The announcement last week by the United
States of the largest military aid
package in its history – to Israel – was
a win for both sides.
Israeli prime
minister Benjamin Netanyahu could boast
that his lobbying had boosted aid from
$3.1 billion a year to $3.8bn – a 22 per
cent increase – for a decade starting in
2019.
Mr Netanyahu has presented this as a
rebuff to those who accuse him of
jeopardising Israeli security interests
with his government’s repeated affronts
to the White House.
In the past weeks alone, defence
minister Avigdor Lieberman has compared
last year’s nuclear deal between
Washington and Iran with the 1938 Munich
pact, which bolstered Hitler; and Mr
Netanyahu has implied that US opposition
to settlement expansion is the same as
support for the “ethnic cleansing” of
Jews.
American president Barack Obama,
meanwhile, hopes to stifle his own
critics who insinuate that he is
anti-Israel. The deal should serve as a
fillip too for Hillary Clinton, the
Democratic party’s candidate to succeed
Mr Obama in November’s election.
In reality, however, the Obama
administration has quietly punished Mr
Netanyahu for his misbehaviour. Israeli
expectations of a $4.5bn-a-year deal
were whittled down after Mr Netanyahu
stalled negotiations last year as he
sought to recruit Congress to his battle
against the Iran deal.
In fact, Israel already receives
roughly $3.8bn – if Congress’s
assistance on developing missile defence
programmes is factored in. Notably,
Israel has been forced to promise not to
approach Congress for extra funds.
The deal takes into account neither
inflation nor the dollar’s depreciation
against the shekel.
A bigger blow still is the White
House’s demand to phase out a special
exemption that allowed Israel to spend
nearly 40 per cent of aid locally on
weapon and fuel purchases. Israel will
soon have to buy all its armaments from
the US, ending what amounted to a
subsidy to its own arms industry.
Nonetheless, Washington’s renewed
military largesse – in the face of
almost continual insults – inevitably
fuels claims that the Israeli tail is
wagging the US dog. Even The New York
Times has described the aid package as
“too big”.
Since the 1973 war, Israel has
received at least $100bn in military
aid, with more assistance hidden from
view. Back in the 1970s, Washington paid
half of Israel’s military budget. Today
it still foots a fifth of the bill,
despite Israel’s economic success.
But the US expects a return on its
massive investment. As the late Israeli
politician-general Ariel Sharon once
observed, Israel has been a US
“aircraft carrier” in the Middle East,
acting as the regional bully and
carrying out operations that benefit
Washington.
Almost no one blames the US for
Israeli attacks that wiped out Iraq’s
and Syria’s nuclear programmes. A
nuclear-armed Iraq or Syria would have
deterred later US-backed moves at regime
overthrow, as well as countering the
strategic advantage Israel derives from
its own nuclear arsenal.
In addition, Israel’s US-sponsored
military prowess is a triple boon to the
US weapons industry, the country’s most
powerful lobby. Public funds are
siphoned off to let Israel buy goodies
from American arms makers. That, in
turn, serves as a shop window for other
customers and spurs an endless and
lucrative game of catch-up in the rest
of the Middle East.
The first F-35 fighter jets to arrive
in Israel in December – their various
components produced in 46 US states –
will increase the clamour for the
cutting-edge warplane.
Israel is also a “front-line
laboratory”, as former Israeli army
negotiator Eival Gilady admitted at the
weekend, that develops and field-tests
new technology Washington can later use
itself.
The US is planning to buy back the
missile interception system Iron Dome –
which neutralises battlefield threats of
retaliation – it largely paid for.
Israel works closely too with the US in
developing cyberwarfare, such as the
Stuxnet worm that damaged Iran’s
civilian nuclear programme.
But the clearest message from
Israel’s new aid package is one
delivered to the Palestinians:
Washington sees no pressing strategic
interest in ending the occupation. It
stood up to Mr Netanyahu over the Iran
deal but will not risk a damaging clash
over Palestinian statehood.
Some believe that Mr Obama signed the
aid package to win the credibility
necessary to overcome his domestic
Israel lobby and pull a rabbit from the
hat: an initiative, unveiled shortly
before he leaves office, that corners Mr
Netanyahu into making peace.
Hopes have been raised by an expected
meeting at the United Nations in New
York on Wednesday. But their first talks
in 10 months are planned only to
demonstrate unity to confound critics of
the aid deal.
If Mr Obama really wanted to pressure
Mr Netanyahu, he would have used the aid
agreement as leverage. Now Mr Netanyahu
need not fear US financial retaliation,
even as he intensifies effective
annexation of the West Bank.
Mr Netanyahu has drawn the right
lesson from the aid deal – he can act
against the Palestinians with continuing
US impunity.
- See more at: http://www.jonathan-cook.net/2016-09-19/palestinians-lose-in-us-military-aid-deal-with-israel/#sthash.fL4Eq28N.dpuf
Celebrating the One Percent
Is
Inequality Really Good for the Economy?
By Michael Hudson
September 24, 2016 "Information
Clearing House"
- To paraphrase Mark Twain, everyone
complains about inequality, but nobody does
anything about it.
What they do is to use “inequality” as a
takeoff point to project their own views on
how to make society more prosperous and at
the same time more equal. These views
largely depend on whether they view the One
Percent as innovative, smart and creative,
making wealth by helping the rest of society
– or whether, as the great classical
economists wrote, the wealthiest layer of
the population consist of rentiers, making
their income and wealth off the 99 Percent
as idle landlords, monopolists and predatory
bankers.
Economic statistics show fairly worldwide
trends in inequality. After peaking in the
1920s, the reforms of the Great Depression
helped make income distribution more
equitable and stable until 1980. Then, in
the wake of Thatcherism in Britain and
Reaganomics in the United States, inequality
really took off. And it took off largely by
the financial sector (especially as interest
rates retreated from their high of 20
percent in 1980, creating the greatest bond
market boom in history). Real estate and
industry were financialized, that is, debt
leveraged.
Inequality increased steadily until the
global financial crash of 2008. Since then,
as bankers and bondholders were saved
instead of the economy, the top One Percent
have pulled even more sharply ahead of the
rest of the economy. Meanwhile, the bottom
25 percent of the economy has seen its net
worth and relative income deteriorate.
Needless to say, the wealthy have their own
public relations agents, backed by the usual
phalange of academic useful idiots. Indeed,
mainstream economics has become a
celebration of the wealthy rentier class for
a century now, and as inequality is sharply
widening today, celebrators of the One
Percent have found a pressing need for their
services.
A
case in point is the Scottish economist
Angus Deaton, author of The Great Escape:
Health, Wealth, and the Origins of
Inequality (2013). Elected President of the
AEA in 2010, he was given the Nobel
Economics Prize in 2015 for analyzing trends
in consumption, income distribution, poverty
and welfare in ways that cause no offense to
the wealthy, and in fact treat the
increasingly inequitable status quo as
perfectly natural and in its own kind of
mathematical equilibrium. (This kind of
circular mathematical reasoning is the
criterion of good economics today.)
His
book treats the movie The Great Escape as a
metaphor. He deridingly pointed out that
nobody would have called the movie “The
prisoners left behind.” Describing the
escapers as brilliant innovators, he assumes
that the wealthiest One Percent likewise
have been smart and imaginative enough to
break the bonds of conventional thinking to
innovate. The founders of Apple, Microsoft
and other IT companies are singled out for
making everyone’s life richer. And the
economy at large has experienced a more or
less steady upward climb, above all in
public health extending lifespans,
conquering disease and pharmaceutical
innovation.
I
recently was put on the same stage as Mr.
Deaton in Berlin, along with my friend David
Graeber. We three each have books translated
into German to be published this autumn by
the wonderful publisher Klett-Cotta, who
organized the event at at the Berlin
Literaturfestival in mid-September.
In
a certain way I find Deaton’s analogy with
the movie The Great Escape appropriate. The
wealthy have escaped. But the real issue
concerns what have they escaped from. They
have escaped from regulation, from taxation
(thanks to offshore banking enclaves and a
rewriting of the tax laws to shift the
fiscal burden onto labor and industry). Most
of all, Wall Street banksters have escaped
from criminal prosecution. There is no need
to escape from jail if you can avoid being
captured and sentenced in the first place!
A
number of recent books – echoed weekly in
the Wall Street Journal’s editorial page –
attribute the wealthiest One Percent to the
assumption that they must be smarter than
most other people. At least, smart enough to
get into the major business schools and get
MBAs to learn how to financialize
corporations with
zaitech or other debt leveraging,
reaping (indeed, “earning”) huge bonuses
The
reality is that you don’t have to be smart
to make a lot of money. All you need is
greed. And that can’t be taught in business
schools. In fact, when I went to work as a
balance-of-payments analyst at Chase
Manhattan in 1964, I was told that the best
currency traders came from the Brooklyn or
Hong Kong slums. Their entire life was
devoted to making money, to rise into the
class of the proverbial Babbitts of our
time: nouveau riches lacking in real culture
or intellectual curiosity.
Of
course, for bankers who do venture to
“stretch the envelope” (the fraudster’s
euphemism for breaking the law, as Citigroup
did in 1999 when it merged with Travelers’
Insurance prior to the Clinton
administration rejecting Glass-Steagall),
you do need smart lawyers. But even here,
Donald Trump explained the key that he
learned from mob lawyer Roy Cohn: what
matters is not so much the law, as what
judge you have. And the U.S. courts have
been privatized by electing judges whose
campaign contributors back deregulators and
non-prosecutors. So the wealthy escape from
being subject to the law.
Although no moviegoers wanted to see the
heroes of the Great Escape movie captured
and put back in their prison camp, a great
many people wish that the Wall Street crooks
from Citigroup, Bank of America and other
junk-mortgage fraudsters would be sent to
jail, along with Angelo Mazilo of
Countrywide Financial. Little love is given
to their political lobbyists such as Alan
Greenspan, Attorney General Eric Holder,
Lanny Breuer and their hirees who refused to
prosecute financial fraud.
Deaton did cite “rent seekers” – but in the
sense that his predecessor Nobel prizewinner
Buchanan did, locating rent seeking within
government, not real estate, monopolies such
as pharmaceuticals and information
technology, health insurance, cable
companies and high finance. So any blame for
poverty falls on either the government or on
the debtors, renters, unemployed and
not-wellborn – the main victims of today’s
rentier economy.
Deaton’s Great Escape sees some problems,
but not in the economic system itself – not
debt, not monopoly, not the junk mortgage
crisis or financial fraud. He cites global
warming as the main problem, but not the
political power of the oil industry. He
singles out education as the way to raise
the 99 Percent – but says nothing about the
student loan problem, the travesty of
for-profit universities funding junk
education with government-guaranteed bank
loans.
He
measures the great improvement in well-being
by GDP (gross domestic product).
Lloyd Blankfein of Goldman Sachs notoriously
described his investment bank’s managers and
partners of being the most productive
individuals in the United States for earning
$20 million annually (not including bonuses)
– all of which is recorded as adding to the
financial sector’s “output” of GDP. There is
no concept at all that this is what
economists call a zero-sum activity – that
is, that Goldman Sachs’s salaries may be
unproductive, parasitic, predatory, and the
rest of the economy’s loss or overhead.
Such thoughts do not occur in the happy-face
views promoted by the One Percent. Deaton’s
praise-hymn to the elites assumes that
everyone earns what they get, by playing a
productive role, not an extractive one.
An
even more blatant denial of rent-seeking is
a new book by one of the founders of Bain
Capital (Mitt Romney’s firm), Edward Conard,
The Upside of Inequality attacking the
“demagogues” and “propagandists” who claim
that the winnings of the One Percent are
largely unearned. Curiously, he does not
include Adam Smith, David Ricardo or John
Stuart Mill as such “propagandists.” Yet
that is what classical free market economics
was all about: freeing economies from the
unearned rental income and rising land
prices that landlords make “in their sleep,”
as John Stuart Mill put it. This propaganda
book thus misrepresents the program that the
major founders of economics urged: public
ownership or collection of land rent,
natural resource rent, and pubic operation
of natural monopolies, headed by the
financial sector.
For
Conard, the reason for the soaring wealth of
the One Percent is not financial, real
estate or other monopolistic rent seeking,
but the wonders of the information economy.
It is Josef Schumpeter’s “creative
destruction” of less productive technology,
by hard working and dedicated innovators
whose creativity raises the level of
everyone. So the wealth of the One Percent
is a measure of society’s forward march, not
a predatory overhead extracted from the
economy at large.
Conard’s policy conclusion is that
regulation and taxation slows this march of
economies toward prosperity as led by the
One Percent. A laudatory Wall Street Journal
review of his book summarized his message:
“Redistribution – whether achieved through
taxation, regulatory restrictions, or social
norms – appears,” he asserts, “to have large
detrimental effects on risk-taking,
innovation, productivity, and growth over
the long run, especially in an economy where
innovation produced by the entrepreneurial
risk-taking of properly trained talent
increasingly drives growth.” His solution is
to lower taxes on the rich!
My
friend Dave Kelley notes the policy message
that is being repeated ad nauseum these
days: the assertion that “progressive moves
like taxation end up hurting the economy
rather than helping it. This ‘I would feed
you but you might become dependent on food’
theory is central in showing how consumer
societies like ours are returning to feudal
distributions of wealth.” This seems to be
the policy proposal of the three leading
candidates for U.S. President – in our
modern post-Citizens United world where
elections are bought in much the way that
consulships were back in the closing days of
the Roman Republic.
Michael Hudson is President of The Institute
for the Study of Long-Term Economic Trends
(ISLET), a Wall Street Financial Analyst,
Distinguished Research Professor of
Economics at the University of Missouri,
Kansas City and author of
Killing the Host (2015), The
Bubble and Beyond (2012),
Super-Imperialism: The Economic Strategy of
American Empire (1968 & 2003), Trade,
Development and Foreign Debt (1992 & 2009)
and of The Myth of Aid (1971), amongst
many others.
http://michael-hudson.com |
