upheaval. We need a revolution. We need this monstrous system to be destroyed in order to move forward.

K.F: so I dare say you’ve got some veggies growing in your back garden?

C.K: nah man. I mean I’ve got a couple of guns. I’ve got a bunch of guns. You have veggies growing in the garden? I’ve got a couple of veggies. I’ve got garlic – some garlic to keep away the vampires.

K.F: well it’s a massive, massive decade or so we’ve got coming up because were just really dealing with peak debt here and peak oil, peak demographics, climate refugees – its all coming our way. Do you think that just reforming the public banking system is enough though? We’re talking huge systemic change here.

C.K: its just one element …. that would have to happen. Because, look, in a system where money is backed by debt, that means you have to have constant growth in order to pay off the interest accrued on that debt. So you borrow 10 bucks. The 10 bucks is brought into the money supply at an interest rate of 2 or 3% or whatever. So the actual money that must be paid back compounds. And you have to continue to grow and grow and grow. That is you have to have this constant growth economy. A constant growth economy implies constant use of resources – increasingly scarce resources.

What we have today is an economy that is both delusional and suicidal. Delusional in the expectations that it can grow forever and suicidal in that we know it can’t grow forever and yet we continually say we need to grow – we want to grow. So you’re also talking about a societal transformation. A transformation which people are no longer engaged in the consumerist hallucination: no longer sickened with affluenza – with this desire for unabated and unhinged affluence. You know, the continual amassing of possessions that you really don’t need.

Then you’re also talking about a transformation of massive brainwashing and propaganda systems inherent in Madison Avenue in the promotion and publicity relation complexes which are all dedicated to deceitfully… basically lying to people in tricking them in to buying things they don’t need – selling sugar water to children. These are sick, demented, degraded, degenerate industries – I don’t see them going away anytime soon. So again were talking about transformations …that maybe are so quixotic, so idealistic to consider that they will never happen.

One of the guys that I got to know at OWS over weeks and weeks of just going there every night and just hanging there and talking to people was a guy called Jeff Smith – formerly in advertising – totally a clean cut dude. Here’s a guy who spent 15 years, as he put it, “selling sugar water to children” and repenting of it and finding now that he had worked for as he put it – quote – the most evil industries. So now he’s down at OWS fomenting disruption and marches and helping to organize the media working groups – so called – that engage in outreach with people like me. So you have the entire spectrum down at OWS in Zucotti Park in Lower Manhattan.

K.F: were talking to Christopher Ketcham, author of Reign of the One Percenters, and Christopher, in closing, can you tell us in about the next level of development for the OWS movement. What has been happening down there? We’re seeing that there’s plenty of goodwill still continuing – meetings going on in various public buildings around the city. But what are you feeling is going to happen once this winter is over in the north?

C.K: well, you know, November 15 rolled around and the park was raided and many people were assaulted and pepper sprayed. It was a bloody scene. It was violent and there was some talk that that was the end of it. That OWS with the scattering of the encampment at Zuccoti Park that that would also be the scattering of the movement. But in fact it rebounded astonishingly. Two days later, on November 17, OWS organized with a labor coalition the largest march it has ever organized to date – 32,000 people marched through lower Manhattan and across the Brooklyn Bridge.

Forty labor representatives in protest of the violent crackdowns of police in New York and elsewhere across the United States were arrested. Now that hasn’t happened since the 1930s. Labor has not come out in a cross-trade coalition to support each other – to support a political movement. That is to support radical political change. So you got a labor coalition coming together with OWS.

OWS now has an office and its got a central core of organizers. Its got lots of support. They’ve got lots of money. They have got their encampments that are still surviving and fighting off the police all over this country whether it be in LA or in Oakland where there’s been a lot of violence.

So you know the movement is not over. And in a sense the destruction of Zuccoti Park, which had become the symbolic centre of the movement, handed to OWS the moral high ground. And, so in a sense, it was a tactical error of huge proportions on behalf of the Bloomberg administration. So I see the movement growing. I see it building coalitions. I see it turning into I’m not sure what, but it will have some sort of effect on the 2012 elections.

K.F: and what would you say to Australian listeners in respect of the northern hemisphere at the moment?

C.K: I would say that the enemy is in NYC and the enemy is the 1% and they’ve got to be taken down – peacefully. That’s what I would say. And the 1% is everywhere.

The 1% is a global elite that want to steal, and plunder, and privatize and sequester the wealth and resources of this planet unto themselves and I think we have to band together, worldwide, and stop it. Stop it so that the world, the planetary commons can be shared among all and so that we can have some sort of dignified survival in the future, you know, as a race – as a human race: as homo sapiens. That’s my message.

Adam Schwab wrote up our fourth report on speculative vacancies in Crikey yesterday.

Shortage or glut? Feast or famine? The question of whether Australia is suffering a housing shortage continues to be hotly disputed, with the real estate and construction lobbies arguing a desperate shortage exists, while other independent bodies, such as Prosper Australia, disputing the notion of a shortage.

The housing glut argument is led by Earthsharing Australia, which last year produced a report suggesting that the vacancy rate in Melbourne (until recently, one of Australia’s hottest property markets) was about 5%. In fashionable suburbs, such as East Melbourne or the Docklands, vacancy rates exceeded 8%. Earthsharing’s report, which was based on water statistics provided by City West Water and Yarra Valley Water, suggested that more than 60,000 properties lay vacant in Melbourne — substantially more than the reported vacancy report suggested by the real estate lobby.

While not a perfect measure, there is a degree of commonsense to Earthsharing’s report. Rather than attempt to guess whether there is a housing shortage based on economic assumptions, the group simply checked whether to see water was being used in a property — it is not unreasonable to suggest that if no water is being used for a length of time, the property is unoccupied.

That view was contrasted by a report released by the National Housing Supply Council, which echoed the sentiments of construction groups and claimed Australia was in the midst of a housing shortage. In fact, according to the council, the shortage actually increased by 28,200 to 186,800 during 2011. Even worse, the alleged shortage is forecast to widen to 640,000 within 20 years.

The National Supply Council is a strange beast — formed by the federal government in 2008, the organisation is a strange mix of academia, property developers and the even respected Saul Eslake. Included in the council are Mark Hunter (CEO of Stockland Residential), Nigel Satterley (property developer and BRW Rich List member), Ruth Spielman (executive officer, National Growth Areas Alliance) and Simon Norris (Clarendon Homes Queensland).

The council’s rationale for deeming a housing shortage is worth considering further. That is because rather than look at actual demand for housing, the council uses “underlying” demand. This leads to strange results.

Last year, the population of Australia increased by 320,000 — this was through a combination of immigration and births (less deaths). This figure is sourced from the ABS, so we can assume it is about a correct a figure as we can locate. According to the council’s report, there were 131,000 dwellings added last year (this figure is lower than what other sources claim, but we’ll accept it).

The council’s own report noted that there are 8.7 million households in Australia — with a population of 22.4 million, that means there are 2.6 people per household. Using fairly simple arithmetic, that means with 2.6 people per dwelling, and 131,000 new dwellings, enough housing was built last year for 340,000 people.

But wait, the population only increased by 320,000 people — that means, despite the council’s claims, there is a surplus of housing being built (even with dwelling construction being less than forecast). This appears to contradict the council’s finding that the shortage increased in 2011.

The council claimed that “on the demand side, at any given point in time underlying demand may not feed through directly into effective (actual) demand” — basically, what that appears to mean is that while there isn’t really a shortage, it will make some assumptions that allow a shortage to appear.

Later, the council noted that “the level of underlying demand is driven mostly by migration and other demographic factors”. Essentially, it appears the council is claiming that demand may increase in coming years (even though immigration levels are falling, rather than increasing), and that is why a shortage exists. The fact that a surplus of housing was built last year is disregarded.

More mysteriously, the Supply Council also claimed that “there were about 8.7 million households in Australia in June 2010. The number of households is projected to be 12 million by 2030, representing a net increase of nearly 3.3 million households between 2010 and 2030″.

This alarming forecast again doesn’t appear matched by recent facts.

Based on household numbers, the council is predicting an Australian population of 31.2 million in 19 years. That’s an increase of 9 million from the current level. The problem? That would require Australia’s population to increase by 473,000 per year — 42% more than the population increased in 2011. In fact, that’s a higher population growth rate than Australia has ever recorded. The claim is more difficult to justify given that Australia’s population growth and migration is slowing after spiking in 2008 and 2009 (see table below).

House prices haven’t increased because of increased demand from migrants outstripping dwelling construction — rather, prices have risen because bank lending has created false demand. Supply factors have played little, if any role in the recent house price growth. As soon as bank lending is restricted (and this is happening already), it is likely the illusion of a supply shortage will disappear. Just like what happened in Japan in the 1990s, or California and Ireland after the recent financial crises.

A clip taken from our film Real Estate 4 Ransom.

For those visitors from this weekend’s Domain article, feel free to read this or this. Listen here.

Renegade Economists 206

Listen to the podcast weekly, broadcast from the almighty 3CR.

Broadcast Oct, 26th, 2011

K.F: Let’s have a chat with Yanis Tziligakis. He’s a New York based academic – he’s got a bachelors, a masters, and a phd in the field of physics – he’s now realized he’s got to get his head around economics and he’s headstrong into it, in the last 3 years doing some really good stuff on creative commons. We started off talking about Jeffrey Sachs’ new book. He was off to see his speech earlier today. Sachs’ new book is called the Price of Civilization. Anyway let’s get into this right now.

Can you give us a broad brush overview of the Greek economy? How much money do they owe? What’s the next tranche of debt they’re struggling to gain finance for at present? Set the scene for us.

Y.T: the level of the Greek debt is about €350 billion but of course that’s sensitive to the interest rates. Now Greece got about €110 billion bailout from the European Union and this is channeled- it’s been given to Greece in installments so this is exactly what the current problem was because Greece is supposed to be fulfilling certain obligations for each installment to be handed to it. Now as you can understand the problem lies in that those expectations that the Greek economy has to be fulfilling every time the new installment comes due to be paid out is that they are unrealistic. Or let me put it they are overly optimistic.

The Greek government thinks that they can target their deficit by austerity but at the same time losing track of their income – the tax revenues keep shrinking because of the austerity. It seems to me that the battle of tax evasion which is the main affliction of the Greek economy, if not of most of the economies around the world, that’s the battle that is impossible to win without international cooperation and that’s what Greece is lacking right now.

K.F: How do people evade their taxes in Greece? We hear a lot of stories of corruption going on there but tell us some of the stories you’ve heard of how the social contract in Greece is somewhat different to most countries, where only fools pay their taxes.

Y.T: I think the problem of tax evasion is not a moral problem. I’m against this corruption nuance that’s been passed around and I don’t think tax evasion is a corrupt act. I think it’s an act that makes economic sense. It basically shows that the citizens do not trust to give their money to the state. So, actually the Greek citizens have withdrawn their trust from the Greek government way before the markets sniffed something iffy in the Greek economy. Now it’s sort of a vicious circle of merry-go-round.

Greeks are very entrepreneurial people. 80% of the work force are entrepreneurs and only 20% are public servants so that’s another defamation that Greece has been afflicted with that it’s a country of an overgrown public sector – overgrown, overpaid and basically an inefficient public sector . That’s not actually true.

Greece is actually on the bottom tier of the European Union as far as size of public sector workforce and the size of its salaries that are devoted to the public sector. So the tax evasion has a very interesting nuance that actually nobody has picked up yet. The nuance is this – if the Greeks were simply tax evading, Greece wouldn’t have a problem because Greece would have been shrinking its economy and the cost of living in Greece would be going down if the Greeks were simply exporting their money overseas but that’s not really what is happening in Greece.

The money gets evaded to offshore tax havens and mattressed to places like Switzerland, the Caymans – Greeks are champions in offshoring – and the money comes back to the country untaxed – inflating real estate prices – which affects the overall cost of living and the cost of doing business. So that’s how Greece gets doubly hurt by tax evasion.

K.F: Tell us about the size of the Greek property bubble through the 2000s – how high did it grow?

Y.T: Greece’s real estate index inflated from the years 1993 to about 2008 – it inflated about 225%. So Greece has wealth – but it is under the mattress we call “slow turnover yielding capital”. That is called, in common parlance, real estate. Now the tragic-comic aspect to this is that offshore companies hold the bulk of this real estate and they artificially make Greece expensive for its own citizens.

K.F: Phenomenal – and then the property tax system in Greece has the curse of taxing the improvements like it does in so many other countries, so I hear there are lots of unfinished houses with steel turrets poking out of the roof as if the house isn’t really finished (only finished houses pay property taxes on the improvements). Is that one of the common sights around Athens and so forth?

Y.T: The common sight in Athens – but I haven’t visited for a few years – but a number I’m going to give you, Karl, is that a few months ago they had about 200,000 vacant properties – lets say available for sale or rent – I mean that’s an amazing supply of housing, however, the ratio of wages and pensions to rent has been constantly decreasing. In other words it becomes more and more unbearable to come up with the everyday living expenses especially for people who are getting unemployed and especially for pensioners.

Everybody’s talking about unemployment relief and extra relief to the pensioners but nobody can see that an immediate relief, which would be of no cost to the budget of the government, is by taxing rents and thus forcing them (house prices) down.

Another impact of the high rents is also on Greek businesses. About 1000 Greek businesses outsourced themselves – like they leave the country to go across the border – it’s a similar situation between the United States and Mexico. Its almost like it reaches the realm of the tragic-comic in Greece because it looks like Greeks keep shooting their own feet but they don’t seem to realize they are doing that. And it’s tragic for all these Greek companies that Greece is too expensive for them but Bulgaria isn’t. That’s the effect of high rents of an inflated real estate market which affects both workers and businessmen – it affects both labor and capital.
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David Smiley

David Smiley is the author of Crumbling Foundations and Third World Intervention – A New Analysis

Revolutions usually start with the violent toppling of some hated figurehead, for example the French Louis XV, the Russian Tsar or some recent Middle Eastern despot. Revolutions usually finish in confusion. This is because, after the smoke and confusion of battle, a hastily patched up government may have given little thought about what comes next. And so, unless the underlying causes of revolution are carefully examined, then important opportunities for reform may be lost, and the revolution may not be successful.

In these articles I will examine a number of revolutions, look at some of the opportunities that were lost, and draw some conclusions. But first, how do we define revolutions?

Classical Marxists saw revolution as the violent anti-capitalist uprising of an urban proletariat. But the urban poor in Paris and St. Petersburg had fled there from rapacious rural landlords, then to be fleeced by rapacious urban landlords. Even today, in the slums of Rio or Mumbai, most of the proletariat would identify the oppressor with the rent collecting slumlord or protection racketeer round the corner rather than some conceptual capitalist. Marx would not have recognised today’s slum dwellers, without factories, workshops and work, without capitalist bosses, in a muddle of informal and criminal activities far beyond class mobilisation. Finally, since I wish to include some revolutions that have been non-violent, or simply evolutionary, I will therefore take revolution to mean any major socio-economic transition.

I must start with a few simplifying assumptions. I will test each of these against a number of revolutions. Where these assumptions do not fit I must explain why. Here, then, are my preliminary assumptions. Revolutions occur when relative deprivation becomes intolerable and some window of opportunity opens. Whether violent or non-violent, the focus on a king, a dictator or an occupying power prevents clear thinking about the powerful agencies that prop up this figurehead.

In a country sliding towards revolution, one of these agencies may control capital assets, collecting monopoly rents. A contemporary example is the Egyptian military. Another agency, a network of absentee landlords and slumlords, collects the land rent. Contemporary examples can be found in Kolkata, Mumbai or in any Latin American city. And a third agency controls the extraction of natural resources, collecting resource rents. Contemporary examples include the Saudi royal family and, at the time of writing, Colonel Gadaffi. Finally, there may be an external agency, an occupying power or a transnational corporation, often in collusion with one of the other agencies in order to share out the rents. So, when the king has been toppled, reforms that do not understand the power of these agencies may be quite inappropriate and the revolution is therefore unsuccessful.

A major object of these articles is to identify, for each case study, non-violent alternatives that could have avoided the huge costs suffered.

In part one I will analyse three classical revolutions, the French, Russian, and the Chinese up to the death of Mao Zedong. In part two I will examine four non-violent revolutions: an evolutionary one called the Industrial Revolution, the coercive but peaceful creation of the Asian Tigers, the spontaneous one that followed the death of Mao, and one called the bourgeois revolution in India. In part three I will trace recent evolutionary revolutions that are experimenting with something that is itself revolutionary, the use of social media.
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