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Mainstream Economics Warns Out-of-Control Inequality Harms the Economy…But Corrupt Government Policy Keeps Increasing Inequality

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Who’s Who of Prominent Economists Agree: Inequality Harms Economic Growth

By WashingtonsBlog

A who’s who of prominent liberal and conservative economists in government and academia have now said that runaway inequality harms economic growth, including:

  • Former U.S. Secretary of Labor and UC Berkeley professor Robert Reich
  • Global economy and development division director at Brookings and former economy minister for Turkey, Kemal Dervi
  • Societe Generale investment strategist and former economist for the Bank of England, Albert Edwards
  • Michael Niemira, chief economist at the International Council of Shopping Centers
  • Former executive director of the Joint Economic Committee of Congress, senior policy analyst in the White House Office of Policy Development, and deputy assistant secretary for economic policy at the Treasury Department, Bruce Bartlett
  • Deputy Division Chief of the Modeling Unit in the Research Department of the IMF, Michael Kumhof

Even the father of free market economics – Adam Smith – didn’t believe that inequality should be a taboo subject.

Numerous investors and entrepreneurs agree that runaway inequality hurts the economy, including:

How Bad Is It?

So how bad is it, really?

Inequality in America today is twice as bad as in ancient Rome, worse than it was in Tsarist Russia, Gilded Age America, modern Egypt, Tunisia or Yemen, many banana republics in Latin America, and worse than experienced by slaves in 1774 colonial America. (More stunning facts.)

It’s Not an Accident … It’s Policy

Extreme inequality helped cause the Great Depression, the current financial crisis … and the fall of the Roman Empire . Bad government policy – which favors the fatcats at the expense of the average American – is largely responsible for our runaway inequality.

And yet the powers-that-be in Washington and Wall Street are accelerating the redistribution of wealth from the lower, middle and more modest members of the upper classes to the super-elite.

Defenders of the status quo pretend that this inequality is something outside of our control … like a force of nature. They argue that it’s due to technological innovation or something else outside of policy-makers’ control.

In reality, inequality is rising due to bad policy.

Nobel prize winning economist Joe Stiglitz said recently:

Inequality is not inevitable. It is not … like the weather, something that just happens to us. It is not the result of the laws of nature or the laws of economics. Rather, it is something that we create, by our policies, by what we do.

We created this inequality—chose it, really—with [bad] laws …

Gaming the System to Pillage and Loot

The world’s top economic leaders have said for years that inequality is spiraling out of control and needs to be reduced. Why is inequality soaring even though world economic leaders have talked for years about the urgent need to reduce it?

Because they’re saying one thing but doing something very different. And both mainstream Democrats and mainstream Republicans are using smoke and mirrors to hide what’s really going on.

And it’s not surprising … Nobel winner Stiglitz says that inequality is caused by the use of money to shape government policies to benefit those with money. As Wikipedia notes:

A better explainer of growing inequality, according to Stiglitz, is the use of political power generated by wealth by certain groups to shape government policies financially beneficial to them. This process, known to economists as rent-seeking, brings income not from creation of wealth but from “grabbing a larger share of the wealth that would otherwise have been produced without their effort”

Rent seeking is often thought to be the province of societies with weak institutions and weak rule of law, but Stiglitz believes there is no shortage of it in developed societies such as the United States. Examples of rent seeking leading to inequality include

  • the obtaining of public resources by “rent-collectors” at below market prices (such as granting public land to railroads, or selling mineral resources for a nominal price in the US),
  • selling services and products to the public at above market prices (medicare drug benefit in the US that prohibits government from negotiating prices of drugs with the drug companies, costing the US government an estimated $50 billion or more per year),
  • securing government tolerance of monopoly power (The richest person in the world in 2011, Carlos Slim, controlled Mexico’s newly privatized telecommunication industry).

(Background here, here and here.)

Stiglitz says:

One big part of the reason we have so much inequality is that the top 1 percent want it that way. The most obvious example involves tax policy …. Monopolies and near monopolies have always been a source of economic power—from John D. Rockefeller at the beginning of the last century to Bill Gates at the end. Lax enforcement of anti-trust laws, especially during Republican administrations, has been a godsend to the top 1 percent. Much of today’s inequality is due to manipulation of the financial system, enabled by changes in the rules that have been bought and paid for by the financial industry itself—one of its best investments ever. The government lent money to financial institutions at close to 0 percent interest and provided generous bailouts on favorable terms when all else failed. Regulators turned a blind eye to a lack of transparency and to conflicts of interest.

***

Wealth begets power, which begets more wealth …. Virtually all U.S. senators, and most of the representatives in the House, are members of the top 1 percent when they arrive, are kept in office by money from the top 1 percent, and know that if they serve the top 1 percent well they will be rewarded by the top 1 percent when they leave office. By and large, the key executive-branch policymakers on trade and economic policy also come from the top 1 percent. When pharmaceutical companies receive a trillion-dollar gift—through legislation prohibiting the government, the largest buyer of drugs, from bargaining over price—it should not come as cause for wonder. It should not make jaws drop that a tax bill cannot emerge from Congress unless big tax cuts are put in place for the wealthy. Given the power of the top 1 percent, this is the way you would expect the system to work.

Former Sectretary of Labor Robert Reich recently noted:

When so much wealth accumulates at the top, with money comes the capacity to control politics… It’s not that people are rich, it’s that they abuse their wealth … The wealthy contribute to political candidates and the access that their contributions buy entrenches inequality by securing subsidies, bailouts and policies that lead to even greater inequality.

Bloomberg reports:

The financial industry spends hundreds of millions of dollars every election cycle on campaign donations and lobbying, much of which is aimed at maintaining the subsidy [to the banks by the public]. The result is a bloated financial sector and recurring credit gluts.

Indeed, the big banks literally own the Federal Reserve. And they own Washington D.C. politicians, lock stock and barrel. See this, this, this and this.

Two leading IMF officials, the former Vice President of the Dallas Federal Reserve, and the the head of the Federal Reserve Bank of Kansas City, Moody’s chief economist and many others have all said that the United States is controlled by an “oligarchy” or “oligopoly”, and the big banks and giant financial institutions are key players in that oligarchy.

The chairman of the Department of Economics at George Mason University says that it is inaccurate to call politicians prostitutes. Specifically, he says that they are more correct to call them “pimps”, since they are pimping out the American people to the financial giants.

Economics professor Randall Wray writes:

Thieves … took over the whole economy and the political system lock, stock, and barrel.

No wonder the government has saved the big banks at taxpayer expense, chosen the banks over the little guy, and

No wonder crony capitalism has gotten even worse under Obama than under Bush.

No wonder big Wall Street players are continuing to loot taxpayer money and public resources.

No wonder the big banks continue to manipulate every market and commit crime after crime and … and profit handsomely from it, while law-abiding citizens slide further and further behind.

Yet Obama is prosecuting fewer financial crimes than Bush, or his father, or Ronald Reagan.

No wonder:

All of the monetary and economic policy of the last 3 years has helped the wealthiest and penalized everyone else. See this, this and this.

***

Economist Steve Keen says:

“This is the biggest transfer of wealth in history”, as the giant banks have handed their toxic debts from fraudulent activities to the countries and their people.

Stiglitz said in 2009 that Geithner’s toxic asset plan “amounts to robbery of the American people”.

And economist Dean Baker said in 2009 that the true purpose of the bank rescue plans is “a massive redistribution of wealth to the bank shareholders and their top executives”.

Without the government’s creation of the too big to fail banks (they’ve gotten much bigger under Obama), the Fed’s intervention in interest rates and the markets (most of the quantitative easing has occurred under Obama), and government-created moral hazard emboldening casino-style speculation (there’s now more moral hazard than ever before) … things wouldn’t have gotten nearly as bad.

As we wrote in March 2009:

The bailout money is just going to line the pockets of the wealthy, instead of helping to stabilize the economy or even the companies receiving the bailouts:

  • A lot of the bailout money is going to the failing companies’ shareholders
  • Indeed, a leading progressive economist says that the true purpose of the bank rescue plans is “a massive redistribution of wealth to the bank shareholders and their top executives”
  • The Treasury Department encouraged banks to use the bailout money to buy their competitors, and pushed through an amendment to the tax laws which rewards mergers in the banking industry (this has caused a lot of companies to bite off more than they can chew, destabilizing the acquiring companies)

As we pointed out in 2008:

The game of capitalism only continues as long as everyone has some money to play with. If the government and corporations take everyone’s money, the game ends.The fed and Treasury are not giving more chips to those who need them: the American consumer. Instead, they are giving chips to the 800-pound gorillas at the poker table, such as Wall Street investment banks. Indeed, a good chunk of the money used by surviving mammoth players to buy the failing behemoths actually comes from the Fed.

Quantitative Easing

It is well-documented that quantitative easing increases inequality (and see this and this.)

Quantitative easing doesn’t help Main Street or the average American. It only helps big banks, giant corporations, and big investors.

The Federal Reserve has been doing quantitative easing for 5 years … and inequality has shot up over the last 5 years. It’s not a coincidence.

Subsidies to Giant, Wealthy Corporations

Massive subsidies to big corporations is also part of the problem. Indeed, some financial analysts say that the taxpayer subsidy to the giant banks alone is $780 billion per year.

The average American family pays $6,000/year in subsidies to giant corporations.

This is a direct transfer of wealth from the little guy to the big guy … which increases inequality.

Goosing the Stock Market

Moreover, the Fed has more or less admitted that it is putting almost all of its efforts into boosting the stock market.

Robert Reich has noted:

Some cheerleaders say rising stock prices make consumers feel wealthier and therefore readier to spend. But to the extent most Americans have any assets at all their net worth is mostly in their homes, and those homes are still worth less than they were in 2007. The “wealth effect” is relevant mainly to the richest 10 percent of Americans, most of whose net worth is in stocks and bonds.

AP writes:

The recovery has been the weakest and most lopsided of any since the 1930s.After previous recessions, people in all income groups tended to benefit. This time, ordinary Americans are struggling with job insecurity, too much debt and pay raises that haven’t kept up with prices at the grocery store and gas station. The economy’s meager gains are going mostly to the wealthiest.

Workers’ wages and benefits make up 57.5 percent of the economy, an all-time low. Until the mid-2000s, that figure had been remarkably stable — about 64 percent through boom and bust alike.

David Rosenberg points out:

The “labor share of national income has fallen to its lower level in modern history … some recovery it has been – a recovery in which labor’s share of the spoils has declined to unprecedented levels.”

The above-quoted AP article further notes:

Stock market gains go disproportionately to the wealthiest 10 percent of Americans, who own more than 80 percent of outstanding stock, according to an analysis by Edward Wolff, an economist at Bard College.

Indeed, as we reported in 2010:

As of 2007, the bottom 50% of the U.S. population owned only one-half of one percent of all stocks, bonds and mutual funds in the U.S. On the other hand, the top 1% owned owned 50.9%.***

(Of course, the divergence between the wealthiest and the rest has only increased since 2007.)

Professor G. William Domhoff demonstrated that the richest 10% own 98.5% of all financial securities, and that:

The top 10% have 80% to 90% of stocks, bonds, trust funds, and business equity, and over 75% of non-home real estate. Since financial wealth is what counts as far as the control of income-producing assets, we can say that just 10% of the people own the United States of America.

Tyler Durden notes:

In today’s edition of Bloomberg Brief, the firm’s economist Richard Yamarone looks at one of the more unpleasant consequences of Federal monetary policy: the increasing schism in wealth distribution between the wealthiest percentile and everyone else. … “To the extent that Federal Reserve policy is driving equity prices higher, it is also likely widening the gap between the haves and the have-nots….The disparity between the net worth of those on the top rung of the income ladder and those on lower rungs has been growing. According to the latest data from the Federal Reserve’s Survey of Consumer Finances, the total wealth of the top 10 percent income bracket is larger in 2009 than it was in 1995. Those further down have on average barely made any gains. It is likely that data for 2010 and 2011 will reveal an even higher percentage going to the top earners, given recent increases in stocks.” Alas, this is nothing new, and merely confirms speculation that the Fed is arguably the most efficient wealth redistibution, or rather focusing, mechanism available to the status quo. This is best summarized in the chart below comparing net worth by income distribution for various percentiles among the population, based on the Fed’s own data. In short: the richest 20% have gotten richer in the past 14 years, entirely at the expense of everyone else.

***

Lastly, nowhere is the schism more evident, at least in market terms, than in the performance of retail stocks:

Saks chairman Steve Sadove recently remarked, “I’ve been saying for several years now the single biggest determinant of our business overall, is how’s the stock market doing.” Privately-owned Neiman- Marcus reported “In New York City, business at Bergdorf Goodman continues to be extremely strong.”

In contrast, retail giant Wal-Mart talks of its “busiest hours” coming at midnight when food stamps are activated and consumers proceed through the check-outs lines with baby formula, diapers, and other groceries. Wal-Mart has posted a decline in same-store sales for eight consecutive quarters.

As CNN Money pointed out in 2011, “Wal-Mart’s core shoppers are running out of money much faster than a year ago …” This trend has only gotten worse: The wealthy are doing great … but common folks can no longer afford to shop even at Wal-Mart, Sears, JC Penney or other low-price stores.

Durden also notes:

Another indication of the increasing polarity of US society is the disparity among consumer confidence cohorts by income as shown below, and summarized as follows: “The increase in equity prices has raised consumer spirits, particularly among higher-income consumers. The Conference Board’s Consumer Confidence index for all income levels bottomed in February/March of 2009. The recovery since then has been notable across the board, but nowhere as much as for those making $50,000 or more.”

Business Week notes:

Barry Ritholtz, [CIO of Ritholtz Wealth, and popular financial blogger], says millions of potential investors may conclude, as they did after the Great Depression, that the market is a rigged game for insiders. Such seismic shifts in popular sentiment can have lasting effects. The Dow Jones industrial average didn’t regain its September 1929 peak of 355.95 until 1954. “You’re going to lose a generation of investors,” says Ritholtz. “And that’s how you end up with a 25-year bear market. That’s the risk if people start to think there is no economic justice.”

Americans know that the system is rigged against them. See this. We know that the government is giving Wall Street crooks a pass. 70% of Americans know that the government’s economic policies have thrown money at the banks and hosed the people.

In such an environment, the average American has largely gotten out of stocks and other investments.

Over-Financialization

When a country’s finance sector becomes too large finance, inequality rises. As Wikipedia notes:

[Economics professor] Jamie Galbraith argues that countries with larger financial sectors have greater inequality, and the link is not an accident.

Government policy has been encouraging the growth of the financial sector for decades:

https://desultoryheroics.com/wp-content/uploads/2014/03/71000-financialandnonfinancialsectors-compensationlesleopold.jpg

(Economist Steve Keen has also shown that “a sustainable level of bank profits appears to be about 1% of GDP”, and that higher bank profits leads to a ponzi economy and a depression).

Unemployment and Underemployment

A major source of inequality is unemployment, underemployment and low wages.

Corporate Profits v. Jobs

Government policy has created these conditions. And the pretend populist Obama – who talks non-stop about the importance of job-creation – actually doesn’t mind such conditions at all.

The“jobless recovery” that the Bush and Obama governments have engineered is a redistribution of wealth from the little guy to the big boys.

The New York Times notes:

Economists at Northeastern University have found that the current economic recovery in the United States has been unusually skewed in favor of corporate profits and against increased wages for workers.

In their newly released study, the Northeastern economists found that since the recovery began in June 2009 following a deep 18-month recession, “corporate profits captured 88 percent of the growth in real national income while aggregate wages and salaries accounted for only slightly more than 1 percent” of that growth.

The study, “The ‘Jobless and Wageless Recovery’ From the Great Recession of 2007-2009,” said it was “unprecedented” for American workers to receive such a tiny share of national income growth during a recovery.

***

The share of income growth going to employee compensation was far lower than in the four other economic recoveries that have occurred over the last three decades, the study found.

Obama apologists say Obama has created jobs. But the number of people who have given up and dropped out of the labor force has skyrocketed under Obama (and see this).

And the jobs that have been created have been low-wage jobs.

Low Wage Jobs

For example, the New York Times noted in 2011:

The median pay for top executives at 200 big companies last year was $10.8 million. That works out to a 23 percent gain from 2009.

***

Most ordinary Americans aren’t getting raises anywhere close to those of these chief executives. Many aren’t getting raises at all — or even regular paychecks. Unemployment is still stuck at more than 9 percent.

***

“What is of more concern to shareholders is that it looks like C.E.O. pay is recovering faster than company fortunes,” says Paul Hodgson, chief communications officer for GovernanceMetrics International, a ratings and research firm.

According to a report released by GovernanceMetrics in June, the good times for chief executives just keep getting better. Many executives received stock options that were granted in 2008 and 2009, when the stock market was sinking.

Now that the market has recovered from its lows of the financial crisis, many executives are sitting on windfall profits, at least on paper. In addition, cash bonuses for the highest-paid C.E.O.’s are at three times prerecession levels, the report said.

***

The average American worker was taking home $752 a week in late 2010, up a mere 0.5 percent from a year earlier. After inflation, workers were actually making less.

AP pointed out that the average worker is not doing so well:

Unemployment has never been so high — 9.1 percent — this long after any recession since World War II. At the same point after the previous three recessions, unemployment averaged just 6.8 percent.

– The average worker’s hourly wages, after accounting for inflation, were 1.6 percent lower in May than a year earlier. Rising gasoline and food prices have devoured any pay raises for most Americans.

– The jobs that are being created pay less than the ones that vanished in the recession. Higher-paying jobs in the private sector, the ones that pay roughly $19 to $31 an hour, made up 40 percent of the jobs lost from January 2008 to February 2010 but only 27 percent of the jobs created since then.

Alan Greenspan noted:

Large banks, who are doing much better and large corporations, whom you point out and everyone is pointing out, are in excellent shape. The rest of the economy, small business, small banks, and a very significant amount of the labour force, which is in tragic unemployment, long-term unemployment – that is pulling the economy apart.

Money Being Sucked Out of the U.S. Economy … But Big Bucks Are Being Made Abroad

Part of the widening gap is due to the fact that most American companies’ profits are driven by foreign sales and foreign workers. As AP noted in 2010:

Corporate profits are up. Stock prices are up. So why isn’t anyone hiring?

Actually, many American companies are — just maybe not in your town. They’re hiring overseas, where sales are surging and the pipeline of orders is fat.

***

The trend helps explain why unemployment remains high in the United States, edging up to 9.8% last month, even though companies are performing well: All but 4% of the top 500 U.S. corporations reported profits this year, and the stock market is close to its highest point since the 2008 financial meltdown.

But the jobs are going elsewhere. The Economic Policy Institute, a Washington think tank, says American companies have created 1.4 million jobs overseas this year, compared with less than 1 million in the U.S. The additional 1.4 million jobs would have lowered the U.S. unemployment rate to 8.9%, says Robert Scott, the institute’s senior international economist.

“There’s a huge difference between what is good for American companies versus what is good for the American economy,” says Scott.

***

Many of the products being made overseas aren’t coming back to the United States. Demand has grown dramatically this year in emerging markets like India, China and Brazil.

Government policy has accelerated the growing inequality. It has encouraged American companies to move their facilities, resources and paychecks abroad. And some of the biggest companies in America have a negative tax rate … that is, not only do they pay no taxes, but they actually get tax refunds.

And a large percentage of the bailouts went to foreign banks (and see this). And so did a huge portion of the money from quantitative easing. More here and here.

Capital Gains and Dividends

According to a 2013 study published by a researcher at the U.S. Congressional Research Service:

The largest contributor to increasing income inequality…was changes in income from capital gains and dividends.

Business Insider explains:

Drastic income inequality growth in the United States is largely derived from changes in the way the U.S. government taxes income from capital gains and dividends, according to a new study by Thomas Hungerford of the non-partisan Congressional Research Service.

Essentially, what Democrats have been saying about income inequality — that it’s in a large part due to favorable taxation and deduction policies for high income Americans — is largely right

***

The study … conclusively found that the wealthy benefitted from low tax rates on investment income, which in turn caused their wealth to grow faster.

Essentially, taxing capital gains as ordinary income would make the playing field more fair, and reduce over time income inequality.

Joseph Stiglitz noted in 2011:

Lowering tax rates on capital gains, which is how the rich receive a large portion of their income, has given the wealthiest Americans close to a free ride.

Indeed, the Tax Policy center reports that the top 1% took home 71% of all capital gains in 2012.

Ronald Reagan’s budget director, assistant secretary of treasury, and domestic policy director all say that the Bush tax cuts were a huge mistake. See this and this.

News Video Roundup

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3/3: PressTV interviews Dan Dicks of Press for Truth on the erosion of freedom of the press in the U.S.

3/3: Gerald Celente speaks out on the rash of recent banker suicides and speculation on a connection to a coming global economic collapse at NextNewsNetwork.

3/4: At Global Research TV, geopolitical analysts from across the board explain how the Ukrainian coup has been deliberately provoked by outside agents to promote a combination of US, EU, NATO and IMF interests, and the possible implications.

3/4: Excellent episode of Breaking the Set in which Abby Martin covers the Ukraine conflict and Washington DC’s shadow lobbyists.

3/5: An inspiring story from WeAreChange.org about libertarian crossfit gym owner Danny Lopez-Calleja who overcame drug abuse and homelessness to become a catalyst for change.

3/6: Over 80 people were shot during riots in Kiev a few weeks ago. Now new evidence is coming out that opposition snipers were behind shootings of police and protesters on both sides:

On the lighter side, the Onion reports on disturbing findings from a new marijuana study. It’s even funnier (or more disturbing) watching it stoned.

Did the CIA Kill Hugo Chavez?

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Chavez

Today marks the first anniversary of the death of Venezuelan President Hugo Chavez. As Washington DC and U.S. corporate media do everything in their power to shift popular support towards the conservative opposition, now is a good time to remember what Chavez and his party stood for, why the U.S. hated him so much, why his people loved him, and how and why the CIA may have assassinated him. These and other topics are discussed in the interview transcript below with author and historian William Blum by John Robles first published by Stop NATO. For more details about likely CIA involvement in the death of Hugo Chavez, read http://www.madcowprod.com/2013/03/08/who-killed-hugo-chavez/.

The CIA has Attempted to Assassinate 50 Foreign Leaders Including Chavez

The late Venezuelan President Hugo Chavez was warned by Fidel Castro to be careful of a very specific attack, namely a quick jab from an infected needle. Such a warning coming from a leader who has reportedly been the target of CIA assassination plots more than 600 times in over 50 years, was sure to be heeded.

Was the illness of Hugo Chavez a completely deniable assassination by the CIA? William Blum spoke with the VOR’s John Robles and discussed this issue and more.

Robles: I’ve read your Anti-Empire report regarding Hugo Chavez. Can you give us your comments on speculation that he was assassinated by the CIA?

Blum: I cannot prove it of course, but I believe he was. It would be totally in keeping with the entire history of the CIA and its attitude towards people like Hugo Chavez.

The CIA has attempted to assassinate more than 50 foreign leaders and successfully at least half the time. And very few of them were as despised by the US government as Chavez was, I would say. So, there would be no reason at all to expect that the CIA would not at least plan on killing, and the nature of his ailment is very odd.

He went from a cancer, which would not go away despite several sessions of chemotherapy and what have you. Then it went to serious lung infections, which would not go away no matter what they did. And then it went to, suddenly, a massive heart attack. All in the same man with no apparent cause, he was only 58-years-old, and as far as we know he was a very healthy until this happened, it is all very odd.

And given the great motivation that the US Government and the persons in the CIA has put for killing a man like Hugo Chavez, I’m pretty sure that the CIA played a role in this.

Robles: Do you know or have you heard of any credible new technology or new programs that could deliver such a cancer?

Blum: The means would be a needle with a quick, sharp jab and what you need is getting one person close enough to Chavez to do that.

Chavez was always in the public eye, he was always embracing people. There must have been countless occasions in the past few years when he was vulnerable to a quick jab by a needle that would be the method of transmitting the ailments.

Robles: Did he ever complain that he had been poked by something in public? Were there any reports of anything like that happening that you had heard about?

Blum: He did mention that Fidel Castro warned him about just that. He said: “A quick jab with a needle, and they’ll do…I don’t know what!” Actually he was told by Fidel.

Robles: A quick jab with a needle. Do you think that happened with Fidel because he had become very ill?

Blum: Well, Fidel…According to Cuban intelligence, there were more than 600 attempts on the life of Fidel Castro by the CIA. There is an entire book on that subject by Cuban intelligence.

And many of the methods were pretty bizarre, including an exploding cigar, but over the course of 50 years the Cubans claim there were more than 600 attempts on his life and it may have taken just one with Chavez.

Robles: Have you heard anything from your sources or from where you get some of your information? Have you heard anything detailing any connection between these two US Air Force attaches that were expelled from the country and the death of Hugo Chavez?

Blum: No. I would assume that there is a connection but I don’t know if the Venezuelan government has actually said so.

Getting back to Chavez’s case, we have to keep in mind that four other South American leaders, prominent people on the left, all came down with cancer within the past year or two.

Robles: I think it was seven, wasn’t it, altogether?

Blum: The four that I named in my report…You can add the ones that you know just for my information… were Cristina Fernandez…

Robles: De Kirchner, right…

Blum: of Argentina, Dilma Rousseff of Brazil, Fernando Lugo of Paraguay, the former Brazilian head of state Lula da Silva. Who would you add into that list?

Robles: Well, and then of course Hugo Chavez himself…

Blum: Castro is one of them…

Robles: I would add Castro to the list and Kirchner’s husband who died of a mysterious heart attack as well.

Blum: Right.

Robles: We might add that as a mysterious illness, not exactly a cancer but…

Blum: Right! If the CIA was involved it doesn’t have to be cancer necessarily of course.

Robles: Oh, sure, it could be anything. Have you heard anything about cancer strains or any kind of killing weapons like this, any kind of biological weapons that would give maybe cancer-like symptoms, not exactly a certain type of cancer?

Blum: I very well may have read of such over the years. I have read so much about the CIA, but at the moment I can’t think of anything to supply you with that information. Although we do know, it is well known, that for decades the CIA was looking for a method of killing somebody which would not leave a trace. The CIA itself has used those words. For the entire period of the Cold War that was a major stated project of the CIA. But where that stands today, I have no idea.

Robles: Yes, of course that is all very secret and no one is going to talk about it, but perhaps there are some echoes or some whispers? Maybe somebody has come out and said something? What other reasons would you give to back up the argument that he was assassinated?

Blum: I will mention there is no one in the entire universe who was more hated, no leader more hated than Chavez was by the US government. In the eyes of the US power that be, Chavez was worse than Fidel Castro and Salvador Allende.

Robles: Why was he so hated?

Blum: Because he was the most outspoken leader in the world when it came to criticizing US foreign policy. He never pulled his punches for a moment, he made a claim that it was all crimes against humanity and the US leaders were war criminals, and he said so explicitly. It is unusual for a head of state to be talking that way. And at the UN he attacked Bush in front of the whole world.

Robles: Oh yes, I remember he said that the Devil had been there the day before or something, and it still smelled like sulfur.

Blum: Yes, Bush had spoken to the UN before Chavez from the same platform. And Chavez said there was a smell of sulfur in the air because of that.

Robles: That’s usually the domain of the United States, I mean… Isn’t it? I mean Bush was calling everybody the axis of evil, and all this stuff, branding everyone evil. Wasn’t that kind of a shock to see the same thing done to an American leader?

Blum: Yeah, it is a shock for anyone under any circumstances to be so outspoken in the criticism of the US foreign policy. It is a point in Chavez’s favor that he could have the honesty and the courage to say such things, which very much needed to be said.

Robles: So, you supported the way he stood up?

Blum: Well, in general yes. I think there certainly were times when he may have overdone it, even for me. I mean, he felt obliged to comment on everything under the sun, and I thought several times that he could have held off on saying certain things, they were not serving any good purpose. But that’s a minor criticism of his overall marvelous record.

Robles: You say he had a marvelous record. What do you think were his major achievements in your opinion?

Blum: What he’s brought to the poor people of Venezuela in the way of education and healthcare, and housing, and what have you. And what he brought to the rest of the South America, he formed various anti-US empire blocs which stood in the way of expansion of the US influence.

He and others formed a new…A counter to the OAS, the Organization of American States, which for decades has been dominated and corrupted by the US and Canada. And they formed a new organization in South America excluding the US and Canada. So it was that simple.

Robles: Do you think his achievements will continue or do you think the US will be successful in rolling back everything he did? Which of course I assume they would want to.

Blum: Yes, they would want to. But if Maduro who was chosen and backed by Chavez, wins, and he is expected to win in the election next month, then most of it will continue, I assume.

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Overthrowing other people’s governments: The Master List

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Corporate-domination

By William Blum

Originally posted at RINF.com

Instances of the United States overthrowing, or attempting to overthrow, a foreign government since the Second World War. (* indicates successful ouster of a government)

  • China 1949 to early 1960s
  • Albania 1949-53
  • East Germany 1950s
  • Iran 1953 *
  • Guatemala 1954 *
  • Costa Rica mid-1950s
  • Syria 1956-7
  • Egypt 1957
  • Indonesia 1957-8
  • British Guiana 1953-64 *
  • Iraq 1963 *
  • North Vietnam 1945-73
  • Cambodia 1955-70 *
  • Laos 1958 *, 1959 *, 1960 *
  • Ecuador 1960-63 *
  • Congo 1960 *
  • France 1965
  • Brazil 1962-64 *
  • Dominican Republic 1963 *
  • Cuba 1959 to present
  • Bolivia 1964 *
  • Indonesia 1965 *
  • Ghana 1966 *
  • Chile 1964-73 *
  • Greece 1967 *
  • Costa Rica 1970-71
  • Bolivia 1971 *
  • Australia 1973-75 *
  • Angola 1975, 1980s
  • Zaire 1975
  • Portugal 1974-76 *
  • Jamaica 1976-80 *
  • Seychelles 1979-81
  • Chad 1981-82 *
  • Grenada 1983 *
  • South Yemen 1982-84
  • Suriname 1982-84
  • Fiji 1987 *
  • Libya 1980s
  • Nicaragua 1981-90 *
  • Panama 1989 *
  • Bulgaria 1990 *
  • Albania 1991 *
  • Iraq 1991
  • Afghanistan 1980s *
  • Somalia 1993
  • Yugoslavia 1999-2000 *
  • Ecuador 2000 *
  • Afghanistan 2001 *
  • Venezuela 2002 *
  • Iraq 2003 *
  • Haiti 2004 *
  • Somalia 2007 to present
  • Libya 2011*
  • Syria 2012

Q: Why will there never be a coup d’état in Washington?

A: Because there’s no American embassy there.

William Blum is an author, historian, and renowned critic of U.S. foreign policy. He is the author of Killing Hope: U.S. Military and CIA Interventions Since World War II and Rogue State: A Guide to the World’s Only Superpower, among others. Visit his blog.

Nicaragua: Land of Revolution, Poetry and Solidarity

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Given its richness and complexity, it would be impossible to give an accurate overview of contemporary Nicaraguan society without years of research and experience within the country. What I humbly offer is just one visitor’s perspective of aspects of the culture picked up from about three week’s worth of experiences and interactions with a small cross-section of the population (mostly poor and middleclass people working as cab drivers, tour guides, museum docents, restaurant/shop employees, and agricultural workers) as well as tourists and expats.

What becomes apparent to visitors to Nicaragua soon after getting off the plane is the country’s pride in two of its most famous figures, revolutionary Augusto Sandino and poet Rubén Darío. Images of them can be seen on posters and decorating various items in gift shops within the airport, and in almost every town and city one can find them depicted on murals and statue monuments (other popular figures include Carlos Fonseca, Che Guevara and Hugo Chavez). The culture’s love for poetry is also expressed through its annual International Poetry Festival which has been hosted in Granada since 2005 (parts of which I was fortunate enough to witness while I was there).

Another sign of Nicaragua’s love for language arts and literacy is the ubiquity of bookstores and libraries which can be found in even the smallest towns. Roots of this aspect of the culture goes as far back as the late 19th century when the Spanish-American literary movement known as Modernismo was started by Rubén Darío who was born in Matagalpa and raised in León (where he also died). Another factor is the Sandinista Literacy Campaigns of 1980 and 2005-2009 whose mission was not just to eradicate illiteracy but to increase political awareness and nurture attitudes and skills related to creativity, production, co-operation, discipline and analytical thinking.

A sophistication of political thought and sense of social consciousness in Nicaraguan society was made apparent to me through extended conversations on history and current events with tour guides of diverse backgrounds (who were the locals I happened to speak with for the longest periods of time due to the nature of the activity) as well as shorter exchanges with random people encountered during the trip. While my impressions of the culture may be biased due to comparatively low levels of political awareness I usually sense when conversing with most U.S. citizens (not including readers & followers of this blog) and more frequent interactions with Nicaraguans from progressive organizations I intentionally sought out to support, I’ve heard similar or related observations from other travelers and expats. I feel it’s a real phenomenon that could be a result of the Literacy Campaigns as well as having collectively experienced relatively recent violent dictatorship, revolution, counter-revolution and widespread poverty. Just as individuals of more privileged backgrounds and little experience dealing with loss tend to have less empathy and understanding of moral complexity than those who have lived through tragedy and hardship, perhaps the same could be said of societies?

Other shared, seemingly culturally determined traits I’ve noticed was a sense of directness and sincerity and willingness to treat everyone as human beings. This is especially true regarding dealings with tourists from the U.S. I was a little surprised to experience no sense of resentment directed towards me for being from the country whose government has been the source of so much pain and suffering. Imagine if some country’s government propped up tyrants in the U.S. or supported militant terrorist groups with money and weapons (which the CIA has done in many places including the U.S.). Would we be as charitable towards the citizens of that country? In fact, from speaking to a docents at the Carlos Fonseca Museum, and León’s Museum of the Revolution, even former adversaries on different sides of the revolution have for the most part resolved their differences and resumed relationships as friends, family and fellow citizens. But this isn’t to say there aren’t differences in political perspectives and opinions on the current government.

One of the more surprising opinions I heard was from a young eco-tour guide in Jinotega who was a recent graduate of a college in León. He mentioned that he was doubtful that Nicaragua would be much different had the Samoza regime stayed in power. This was a bit shocking for me in light of what I’ve heard about Samoza’s human rights abuses but it made me think of how things might have changed or stayed the same. It’s likely the crackdown on dissidents would continue or worsen, but would the economy have been improved had the revolution and embargo never happened, or would it have been the same or worse due to increasing militarization and corruption? In either case, it seems unlikely Nicaragua would avoid long term economic harm caused by structural adjustment policies demanded by the International Monetary Fund and World Bank. In contrast to the guide in Jinotega was the eco-tour guide in Matagalpa who took me and other tourists to Mombacho Volcano. He made it clear that he felt Nicaragua had greatly improved since the overthrow of Samoza, embedding his views into the tour by talking about how during the Samoza regime prisoners would sometimes be dropped from helicopters into active volcanoes. He also took pride in the fact that Nicaraguans now have access to free education and healthcare.

The most memorable and moving conversation was with Hugo, a docent at the Museum of the Revolution in León who fought for the Sandinistas as a young man. Through an interpreter he told me of the impact the revolution has had on his life. Many of his siblings and relatives were forced to leave the country and many of his comrades died in battle. He seemed disappointed that there has not been greater improvements as a result of the massive struggle and sacrifice. He mentioned how after the revolution some Sandinista veterans were given parcels of land but many were given less support than they deserved and were promised in terms of land, pensions and healthcare. Hugo himself was struggling economically. As a side-gig he also sold bootleg documentary dvds outside the museum, one of which I purchased (FSLN: Un Pueblo en Armas). Despite his personal hardships, he made it clear that he remains a patriot and has no regrets about fighting the Somoza regime.

One topic that often arose unprompted was upcoming plans for a new canal allowing ships to travel back and forth from the Atlantic Ocean through the San Juan River and Lake Nicaragua to the Pacific Ocean. Though such ideas were proposed nearly 200 years ago, just last year Nicaragua’s National Assembly approved a concession agreement with the Hong Kong Nicaragua Canal Development Investment Company (HKND) giving them the rights to construct and manage the canal for 50 years. In January HKND CEO Wang Jing and President Daniel Ortega issued a statement that construction of the canal would begin in December 2014. Across the board, Nicaraguans I spoke with seemed excited about the plans but conflicted. The most skeptical opinion came from the eco-tour guide in Jinotega who took me to Lake Apanas. Though he acknowledged the potential benefits it would have for Nicaragua’s economy, he was well aware of the inevitable negative impact it would have on indigenous species and ecosystems. At the same time, he seemed resigned to the fact that coming changes are inevitable. He pointed out that Lake Apanas was artificially created to produce hydroelectric power for several towns. Once thriving trees and farmland are now underwater, but the area is now a habitat of different and diverse flora and fauna which supports the local economy through recreation, tourism and fishing. Other people I spoke with about the canal voiced concerns about whether Nicaragua would truly benefit from the project or if it would create a flow-through economy in which most workers and contractors would be brought from China and primarily Chinese corporations reaped the profits.

Another topic that frequently came up (most likely because the livelihoods of many people I spoke with are largely dependent on it), was the rise of Nicaragua’s tourism industry within the past few years. While its effect of boosting the economy is widely acknowledged, it has also in some cases led to problems such as gentrification, inadequate access to land and resources reserved for tourists and foreign owned corporations, commodification or loss of culture. I’ve also witnessed first-hand how Nicaraguan service sector workers have had to tolerate rude behavior from entitled wealthy tourists or expats doing their visa runs. To their credit, the workers showed incredible patience and professionalism, much more, I suspect, than employees and native citizens in the U.S. would show towards foreign tourists and expats had the tables been turned.

The following are just some of the more trivial miscellaneous observations that seemed odd or interesting to me from a visitor’s perspective:

  • It seems to be trendy for car owners (especially in larger cities) to decorate their vehicles with colorful LED lights on the hood, around license plates, underneath, etc.
  • Motorcycles are extremely popular. One tour guide who’s also a motorcycle rider said he estimates the number of other bikers he sees on the roads has nearly doubled in the past 7 years.
  • On a “Chicken Bus”, be prepared to be squashed like sardines if you don’t get a seat. And try not to end up near the front door because they usually won’t close it even while speeding through steep winding (occasionally unpaved) roads in the mountains.
  • The rule of the road is usually the largest vehicle that gets there first has the right of way. The order of hierarchy looks something like this: large truck>bus>van>SUV/small truck>sedan>Horse>tuk-tuk/pedicab>motorcycle>scooter>bicyclist>pedestian
  • DVD bootleggers work extremely quickly. I saw a bootleg of the Robocop remake on the streets at least a day or two before its official release in theaters.
  • While staying at the few places that had cable television I flipped through channels to get an idea of what Nicaraguan viewers were offered. I was disappointed to find that out of nearly 100 channels, about 2/3 of them featured primarily dubbed or subtitled U.S. television programming and Hollywood blockbusters. Out of the remaining 1/3, about a dozen featured mostly telenovela soap operas, another dozen were spanish language original programing featuring occasional dubbed or subtitled Hollywood films and spanish language versions of popular North American game shows and reality TV, there were about a half dozen music channels featuring latin and some U.S. pop music and just a few regional and public access stations devoted solely to news, local culture and community events.
  • For some reason, 70s-80s era adult contemporary or “yacht rock” music seems to be popular. While in more than a few shops and restaurants that don’t cater to tourists I’ve heard the likes of Brian Adams, Air Supply and Christopher Cross playing on the radio in the background.
  • In more bohemian “cultural cafes” the music of choice seems to be artists eternally popular with college kids and hippies (ie. Hendrix, Doors, Beatles, Pink Floyd, Bob Marley etc.) which though I am neither I do enjoy.
  • Backpacks and shoes seem to be popular items. At almost every major street market  in every town I’ve been to, usually located close to the main bus stations, there were huge numbers and varieties of these items sold at multiple booths. My theory is that since most kids in Nicaragua go to Catholic schools and are forced to wear uniforms they might value these items more as expressions of individuality (and they’re practical).
  • Many young people in Nicaragua (mostly middle/upper-middle class) are just as enraptured by wireless technology as people in the states.
  • Another favorite pastime among the youth is hanging out in the central parks (usually located near the largest church) where I’ve seen some groups do awesome breakdancing competitions.
  • The “typico” Nicaraguan meal of salsa, beans, rice, eggs, cheese and plantains is cheap, delicious and will get you through the day.

A Brief History of Nicaragua

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To have even a basic understanding of Nicaraguan culture it’s important to first know a little about the land’s history. In the Pre-Columbian era, the region now called Nicaragua was inhabited by several tribes culturally related to Aztec and Maya civilizations. Not long after Christopher Columbus first reached Nicaragua in 1502, an attempt was made to conquer the region by Gil González Dávila in the 1520s. On April 17, 1523, Dávila first met with Cacique Diriangen, leader of the Dirian peoples. Dávila gave the tribe a three day deadline to become Christians but rather than comply Diriangen led an attack, making him the first known resistance fighter of Nicaragua.

A statue of Diriangen at the entrance to the town of Diria.

A statue of Diriangen at the entrance to the town of Diria.

During over 300 years of colonization, countless indigenous people died of diseases, rival conquistadors waged war on each other, Caribbean pirates raided cities along Lake Nicaragua, British forces fought the Spanish in Nicaragua during a sub-conflict of the the Seven Years’ War, and in 1610 Momotombo volcano erupted, destroying the old capital city of León. In 1838, Nicaragua became an independent republic. Within a few decades, during a power struggle between León and Granada, filibusterer William Walker was hired by the government of León to fight on their side but he exploited the region’s instability and briefly established himself as President of Nicaragua before being forced out of the country a few years later. Three decades of conservative rule followed, during which the U.S. began formulating plans to build a canal across Nicaragua (which may soon become a reality with funding from Chinese corporations). However, when the U.S. shifted their plans to Panama, President Jose Santos Zelaya attempted to negotiate with European partners. Because of the potential threat Zelaya posed to U.S. hegemony and his ambitions to unite the Central American nations, the U.S. government compelled him to resign with the threat of military force and funding of conservative opposition groups, replacing him with a series of puppet regimes. Attempting to prevent insurrection, Nicaragua was occupied by U.S. Marines from 1912 to 1933. From 1927 (the start of Somoza’s rise to power though the National Guard), national hero Augusto César Sandino led a guerrilla war against the conservative government and the U.S. Marines. Shortly after a peace agreement was reached with a newly elected Sacasa administration, the Marines left Nicaragua and the head of the National Guard, Anastasio Somoza García ordered Sandino’s assassination. Sandino was killed by National Guard troops on February 21, 1934. His body was hidden and never found. In 1937 Somoza ousted the Sacasa government in a rigged election.

A statue of Sandino at the Augusto C. Sandino Library, a museum located in the house where he grew up in the town of Niquinohomo (Valley of the Warriors).

A statue of Sandino at the Augusto C. Sandino Library, a museum located in the house where he grew up in the town of Niquinohomo (Valley of the Warriors).

The Somoza regime was Nicaragua’s longest lasting hereditary military dictatorship, having ruled for 43 years. The father of the dynasty, Anastasio Somoza García, was famously called “our son of a bitch” by FDR and was assassinated by 27 year old poet Rigoberto López Pérez in León in 1956. In response to increasingly corrupt and reactionary policies of the Somoza government, Carlos Fonseca, Silvio Mayorga, and Tomás Borge led the formation of the Sandinista National Liberation Front (Frente Sandinista de Liberación Nacional or FSLN, named after and inspired by Augusto Sandino) in 1961. In 1972 a major earthquake hit Managua killing 6000 people, injuring tens of thousands and leaving hundreds of thousands homeless. President Anastasio Somoza Debayle mishandled the situation by failing to distribute essential aid and supplies. When it was later revealed that the government was siphoning relief money for personal gain, popularity and membership of the FSLN greatly increased. Hundreds of Chilean refugees also joined their ranks after a CIA-backed coup assassinated Chilean president Salvador Allende in 1973 and installed the dictator Augusto Pinochet the following year.

A display at the Carlos Fonseca Museum in Matagalpa.

A display at the Carlos Fonseca Museum in Matagalpa.

When Pedro Joaquin Chamorro, editor of the national newspaper and critic of Somoza, was assassinated by the government on January 10, 1978, a mass insurrection was triggered. By the end of Summer, armed youths took over Matagalpa while factions of the FSLN and civilian recruits had the National Guard under siege in Managua, Masaya, León, Chinandega and Estelí. On July 19, 1979, FSLN forces entered the capital and officially assumed power. Just two days before, Anastasio Somoza Debayle resigned and fled to Miami. He was killed a year later by a rocket attack from members of the Argentinian Revolutionary Workers Party while in exile in Paraguay.

Though the Sandinista government inherited a country in ruins and over a billion dollars in debt, they had an ambitious platform which included:

  • nationalization of property owned by the Somozas and their supporters
  • improved rural and urban working conditions
  • free unionization for all workers, both urban and rural
  • price fixing for commodities of basic necessity
  • improved public services, housing conditions, education
  • abolition of torture, political assassination and the death penalty
  • protection of democratic liberties
  • equality for women
  • non-aligned foreign policy

The Sandinistas had early successes with their education and literacy programs but were soon hindered by emerging conflicts with counter-revolutionary Contra forces heavily financed, armed and trained by the CIA. Investigations into the Iran-Contra scandal revealed some of the funding was acquired through arms sales to Iran and drug shipments to U.S. inner cities (read Gary Webb’s Dark Alliance for more about this). Despite strong support for the opposition by the U.S., the FSLN’s Daniel Ortega won the 1984 elections. Less than a year later the Reagan administration implemented a complete embargo on U.S. trade with Nicaragua that would last five years. By the late 80s, the continuing Contra campaign was notorious for human rights violations, corruption and terrorism. In August 1987, Costa Rican president Oscar Arias Sanchez created a peace accord which led to a ceasefire signed by Contra and Sandinista representatives a year later. Disillusioned by conflict and economic strife (made worse by Reagan’s embargo), Nicaraguan voters elected conservative administrations throughout the 1990s and early 2000s but seeing little improvement and much corruption, they reelected FSLN member Daniel Ortega in 2006 and 2011. So far, there has not yet been radical reforms that corporate investors feared and that more radical liberals hoped for, but Ortega has maintained a skepticism towards capitalism while simultaneously maintaining relations with the U.S. and rivals such as Iran, Libya and Venezuela.

As for how the average Nicaraguan feels about their current situation, opinions seem to vary but I plan to share some of the impressions I got in a future post.

Back in the Belly of the Beast

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Those who spend their lives within the belly of the beast see mostly the insides of the belly. Traveling outside the beast gives one a better idea of what the beast looks like and the impact of its actions on the world. For those who missed the 1/31 post (my last “live” post before this one), for the past few weeks I’ve been traveling through Central America. More specifically, exploring various towns, cities and nature reserves across Nicaragua. Though my primary reason for being there was for vacation, I took it as an opportunity to learn much about the region’s culture, environment, and often turbulent past. Though I’m sure much has happened while I was away (I’m still catching up on news), within the next few days I hope to share some of what I learned and experienced on the trip.

For others who might be planning vacations to other countries combining recreation and education, the importance of having at least a basic grasp of the native language (or traveling with fluent bilingual people) shouldn’t be underestimated. It greatly enriches interactions not only because locals can express themselves more authentically in their primary language, but it could help reduce potential social tensions. While many less developed nations including Nicaragua are increasingly economically dependent on the tourism industry, tourists need to be aware of problems their presence may cause or contribute to such as gentrification, cultural commodification and cultural dilution. U.S. tourists speaking in native tongues might not solve such problems, but it at least symbolically helps counteract inherent power imbalances while making possible more conscious consumer choices such as supporting smaller ecotourism, agritourism and community-based establishments which may not offer the same level of English language services and materials as larger, often foreign-owned businesses which cater to English language speakers. Greater fluency in the native language also allows tourists to acquire and compare more information on essential expenditures such as transportation, lodging and food, resulting in options of higher quality or greater practicality (and preferably locally-owned) for less money.

That being said, I’m definitely not fluent in Spanish but was fortunate enough to travel with someone who is. Without my travel partner I wouldn’t have been able to experience nearly as much as I did. Among the highlights:

  • Jumping into the Rio Coco in Somoto Canyon from a height of 12 meters (high enough for me).
  • Hiking though a cloud forest in the mountains surrounding Jinotega.
  • Kayaking on rough waters of Lake Apanas.
  • Seeing indigenous petroglyphs in a rural village near Matagalpa.
  • Climbing to the roof of the Basilica Catedral de la Asuncion in Leon, the largest church in Central America.
  • Learning to ride a motorcycle and driving it across Ometepe Island.
  • Hiking around the top of the Mombacho Volcano Nature Reserve.
  • Boating through Las Isletas near Granada.

There’s lots I’m leaving out, including visits to various cultural museums in different towns, some of which I plan to feature in future posts.