Here’s a nice thought for public education – let’s put automatic weapons into children’s hands, and let’s show them how to use them. Even better – let’s pay them $600 a week for the training. Sounds a bit wrong? Well, since 2006 it’s been the policy of the Toronto District Public School Board.[1] One other point – the students actually get credit for this, their placement with the military being done through the Army Reserve Cooperative Education Program.
A similar program existed in the 1990s, but was terminated in 2002. In this earlier program, when placed with the military as part of their “experiential” learning, students were not paid, as is the case with every other placement. In 2002, the Canadian Armed Forces terminated the program “since the army reserve in June 2002 determined that first they must pay students and second that they could not afford to pay.”[2]
But in 2005, talks opened up between the School Board and the Army Reserve leading to a revival of the program – this time with the students – who “actually become members of the Canadian Forces Primary Reserve” – being paid a salary equivalent to about $600 per week. In 2005-2006 there were 14 Toronto school children taking part in this program – one just 16 years old, three others just 17 – along with 104 others from “boards such as York Region, Peel, and Toronto Catholic School Boards.”[3]
This is being sold as a way of building character. “The military is great for time-management skills” said Martin Boreczek a corporal in the Reserve now attending York University. “A lot of things need to get done on time, which is something procrastinating university students could learn and apply.” But the real reason has more to do with war than study skills. Boreczek, for instance, was a soldier in Afghanistan from 2004-2005.[4] It is the needs of the war machine – now committed to fighting in that country until 2011 – which is behind the intrusion of war-making into the school system.
In response, Educators for Peace and Justice (EPJ) have launched a “War Free Schools” campaign. A fund-raiser to launch the campaign was held June 19 in the East End of Toronto. Teachers and students from high schools and universities listened to a presentation from Dylan Penner of Operation Objection, who made the case for getting the military out of our classrooms. Playing in the background were images from the War Free Schools Organizing Kit – a Backgrounder and a Handbook available from their web site, www.operationobjection.org.
Canada has a reputation as being a peacekeeper, but it is clear that this peacekeeping moment is now over. In 1991, Canada was a full participant in the first Gulf War. Its 1993 intervention in Somalia looked to the Somalis more like occupation than peacekeeping.[5] In 1999 it was one of the principal contributors to NATO’s bombing campaign against Yugoslavia. And from 2001 to the present, it has been a central component of the war in Afghanistan. This has been accompanied by initiatives from both Liberal and Conservative governments to increase spending on the military. Most recently, Prime Minister Stephen Harper’s government announced a plan for a significant expansion of Canada’s military. In May, the National Post gave a “sneak preview” of the plans.
Over the next 20 years, the Tories want to commit Ottawa to spending $30-billion more on the military. Mr. Harper foresees an expansion of our Forces to 100,000 soldiers, sailors and airmen. Troop strength will include 70,000 regular forces, up from 65,000 today, while the reserves will expand from 24,000 to 30,000. Ageing warships will be replaced, and new transport aircraft and armoured vehicles will be purchased. New medium-lift helicopters will be bought immediately to ferry our troops over and around roadside bombs and snipers in Afghanistan.[6]
This was confirmed while the fund-raiser was in progress. On the evening of Thursday June 19, 2008 – “the night before Parliament adjourns for the summer”[7] – a major document appeared on the National Defence web site, announcing a 20 year, $490-billion “Canada First” Defence Strategy to steadily upgrade Canada’s military capacity over a generation.[8]
This is being accompanied by a serious intensification to recruit young people into the Canadian military. In February 2006, then Chief of the Defence Staff, General Rick Hiller, launched “Operation Connection” whose goal was to enlist all the uniformed personnel of the Canadian Armed Forces into the recruitment effort, saying: “I expect every sailor, soldier, airman and airwoman to recognize their role as a potential CF recruiter, effectively spreading the load from the shoulders of recruiting centre personnel to the shoulders of all Regular and Reserve personnel.” The effect would be to enlist 85,000 uniformed personnel as active recruiters to the armed forces.[9]
This pressure to pull young people into the service of Canada’s wars abroad is not going to end anytime soon. Building a movement to get the troops out of Afghanistan, is going to require building a movement to get the military out of our schools. No blood for oil, no youth for the killing fields.
© 2008 Paul Kellogg
References
[1] “Briefing Note: Cooperative Education and the Canadian Armed Forces,” Toronto District School Board, June 5, 2006
[2] “Briefing Note”
[3] “Briefing Note”
[4] “Military co-op opens door to a career,” ylife: York’s Weekly Newsletter for Students, October 2, 2006
[5] Sherene H. Razack, Dark Threats and White Knights: The Somalia Affair, Peacekeeping and the New Imperialism (Toronto: University of Toronto Press, 2004)
[6] “Bolstering our Forces,” National Post, May 14, 2008
[7] David Pugliese, “Parliament in the dark on major weapons purchase,” Canwest News Services, June 19, 2008
[8] “Canada First Defence Strategy,” National Defense, Canada, June 18, 2008
[9] “Op CONNECTION: Reaching out and touching Canadians,” National Defense, Canada March 9, 2006. For the response of the anti-war movement, see Dylan Penner, ed., War Free Schools: The Rise of the Counter-Recruitment Movement (Toronto: Act for the Earth, 2006)
Tuesday, July 8, 2008
War Free Schools
Friday, July 4, 2008
The case for deep writing
Letter to the Editor submitted to The Atlantic July 2, 2008 • Nicholas Carr says that Google is making us stupid.[1] The ubiquity of the Internet, he argues, is leading to a change in the habits of information acquisition, a change in the norms of information processing, and an accompanying change in the very structure of our way of thinking. The very strong implication of the article is that this is a “bad thing,” leading to the demise of what he calls “deep reading”. But deep reading requires its complement, deep writing – deep writing requires facts, and the article has, well, none. The handful of anecdotes at the beginning of the article do not so qualify. Neither does the cute story about Nietzsche and the typewriter. They make good journalism, good copy, but they do not make good research. And without facts, deep writing is close to impossible.
There is one part of the article that does, I think, provide an interesting “open door” to such deep writing. “The Internet” Carr writes is “becoming our map and our clock, our printing press and our typewriter, our calculator and our telephone, and our radio and our TV.”[2] Think about the latter for a minute. Carr throughout is presuming a causal relationship between an increase in Internet reading and a decline in “deep reading” (the focused immersion in long articles, books, etc.). Perhaps, however, this is a false, very false, equation. Perhaps the Internet is not a step down from “deep reading” but a step up from channel surfing? That might be a very good thing, as there are many studies about that older medium – television – warning about its baneful effects on literacy.[3]
I go to the Internet, stopwatch in hand (an homage to the reference to Taylor in the article). Two minutes gone. I have a 2002 study by Norman H. Nie and Lutz Erbring (both at the time at Stanford University). “Internet and Society: A Preliminary Report” is worth some deep reading. It indicates that Internet use is cutting into time spent with friends and family, a shift that worries them. But it also concludes that “time on the Internet is coming out of time spent viewing television.”[4] Seen from this standpoint, the spread of the Internet might be seen as a quite positive development – the evolution, if you will, from “Happy Days” and “Rockford Files” to Google, Facebook and Email.
This has me suddenly engaged in what Carr cites (negatively) as “a form of skimming activity”[5] – to whit, wondering about the relationship between email (the Internet’s close cousin) and writing ability. This time it takes longer – three minutes – but the extra minute is worth it. I find an authority, Al Filreis, director of the Center for Programs in Contemporary Writing at the University of Pennsylvania, who, according to a 2005 Associated Press story, “thinks frequent e-mail improves writing: ‘To become a better writer, you have to write.’”[6]
But the central issue has yet to be broached – the connection, if any, between Internet use and deep reading. Let’s try a hypothesis – that book purchases are a good proxy for deep reading, and that a decline in deep reading would be made evident in a decline in book purchases. You might know where I’m going with this. If my city is anything like your city, one of the most interesting phenomena of the end of the last century and the beginning of this century has been the explosion of big box bookstores. There is also, of course, the Amazon.com explosion. There was also the near hysteria about the release of the latest Harry Potter book, and the interesting sight of millions of young (and old) engaged in what looked quite a lot like “deep reading.”
Can this be quantified? This time the stopwatch records twenty minutes of research – the information is a little more hidden. But then I have it – the U.S. Census Bureau provides information from 1992 to 2007 on sales from bookstores in the United States.[7] The following chart is the result.
What does it tell us? First, bookstore sales in the U.S. have doubled from 1992 to 2007, from just over $8 billion to just over $16 billion. Second, that growth has now flattened in the period 2004 to 2007. What can we conclude from this? Not very much. First the growth rate while real, needs to be qualified by both population increases and inflation. Second, the “flattening” in recent years may be related to the spread of the Internet – or it may be related to the spread of the sub-prime mortgage crisis and resulting economic hardship – another matter that demands both serious deep reading and deep writing. Or perhaps the industry did expand, responding to demand, but did so too quickly – is now in a holding pattern, but will return to growth shortly. What the graph does not show, however, is a steep drop off in purchases of books in the United States. I guess we have to say, then, that the jury is still out.
Enough. This is simply a quick foray into an area opened up by Carr’s provocative article, emphasis on the word “quick.” While this response to Carr is an appeal for “deep writing,” it is certainly not an example of the art. That would require more focus, more time – and perhaps more, not less, use of the Internet.
© 2008 Paul Kellogg
References
[1] Nicholas Carr, “Is Google Making Us Stupid?,” Atlantic, July/August 2008, pp. 56-63
[2] Carr, p. 60
[3] See for example, Sonia Livingstone and Moira Bovill, Children and Their Changing Media Environment: A European Comparative Study (Mahwah, New Jersey: Lawrence Erlbaum: 2001)
[4] Norman H. Nie, Lutz Erbring, “Internet and Society: A Preliminary Report,” IT & Society, Volume 1, Issue 1, Summer 2002, p. 280
[5] Carr, p. 58
[6] Cited in “Is email ruining the way we write?” Associated Press, December 12, 2005
[7] U.S. Census Bureau, “Service Sector Statistics: Estimates of Monthly Retail and Food Services Sales by Kind of Business,” 1992-2007
The Gutter Press and the ‘War on Terror’
Letter to the Editor submitted to The Globe and Mail June 26, 2008 • George Bush is white. Stephen Harper is white. Tony Blair is white. So, I will now write about white terrorism as a plague covering the planet, given that several hundred thousand in Iraq and Afghanistan, as a result of the military actions of these white men, are dead, maimed and/or traumatized. I will use the term “honky.” Were I to do this, of course, and submitted it as an article to the very respected The Globe and Mail, it would be rejected as being inflammatory, crude and, well, just a little too “gutter”. The language of the tavern is not appropriate for Canada’s national newspaper. However, when Christie Blatchford applies the same technique to people from Pakistan, not only is her article accepted – it is featured on the front page.[1]
But I urge you not to stop at the front page. Read the article in its entirety. She goes on to write about a man whose mother was in the World Trade Centre September 11, 2001, but who managed to survive. But the son, to Blatchford’s surprise, does not sign up to fight for the United States but is “inspired to go to Afghanistan not to fight the guys who nearly killed his mummy, but to fight the dirty kuffar, or infidels.”
She then compares him to an elephant, likens Manhattan to “civilization,” Central Asia to “the jungle” and says that the fellow left Manhattan for “the wilds of northern Pakistan, and wanted all the more to blow civilization to smithereens.”
Rudyard Kipling would be delighted. Blatchford has “taken up the white man’s burden” complete with racializing the enemy (Kipling disgustingly called his era’s enemy “new-caught, sullen peoples, Half-devil and half-child”) all to prosecute our era’s “savage wars of peace.”[2]
It is a shame that 109 years after Kipling’s hymn to racism and imperialism, there are some who have not discovered a better hymnal. It is a shame that seven years after the launch of the “War on Terror,” Canada’s national newspaper could give pride of place to something as poorly written and racially provocative as this article by Blatchford.
© 2008 Paul Kellogg
References
[1] Christie Blatchford, “ ‘Down with the J,’ and out of their senses,” The Globe and Mail, June 24, 2008, p. A.1.
[2] Rudyard Kipling, “The White Man’s Burden,” Literature Network, Rudyard Kipling, www.online-literature.com
Let’s Not Forget Mexico
Letter to the editor printed in Queen’s Alumni Review, Review Plus, Volume 82 Number 2, May 19, 2008 • Thanks to Sara Beck for her informed, well-researched and interesting article, "A Question of Treason."[1] The stories of Israel Halperin in the 1940s and the Security Certificate Five in the 21st century show clearly the frightening ease with which human rights can be swept away in moments of societal panic.
One small correction I would like to make. Sara calls the events of 9/11 "the most horrific act of violence ever on North American soil." I have in front of me William H. Prescott's classic History of the Conquest of Mexico and History of the Conquest of Peru.[2] The first few hundred pages of the book amount to a dry tale of the utmost brutality carried out by the European armies of Cortés against the people of what is today Mexico, culminating with his barbaric assault on the capital.
And when the conquest was complete, the corpses “‘lay so thick,’ says Bernal Diaz, ‘that one could not tread except among the bodies.’ ‘A man could not set his foot down,’ says Cortés, yet more strongly, ‘unless on the corpse of an Indian!’ They were piled one upon another, the living mingled with the dead. ... Death was everywhere. The city was a vast charnel-house, in which all was hastening to decay and decomposition. A poisonous steam arose from the mass of putrefaction, under the action of alternate rain and heat, which so tainted the whole atmosphere, that the Spaniards, including the general himself, in their brief visits to the quarter, were made ill by it, and it bred a pestilence that swept off even greater numbers than the famine.”[4]
Enough. The attacks of 9/11 were acts of terrible violence. But they do not qualify as “the most horrific act of violence ever on North American soil.” As someone who teaches history and politics of Latin America and the Caribbean, I feel it is important to qualify that one sentence from an otherwise excellent article. Mexico is part of North America, and we have to know that the Europeanization of North America – in Mexico, in the United States and in Canada – has at its foundation terrible acts of violence against this continent’s original inhabitants.
© 2008 Paul Kellogg
References
[1] Sara Beck, “A Question of Treason,” Queen’s Alumni Review, Volume 82 Number 1, February 19, 2008
[2] William H. Prescott, History of the Conquest of Mexico and History of the Conquest of Peru (New York: Modern Library, 1936)
[3] Prescott, p. 592
[4] Prescott, p. 599
Monday, June 2, 2008
Bolivia: Referendums of Reaction
To understand the recent “autonomy” referendums in Bolivia, don’t count the ballots – travel to the south-central city of Sucre. Saturday, May 24 a horrific scene of racism and violence played out that exposed the reactionary nature of the forces fighting for “autonomy.”
That day, Bolivian president Evo Morales was scheduled to appear in the town to announce the delivery of some new ambulances and some government funding for local projects.
“But in the early hours of Saturday morning, organized groups opposed to Morales began to surround the stadium where he was to appear a few hours later. Confronting the police and soldiers with sticks, stones and dynamite, they managed to occupy the stadium.”[1]
It was a racist occupation. Morales cancelled his visit, but the mob wasn’t satisfied. They surrounded several dozen Morales supporters – many of them Quechua Indians – robbed them, forced them to walk several kilometres, and then “to kneel, shirtless, and apologize for coming to Sucre.”[2]
Morales is an Aymara Indian, the first indigenous president in Bolivia’s history. Bolivia’s population is two-thirds indigenous, mainly Quechua and Aymara. The people of the western highlands, who are in the main indigenous, were the key to the surprise election victory of his party, Movement to Socialism (MAS), in 2004. The racist mob which attacked his supporters in Sucre, are part of a movement rooted in the European minority of Bolivia, resentful of Morales’ attempt to redistribute wealth in the country.
Central to that redistribution is a new constitution that will allow greater access to the land for the indigenous majority. This majority has been fighting for equality for centuries. It took a revolution in 1952 to abolish a system called “pongaje” that was a kind of feudalism, in which the indigenous people had few rights, and were virtually slaves to European landowners.
This is the necessary background to the “autonomy” referendums taking place in Bolivia. May 4, the voters in Santa Cruz were said to have voted “with a majority of no less than 85 per cent” to have greater autonomy. June 1, the departments of Beni and Pando also voted for autonomy, “with a majority of nearly half a million.”[3]
But these claims are quite dubious. First, these referendums do not have legal status, and Morales’ instructions to his supporters were to refuse to participate. The “high rate of abstention in various provinces in Santa Cruz such as Camiri (42%), Puerto Suárez (31%), Montero (62%), Portachuelo (19%), San Ignacio de Velasco (17.8%), Charagua (40%) and Saipina (60%), indicate an overall abstention rate of between 40-45%, according to the Bolivian Information Agency.”[4] And as British-based Latin American expert Mike Gonzalez has pointed out, those who did vote, often did so out of fear, voting “under the watchful eye of the thugs of the UJC – the neo-fascist youth organization of Santa Cruz.”[5]
The referendums all are couched in demands for “autonomy.” These demands are accepted uncritically in most of the western media. More balanced coverage is available from Al Jazeera.
“Statutes passed in Santa Cruz and on the ballot in Beni and Pando would protect huge cattle ranches and soya plantations from expropriation under Morales’ ambitious land reform. Santa Cruz also voted to withhold a bigger share of its natural gas reserves, which Morales needs to finance his reforms, although the state has yet to enforce the rule.”[6]
The threat of withholding the natural gas reserves is now a central issue. The next referendum will take place June 21 in natural gas rich Tarija – centre of most of Bolivia’s gas reserves.
It is critically important that the Bolivarian Republic of Venezuela has rejected the results of these “autonomy” referendums. That country’s representative to the Organization of American States (OAS), Jorge Valero, said he was certain that a majority of Bolivians rejected the results in Santa Cruz, “despite the media terrorism which aimed to persuade them of the suicidal policy of dividing their country.”[7]
The support of Venezuela will be crucial in the coming months. These referendums are not just a cover for the European elite in Bolivia – they are seen by US imperialism as a vehicle for undermining the new sovereignty movements that are challenging its hegemony everywhere in Latin America.
Respected analyst Eva Golinger has convincingly documented that two agencies notorious for undermining popular movements in Latin America – USAID and the so-called “National Endowment for Democracy” – are deeply involved in supporting the “autonomy” movement.
“In Bolivia,” she wrote last year, USAID “is openly supporting the autonomy of certain regions, such as Santa Cruz, Beni, Pando and Tarija, and therefore promoting separatism and the destabilization of the country and the government of Evo Morales. The National Endowment for Democracy (NED), another one of Washington’s financial organs, which promotes subversion and intervention in more than 70 countries across the world, including Venezuela, is also funding groups in regions such as Santa Cruz, which fight for separatism.”[8]
We all have a stake in the desperate struggle underway in this, the poorest country in South America. It was in Bolivia in 1999, that the poor rose up and delivered a central blow against neoliberalism, when a mass movement in Cochabamba stopped the privatization of water. If the forces of neoliberalism and imperialism succeed in reversing this movement, all the people of the Americas will suffer, not just the poor and the oppressed in Bolivia.
What you can do
• In Toronto, June 11, 7pm, Toronto Bolivia Solidarity will be holding a meeting at OISE (St. George and Bloor) to discuss the attack on democracy in Bolivia. For more information, torontoboliviasolidarity@gmail.com
• For more information, see boliviarising.blogspot.com and http://grupoapoyo.org/basn/
© 2008 Paul Kellogg
References
[1] Franz Chávez, “Bolivia: Local Indigenous Leaders Beaten and Publicly Humiliated,” Inter Press Service News Agency, May 27, 2008, www.ipsnews.net
[2] Chávez, “Bolivia: Local Indigenous Leaders Beaten and Publicly Humiliated”
[3] Cees Zoon, “Bolivia: mutiny in the provinces,” Radio Netherlands Worldwide, June 2, 2008
[4] Kiraz Janicke, “Venezuela Rejects Bolivian Province’s Autonomy Vote,” May 5, 2008, venezuelaanalysis.com
[5] Mike Gonzalez, “Fight for Bolivia’s future lies behind referendum,” Socialist Worker (U.K.), May 10, 2008, www.socialistworker.co.uk
[6] “Bolivian states vote for autonomy,” All Jazeera English, June 2, 2008, http://english.aljazeera.net
[7] Janicke, “Venezuela Rejects Bolivian Province’s Autonomy Vote”
[8] Eva Golinger, “USAID in Bolivia and Venezuela: The Silent Subversion,” September 12, 2007, venezuelaanalysis.com
Saturday, May 31, 2008
Labour solidarity with Palestine
“I want to express my gratitude to both CUPE (Canadian Union of Public Employees) and CUPW (Canadian Union of Postal Workers) for the solidarity they have shown to the Palestinian people.” With these words, Manawell Abdul Al, member of the executive committee of the Palestinian General Federation of Trade Unions summed up the sentiment at the 150-strong opening plenary of the “Brick by Brick” conference at the Steelworkers Hall in Toronto. He was referring to the motions passed first at CUPE-Ontario, and this year at CUPW national, supporting the campaign for Boycott, Divestment and Sanctions against the state of Israel.
Organized by the Labour Committee of the Coalition Against Israeli Apartheid (CAIA), the conference focused on “building labour solidarity with Palestine.” As well as members of CUPE and CUPW, the weekend conference brought together members of CAW (Canadian Auto Workers), the USWA (United Steelworkers of America), FNEEQ (Fédération nationale des enseignantes et des enseignants du Québec), OSSTF (Ontario Secondary School Teachers Federation) and other unions to debate ways to strengthen the BDS campaign in the labour movement.
Marion Pollack from CUPW also spoke on the opening panel. “It is very clear to us that the struggle facing the Palestinian people is the same struggle faced by the South African people against apartheid,” she said, and thanked CUPE Ontario for taking the lead in being the first major union grouping in Canada to pass a BDS resolution. In the wake of the CUPE Ontario resolution, there were literally thousands of emails sent by pro-Israeli forces denouncing the union. After CUPW members at the recent national convention voted 90 per cent to endorse the BDS resolution, “we were braced for a backlash” Pollack said. “However, we have not had the same level of fall-out.”
One of the most moving speeches came from Paul Loulou Chery, Secretary of the Confederation of Haitian Workers. He described the extremely difficult conditions being faced by Haitian workers, chafing under military occupation sanctioned by the United Nations. He talked about the conditions created by the 2004 coup d’état, carried out by the military of the U.S., France and Canada. But he also said that even though Haitian workers face terrible conditions, they do not want their Palestinian sisters and brothers to stand alone. Manawell Abdul Al took the microphone in response, and said that the occupation of Haiti and the occupation of Palestine are one and the same. “It is the dictatorship of capital that wants to exploit and put its hands on the wealth of the people.”
Notably present at the opening plenary was Phyllis Bennis, well known anti-war activist, (prominent in United for Peace and Justice (UFPJ), the principal anti-war organization in the United States), who spoke from the floor as a member of the US Campaign to End the Israeli Occupation. Also from the US were members of US Labor Against the War. Links with the U.S. anti-war and labour movements will be critical in the campaign to build solidarity with Palestine.
© 2008 Paul Kellogg
Resources
Coalition Against Israeli Apartheid Labour Committee, www.caiaweb.org/labourcommittee
CUPE B.C., The Wall Must Fall, 2007, www.cupe.ca/updir/WallMustFall2007-eng.pdf
CUPE, "CUPE Resolution 50 Palestine", www.cupe.on.ca
CUPW, Resolution for BDS, http:stopthewall.org
U.S. Campaign to End the Israeli Occupation, www.endtheoccupation.org
Friday, May 30, 2008
The toxic tango of markets and housing
You can see it in the streets of Cleveland, or Buffalo, or Minneapolis. On all those streets, the working poor who five years ago lived in their own homes, are back in cramped apartments, paying rent to their landlords. On the streets where they used to live, their old houses sit boarded up and rotting. Every week, some of these homes come down, as city governments spend millions to demolish houses abandoned because of what is being called the “subprime” mortgage crisis. It should be called the “free-market” housing crisis. What these streets tell us is the catastrophic failure of a decade long experiment in using the free-market to regulate housing policy in the United States.
Go back to 1999. Then U.S. Federal Reserve Chairman Alan Greenspan put his weight on the scales to block new regulations for interesting things called “derivative products.” Any new regulations would be a “major mistake” he told the Futures Industry Association in March of that year.[1] Derivatives are complex financial instruments whose value is related to an underlying asset. They can become enormously complex. But Greenspan – at the time arguably the most powerful financial manager in the world – used his authority to make sure that the trading in these derivatives should be very loosely regulated. Greenspan is a free-market evangelist.
A loosely regulated derivatives market encouraged the creation of “exotic” investment vehicles, including the practice of combining consumer debt (credit card debt, automobile, mortgages, etc.) from hundreds and thousands of different customers, dividing up the resulting amalgam into smaller portions, calling them “securities,” and then selling these securities for a profit. The underlying assumption was that behind these “exotics” were real assets – debt that was going to be repaid.
Move ahead to 2001. The long stock market expansion rooted in the 1990s came to a sudden halt. The enormous speculation in high tech industries was unsustainable. The stock index most closely associated with the high tech sector – the NASDAQ – suffered a collapse that rivaled that of the Japanese stock market ten years earlier.
Greenspan’s response was to cut interest rates to almost zero – effectively, printing money and making it available on the cheap to banks and other financial institutions, to keep the US economy out of recession.
But this had another effect. Other interest rates came down as well, including those for mortgages. With interest rates for mortgages at historic lows, a new industry emerged – selling mortgages to people who had low incomes, who had never thought of buying a house.
From the standpoint of the poor, it was a good move. If low interest rates meant that a mortgage was cheaper than rent, then why not invest in a mortgage? Millions did so. This in turn fed the practice of repackaging this debt as exotic derivatives, and increasing portions of these derivatives had mortgages as the underlying asset – and many of those were the mortgages taken on by the poor, the ones we have come to call “subprime”.
Don’t blame the poor for the consequences. According to Mark Seifert of Cleveland’s East Side Organizing Project (ESOP) “predatory lenders targeted inner-city, African-American neighbourhoods, where they fudged property values and signed up thousands of borrowers without explaining the details of the loans.”[2]
Lenders and investors were locked in a toxic tango – lenders pushing “cheap” mortgages on the working poor, investors creating a billions-dollar market for the derivatives based on these “cheap” mortgages. As long as the tango lasted, both lenders and investors made huge sums of money in fees and bonuses.
The low rates driving this tango could not last. In the years after 2001, the U.S. Federal Reserve sent interest rates steadily higher. The low interest rate policy had saved the stock market, but it had created another problem – a weakening of the U.S. dollar, which was slowly losing strength against other currencies. To protect the dollar, interest rates rose higher and higher.
By 2007, the problems created were massive. The rise in interest rates meant that mortgage payments were floating up, not down. The low “teaser” rates were ending, and millions of working poor did not have the income to make their payments. The home ownership mirage of the early 21st century had, in the words of British analyst Robin Blackburn, “avoided the real problem, which is the true extent of poverty in the Untied States and the folly of imagining that it can be banished by the waving the magic wand of debt creation.”[3]
Predictably, the working poor were driven from their homes. Their mortgages were unsustainable. They returned to cramped apartments, the locks on their foreclosed homes were changed, windows boarded up, a target for wind, rats and vandalism.
The result is an enormous mess. The subprime/derivatives tango had encouraged real estate speculation sending house prices through the roof. With defaults on the rise, the housing market is being flooded with homes, and predictably prices are now collapsing. But the derivatives market based on mortgages and based on assumptions of continuously rising real estate prices had become truly massive. The Federal Reserve has abandoned its high interest rate policy in an attempt to reduce the damage. This has had some impact – the U.S. economy is not yet in an official recession. But it is exposing the U.S. to other risks, as the return to low interest rates has accelerated the decline of the U.S. dollar.
But the real victims of the subprime crisis are on the working class streets of Cleveland. In 2003, there were 200 foreclosures in Cleveland Ohio. In 2007, there were 7,583. “On average, 20 Cleveland homeowners faced foreclosure every day last year.”
“Many streets” are “lined with vacant buildings. Most have been stripped of windows, doors, siding and even copper wiring and pipes.” And after a while, there is nothing to do with an abandoned house except to tear it down. “Last year, Cleveland spent $7-million demolishing abandoned homes, compared with about $1-million a couple of years ago.” That demolition bill might rise to $70 million to deal with all the vacant buildings.[4]
This is not just a Cleveland story. Chicago Heights mayor Anthony De Luca said that “city officials are planning a major wave of demolitions of homes and businesses that have been left in disrepair.”[5] And governments in Cleveland, Baltimore, Buffalo and Minneapolis “have all filed lawsuits against lenders or developers based on the devastating effects foreclosures have wreaked on their communities.”[6]
“I was aware that the loosening of mortgage credit terms for subprime borrowers increased financial risk” said the Greenspan in his very defensive autobiography. “But I believed then, as now, that the benefits of broadened home ownership are worth the risk.”[7] But Greenspan was wrong on derivatives and wrong on mortgages, and the result has been an economic and social mess.
Here’s a modest idea. Instead of pushing people out of apartments and into houses, and then back to their apartments, instead of boarding up their abandoned homes and then spending millions to demolish them, instead of spending additional millions to sue the lenders and developers who profited from this mess – instead of this frenzy of unproductive spending, lets instead invest in public housing. Instead of tricking people into financing this public housing with risky mortgages, lets make these new houses geared to income. Instead of leaving the managing of housing to speculators and developers, lets manage housing ourselves through the well-established principle of housing co-ops. There will be some who object, saying "that's a socialist housing program." Whatever you call it, it's a bit more rational than the chaos left behind by ten years of the free market.
© 2008 Paul Kellogg
References
[1] Nelson D. Schwartz and Julie Creswell, “What Created This Monster?”, New York Times, March 23, 2008; cited in Robin Blackburn, “The Subprime Crisis,” New Left Review, 50, March/April, 2008, p. 82
[2] Paul Waldie, “Is the U.S. housing mess headed our way?", The Globe and Mail, January 19, 2008, p. F.1
[3] Blackburn, p. 73
[4] Waldie
[5] David Schwab, “30 buildings to be demolished this summer,” The Southtown Star, May 4, 2008
[6] Julie Kay, “Empty Homes Spur Cities’ Suits,” The National Law Journal, May 9, 2008, www.law.com
[7] Alan Greenspan, The Age of Turbulence: Adventures in a New World, New York 2007, p. 233; cited in Blackburn, p. 82