Saturday, February 13, 2016

The Big Short

A review of the film directed and co-written by Adam McKay.
Starring: Christian Bale, Steve Carell, Ryan Gosling, and Brad Pitt

Paramount Pictures

Based on the book of the same name by Michael Lewis

Usually I do reviews of books or films that I feel are worth seeing.  I don’t believe The Big Short is a very good film.  The reason I decided to write this review is because the subject matter of the film is worth looking at.

The story is about money managers who look for a way to make a killing on the stock market.  This doesn’t sound so unusual or compelling.  However, investment managers usually profit from investments that increase in value.  The Big Short is about investors who bet that the stock market would collapse.

The Big Short

One of those investors was Michael Burry, (Christian Bale) who analyzed the mortgage market and predicted that there would be a collapse.  We see Burry talking to bankers at Goldman-Sachs who thought he was crazy.  They argued that the housing market never went down. 

After Burry said he was prepared to invest in a credit default swap to the tune of $100 million, the Goldman-Sachs bankers asked if he had any concerns about this huge investment. 

Burry argued that he was concerned that when this investment matured that Goldman-Sachs would not have enough money to pay his investors.  From the numbers I’ve seen, Burry’s return on this investment was 489%.  This was while the rest of the stock market collapsed.   

In another scene, investors challenged a representative of a ratings agency.  They asked how this ratings agency could give collateralized debt obligations (CDO’s) an AAA rating.  These CDO’s would be one of the triggers of the financial collapse.  The representative of the ratings agency argued that if it didn’t give an excellent rating to these largely worthless funds bankers would simply go down the street and get rated by another agency.

In another scene, the investors asked a reporter of the Wall Street Journal to do a story on how the housing market was due to collapse.  This reporter knew the investor and implied that he might loose his job if he were to do such a story.  Then, the reporter asked the investor if he was still living with his mother.  This was a clear example of how the reporter believed that personal financial success was tied to journalistic dishonesty.

There was one moment of the film that gave viewers a glimpse of the real world that working people experience every day.  Two young investors were celebrating the fact that they had just made a deal that would make them rich.  A banker named Ben Rickert (Brad Pitt) chastised the young investors arguing that millions of workers would loose their jobs because of the stock market collapse, and this was nothing to celebrate.

Greg Ip reviewed this film in the December 11, 2015 edition of the Wall Street Journal.  Ip argued that the reason for the 2008 economic collapse was much more complex than the film portrayed.  These are Ip’s words: “The reason lies in broader macroeconomic and societal forces that are barely mentioned.”

Well, Greg Ip might loose his job if he were to report on the real cause of the economic collapse of 2008.  Before we look at that question, permit me to ask a few other questions. 

Since there is enough food to feed the world several times over, why are there hundreds of millions of people who don’t have enough to eat?  Why would people who have power allow there to be an economic collapse when the resources exist to eliminate poverty in the world?

The source of economic crisis—capitalism

Jonathan Sperber begins to answer these questions in his biography: Karl Marx: A Nineteenth Century Life.  Sperber looked at the writings of the original theoreticians of capitalism, Adam Smith and David Ricardo.  He showed how they both predicted that the natural functioning of capitalism would lead to its collapse.  While they had no solution for this problem, Karl Marx argued that a workers government had the potential to transform the world so these kinds of crisis would be things of the past.

For various reasons, the percentage of profits on investments declines in capitalism.  This can be illustrated in a simple example. 

Let’s say there is a corporation that, for three years has investments of, $10, $100, and $1,000.  Let’s say that profits on those investments are, $2, $10, and $50.  So, we might say that profits and investments are increasing and things look good for investors. 

However, there is a problem.  The percentage of profits on investments goes from 20% to 10% to 5%.  Eventually, if this corporation continues to grow at this rate, huge investments will only turn over a tiny profit.

In order to adjust to this environment, corporate officers do two basic things.  They must be obsessed with increasing sales as well as cutting costs.  As we might imagine, these two obsessions will also contribute to an economic catastrophe. 

An example of how corporations cut costs can be found in their response to the labor and civil rights movements.  These movements improved the standard of living for millions of workers in this country.  Because corporations are obsessed with cutting costs, they found this improvement in the standard of living to be intolerable.

So, they made huge investments to build factories in nations where wages might be two dollars per day or less.  They also closed down factories in this country.  Instead of having the legalized discrimination of Jim Crow against Black people, they used the law to discriminate against workers who were born in other countries.  By using these measures they merely postponed the eventual economic collapse.       

Karl Marx and Frederick Engels wrote about what happens when an economic crisis unfolds in their Communist Manefesto:

“In these crisis there breaks out an epidemic that, in all other epochs, would have seemed an absurdity—the epidemic of overproduction.  Society suddenly finds itself put back into a state of momentary barbarism, it appears as if famine, a universal war of devastation had cut off the supply of every means of subsistence; industry and commerce seem to be destroyed.  And why?  Because there is too much civilization, too much means of subsistence, too much industry, too much commerce.”

So if overproduction is a primary cause of depression, why doesn’t the educational system teach this to children at an early age?  Why doesn’t the media make this a routine theme in the press? 

The answer lies in a simple fact.  No one would support the capitalist system if they understood that the natural functioning of this system can only lead to economic disaster.  This kind of consciousness would not be good for the ruthless drive for corporate profits.

The current election for President

Understanding this reality gives us insight to the current elections.  The only reason the capitalist system survived the 2008 collapse was because of massive government assistance.  The government invested trillions of dollars in something they called quantitative easing.  Investors had huge investments that were worthless, and the government effectively gave these investors obscene amounts of money for, what might be termed, horse manure.

The only reason why Donald Trump is not bankrupt is because of this massive amount of government charity.  The primary focus of Trump has been to argue that the government isn’t doing enough to support corporations.

Some people argue that Trump is a fascist.  Fascism is a political mass movement aimed at destroying any working class resistance. 

After Adolf Hitler was elected in Germany he eliminated all political opposition.  Then, he cut wages of workers in half.  When we understand the workings of capitalism, this is the only way the system can survive after a collapse of the economy.  While Trump might sound like a fascist, today a fascist takeover of the government is not an immediate prospect.

On the other hand, there is Bernie Sanders.  While Sanders pretends to be a socialist, throughout his political life, he has made it clear that he merely wants to reform capitalism.  One of the most reformist governments in the history of the world was the Weimar Republic of Germany.  This government proved to be such a complete disaster that it was replaced by the government of Adolf Hitler.

However, Goldman-Sachs C.E.O. Lloyd Blankfein argues that Sanders candidacy represents a “dangerous moment.”  Blankfein finds Sanders criticism of the “billionaire class” to be especially dangerous.  This class, that produces nothing, yet controls the economy hires people like Blankfein to look after their money.

Michael Moore has a new film, Where to Invade Next, that makes a similar argument as Bernie Sanders.  Moore looks at several capitalist nations that have more liberal health care and labor laws than the United States.  Moore has been an ardent supporter of the Democratic Party.  This party shares responsibility for the crisis we face today.

The alternative

The compelling stories we see today are the ones where working people organize to challenge the routine practices of the government.  We see this in the movement of Black Lives Matter.  We see this when workers go on strike from locations all over the world.  We see this in the struggle for immigrant and women’s rights.  We see this in the struggle of the Cuban people to build an economy free of capitalist exploitation.

Understanding this reality, we can say that the film The Big Short underscores the argument that twenty-first century economists fail to grasp the reality nineteenth century economists uncovered.  Capitalism moves towards collapse, not just because of bad investments, but because this is the nature of the system.  The idea of supply and demand will only work until the supply grossly exceeds the demand.  Then, there is a crisis.

A workers and farmers government is the only realistic way of dealing with the inevitability of capitalism.  This kind of government can mobilize humanity to do away with poverty in the world.  It can do this in a way that is in harmony with the environment.  When we understand the true reality of capitalism, a workers and farmers government appears to be the only realistic course worth striving for.   


Monday, February 8, 2016

Confronting Black Jacobins – The United States, The Haitian Revolution, and The Origins of the Dominican Republic

By Gerald Horne

A review

The revolution that created the United States of America was a turning point in the history of the world.  This revolution made a clean break with the feudal order that was dominated by kings, queens, and royal families.  However, after the revolution, chattel slavery continued to be the law of the land.  This was in spite of the fact that the Constitution declared, “all men are created equal.”

Thomas Jefferson, a slave owner, wrote the Constitution.  Jefferson lived an opulent lifestyle because of the slaves he owned.  He clearly did not believe these slaves were his equals.

The Haitian Revolution

Then, in 1791 a revolution in the French colony of San Domingue erupted.  The primary goal of this revolution was to abolish the dreaded institution of slavery.  Initially the revolutionary slaves sided with the Spanish who controlled the eastern section of the island of Hispaniola.  Then, as the revolution in France erupted, the new French government abolished slavery.  The revolutionary government of San Donmingue responded to this development by siding with France and taking control of the entire island.

Then, the British invaded the island only to be defeated decisively.  Napoleon betrayed the French revolution and attempted to reestablish slavery on the island.  This decision led to Napoleon’s first decisive defeat and France lost about 60,000 soldiers. 

As a result of this defeat, Haiti was established as an independent nation.   Napoleon sold the French colony to the United States.  This sale is known as the Louisiana Purchase.                

Understanding this background, my opinion is that the Haitian Revolution (1791-1804) is one of the many historical events we need to be aware of in order to begin to have an understanding of the history of the world.  I didn’t learn about this in high school, but from C.L.R. James wonderful book, The Black Jacobins: Toussaint L’Ouverture and the San Domingo Revolution.  While I believe that this book continues to be the best source for information on that event, today we can read Gerald Horne’s book that looks at the Haitian Revolution from a different perspective.

The theme of Horne’s book Confronting Black Jacobins looks at the interaction of revolutionary Haiti with the United States, Britain, France, and the Dominican Republic.  We can start the narrative of this book with the fact that the nation of Haiti abolished slavery at a time when all the other nations that dominated the Americas gouged out tremendous profits from slave labor.

The Caribbean islands had been the prime location to gouge out profits in the world over 100 years before the Haitian Revolution.  Sales of sugar were the primary source of this fantastic wealth and the French colony of San Domingue was the most lucrative center for this trade.  When the Haitian Revolution erupted, this relationship of forces began to change.  We can see this by taking a look at all the nations affected because of this monumental revolution.

The revolution transformed Haiti from a place where hundreds of thousands of people lived in slavery, to a place where former Black slaves became the political force of the nation.  The Haitian constitution made it illegal for Caucasians to own land.  The government actively worked to prevent its citizens from being kidnapped and sold into slavery.

As a result, for a time, there was little crime between Haitians.  Murder was unheard of.  For a time, the only crime on the island was petty theft.  This new atmosphere attracted thousands of Black people from the United States. 

These U.S. citizens understood that they were treated as second-class citizens.  They also understood that they could be kidnapped and sold into slavery.  Under this environment thousands of Black citizens of this country were attracted to a government run by Black people that outlawed slavery.

The slave owning republic, and the colonial powers

Gerald Horne labeled the pre-Civil War United States as the “slave owning republic.”  The Haitian Revolution struck a gripping fear into the minds of slave owners.  Haiti represented a nation where slave owners lost virtually everything.  Haiti also was the place where former slaves freed themselves to bring justice to those who had tortured them for over a century.  Slave owners in this country took extraordinary measures attempting to avoid the fate of the former slave owners of San Domingue. 

The United States didn’t recognize Haiti until after the Civil War.  Recognition of Haiti would mean that representatives of Haiti and the U.S. would have to discuss numerous issues as equals.  Until the Civil War, slave owners were the dominant force in this country, and they viewed recognition of Haiti as totally unacceptable to their way of life.

The British Empire transformed itself during the 19th century.  On the one hand, British industry became a dominant force because of the cotton purchased from the United States that had been picked by slave labor.  On the other hand, in 1834 the British outlawed slavery in Jamaica responding to slave rebellions on that island.  However, Britain had already recognized Haiti in 1825.  Part of the British government’s motivation was to have a policy that challenged the other powerful nations of the world.

The French government recognized Haiti in 1838.  However, this came at a price.  The French threatened Haiti with war unless Haiti paid France 60 million Franks as reparations for defeating France in the Haitian Revolution.  Rather than risk fighting a war that might have been extremely destructive, the Haitian government agreed to pay the insulting reparations for winning independence.

The Spanish monarchy had been one of the most powerful in the world.  This monarchy literally looted the Americas for gold and silver.  The problem was that Spain didn’t develop manufacturing.  This meant that the gold and silver looted from the Americas went to Britain, France, and Amsterdam.  This problem led to the decline of the Spanish empire. 

Spanish colonies throughout the Americas erupted in revolutions demanding independence.  Haiti gave the revolutionary leader Simon Bolivar asylum while Spain viewed him as a fugitive.  

The creation of the Dominican Republic

During the period of slavery, the colonial powers created divisions between Black and colored people.  These divisions continued after the revolution.  As I mentioned, revolutionary former slaves took control of the eastern part of the island of Hispaniola. 

This eastern section of the island had a much smaller population.  The people were predominantly colored and spoke Spanish.  The colonial powers fomented the divisions between the eastern and western parts of the island.  The eastern section of the island received heavy armaments that were used to become independent and establish the nation of the Dominican Republic.  While the new government became independent of Haiti, they were also successful in resisting Spanish attempts to colonize the island.  

The colonial powers also had their eyes on the Bay of Samana, considered to be one of the most important in the world.  Samana is located in the Dominican Republic and the area of the bay became the home of hundreds of Black immigrants from the United States. 

With all the problems that faced the nation of Haiti, I agree with the following conclusion of Gerald Horne about the significance of the Haitian Revolution.

“Still, the spirit of Back Jacobins has yet to be quelled, not least since the revolutionary example of Haiti spread throughout the Americas and created a general crisis of the slave system that could only be resolved­—thankfully—with its collapse.  As a result, Africans in particular and the international working class in general owe a massive debt of gratitude to the Black Jacobins of Hispaniola.” 
155 years after the Haitian Revolution, a revolutionary government took power in Cuba.  The revolution started in the eastern section of Cuba that is closest to the nation of Haiti.  Haitian slave owners as well as slaves who left San Domingue because of the revolution immigrated to this eastern section of Cuba.  This French speaking community had an enormous influence in Cuba.  This is just one example of how the Black Jacobins continue to influence our reality today.