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Frontrunning: January 23

  • Doubt Greets Bank of Japan's Easing Shift (WSJ)
  • Japan hits back at currency critics (FT)
  • Japan upgrades economic view for first time in eight months (Australian) - only to lower them in a few months again
  • GOP critics get opportunity to grill Secretary Clinton on Benghazi (Hill)
  • Global economy set for ‘slow recovery’ (FT)
  • Obama to back short debt limit extension (FT)
  • Spain economy contracted 1.3% in 2012: Bank of Spain (Presstv)
  • Unfinished Luxury Tower Is Stark Reminder of Las Vegas’s Economic Reversal (NYT)
  • Draghi Says ‘Darkest Clouds’ Over Europe Have Subsided (BBG)
  • High-Speed Dustup Hits a Clubby Corner (WSJ)
  • U.S. Budget Discord Is Top Threat to Global Economy in Poll (BBG)
  • Sir Mervyn King says abandoning inflation target would be 'irresponsible' (Telegraph)
  • Spain Says It May Cover 13% of 2013 Funding in January (BBG)
  • BOE Cites Pound as Rebalancing Obstacle in 8-1 Stimulus Vote (BBG)
  • Riksbank Has Room for More Cuts as Krona Gains, Ekholm Says (BBG)

Overnight Media Digest

WSJ

* Microsoft Corp entered discussions in recent days with private equity firm Silver Lake Partners and Dell Inc founder Michael Dell to help finance a leveraged buyout of the computer maker, according to people familiar with the deliberations. (http://link.reuters.com/vuq45t)

* Google Inc reversed the trend of slowing revenue growth in its core online advertising business, signaling that the internet giant is beginning to get a handle on how the consumer shift toward mobile devices is affecting the online ad industry. (http://link.reuters.com/xuq45t)

* Johnson & Johnson officials learned of problems with a metal hip-replacement implant in 2008, a year before the company stopped making the joints and two years before recalling them, according to documents unsealed in a California state court. (http://link.reuters.com/gyq45t)

* Allergan Inc said it will buy MAP Pharmaceuticals Inc in a $958 million deal that would help the Botox maker expand sales of medical treatments. (http://link.reuters.com/jyq45t)

* IBM Corp got back on track in the fourth quarter after disappointing investors the previous quarter as its software business and sales in emerging markets returned to growth. (http://link.reuters.com/byq45t)

* The White House offered a tacit endorsement of a House Republican plan to defer a fight over the U.S.'s borrowing limit, likely clearing the way for a deal that would forestall a showdown over the country's borrowing limit until late spring. (http://link.reuters.com/tuq45t)

* Prime Minister David Cameron plans to let the British people vote in about five years on whether or not to stay in the European Union, a surprise move critics say will hurt both economies and cast a new shadow over the troubled bloc. (http://link.reuters.com/suq45t)

* Two prominent names in semiconductors, Advanced Micro Devices Inc and Texas Instruments Inc, provided more evidence of soft demand for personal computers and other products. (http://link.reuters.com/myq45t)

* Dish Network Corp plans to close a further 300 Blockbuster stores in the U.S. in the coming weeks, leaving the video chain with less than one-third of the stores acquired by the satellite-television company in 2011. (http://link.reuters.com/nyq45t)

* Banks are fighting an effort by Fannie Mae to cut costs on backup insurance policies often imposed on cash-strapped homeowners, a step that would crimp the lucrative fees the lenders collect on the coverage. (http://link.reuters.com/hyq45t)

* The U.S. Securities and Exchange Commission barred Egan-Jones Ratings Co from issuing ratings on certain bonds, an unprecedented step by the regulator and a setback for a small credit-rating firm. (http://link.reuters.com/zuq45t)

* IKEA is poised to embark on a global spending spree, but its departing chief executive says red tape is slowing how fast the home-furnishings retailer can open its pocket book. (http://link.reuters.com/dyq45t)

FT

 CAMERON TO PROMISE IN-OUT EU BALLOT David Cameron will on Wednesday vow to settle Britain's future in the European Union with a straight in-out referendum by 2017, in a high-risk strategy which will test the willingness of Paris and Berlin to cut the UK a better membership deal.

KING STANDS BY INFLATION TARGETING The governor of the Bank of England has called for it to shed some of the burden of reviving Britain's economy, suggesting the UK government should do more to support the "disappointingly slow" recovery.

POSEN ATTACKS BANK OF ENGLAND'S CULTURE A former policy maker at the Bank of England has attacked the management and culture of the bank, saying its directors abdicated responsibility for reining in a governor who had become far too powerful.

BoJ ACTION TRIGGERS CURRENCY WAR FEARS The Bank of Japan bowed to domestic political pressure and pledged to buy government bonds in potentially unlimited quantities as international policy makers aired fresh concern about the possibility of a global currency war.

BARCLAYS REVAMP TO COST UP TO 2,000 JOBS Barclays is cutting up to 2,000 jobs in its investment bank as part of a strategic overhaul by the bank's chief executive Antony Jenkins. BUMI MOVES CLOSER TO TAKING LEGAL ACTION Bumi intends to take legal action to recover lost funds at its Indonesian subsidiary, Berau Coal, as well as considering other claims resulting from a four-month long investigation into "financial irregularities" at its mining businesses.

NYT

* Microsoft Corp is in talks to help finance a takeover bid for Dell Inc that would exceed $20 billion, a person briefed on the matter said. Microsoft is expected to contribute up to several billion dollars. (http://link.reuters.com/gar45t)

* A closer look at Google Inc's results shows that while the company continues to be a moneymaking machine, its most lucrative business, search on desktop computers, is slowing, while it has not yet figured out how to make equivalent profits on mobile devices. (http://link.reuters.com/har45t)

* Allergan Inc has agreed to pay nearly $1 billion to acquire MAP Pharmaceuticals and gain full control of its experimental treatment for migraine headaches, the two companies announced Tuesday night. (http://link.reuters.com/par45t)

* Investigators in the United States and Japan indicated on Tuesday that many questions remained unanswered in their search for the cause of two incidents in which lithium-ion batteries burned on Boeing Co's 787 aircraft. (http://link.reuters.com/var45t)

* An internal analysis conducted by Johnson & Johnson in 2011 not long after it recalled a troubled hip implant estimated that the all-metal device would fail within five years in nearly 40 percent of patients who received it, newly disclosed court records show. (http://link.reuters.com/kar45t)

* Celgene Corp's drug Abraxane prolonged the lives of patients with advanced pancreatic cancer by almost two months in a clinical trial, researchers reported Tuesday, signifying an advance in treating a notoriously difficult disease but not as big a leap as some doctors and investors had hoped. (http://link.reuters.com/nar45t)

* A hotly contested tax on financial trades took a big step forward on Tuesday when European Union finance ministers allowed a vanguard of member states to proceed with the plan. (http://link.reuters.com/qar45t)

* The governor of Nebraska on Tuesday approved a revised route through the state for the Keystone XL pipeline, setting up a decision for President Obama that pipeline opponents say will be a crucial test of his intentions on climate change. (http://link.reuters.com/rar45t)

* Facing criticism for selling garments made at a Bangladesh factory where 112 workers died in a fire last November, Wal-Mart Stores Inc told its worldwide suppliers that it was adopting tougher rules on fire safety at its contractors and would have "zero tolerance" for suppliers that used unauthorized subcontractors.

Canada

THE GLOBE AND MAIL

* British Columbia community minister Bill Bennett said on Tuesday that the final regulatory pieces have fallen in place for a new liquefied natural gas plant to be built on a native reserve near Kitimat.

The massive LNG plant, a joint venture by Apache Canada Ltd and Chevron Canada Ltd, in cooperation with the Haisla First Nation, will process about 700 million cubic feet of gas per day, becoming a key link in the transportation chain between the province's northeast gas fields and off-shore markets.

* Cash-strapped Parks Canada is consulting the public on a long list of proposed fee hikes for the country's national parks and historic sites, pointing out that the rates have been frozen since 2008 and costs are on the rise.

But at the same time as fees are going up, many services are in decline following C$55 million in announced budget cuts and the resultant 600 jobs lost across the system.

Reports in the business section:

* Quebecor Inc may be the next Canadian regional cable company that will strike a deal to eventually sell some of its unused wireless spectrum, predicts a new analyst report.

* The Canadian federal government is ready to offer financial incentives as part of a pitch to get Volkswagen AG to locate some manufacturing facilities in the country.

Industry minister Christian Paradis said he urged senior Volkswagen executives to "look north" during meetings in Berlin this week, offering the prospect of tapping into Ottawa's newly-replenished C$250 million ($252 million) auto innovation fund.

NATIONAL POST

* Calgary energy firm Griffiths Energy International Inc (GEI) pleaded guilty to a bribery charge under the Corruption of Foreign Public Officials Act and faces fines in excess of C$10.3 million. The company admitted that it paid C$2 million to officials in Chad to get an advantage in two exploration blocks in the oil-rich African country.

* Manitoba chiefs meeting in Winnipeg this week are reportedly slated to consider pulling out of the Assembly of First Nations, highlighting the fragility of a national body that some say needs a reset of its own.

FINANCIAL POST

* Inmet Mining Corp made its long-awaited rejection of First Quantum Minerals Ltd's C$5.1 billion hostile bid on Tuesday.

The Toronto-based miner disputed First Quantum's assertion that it could realize enormous cost savings at Cobre Panama project by using its internal project team and hiring far fewer contractors.

* Supermarket chain Metro Inc will sell about half of its 25-year investment in convenience store operator Alimentation Couche-Tard to three Canadian banks for C$479 million.

The Montreal-based company said on Tuesday that it has agreed to sell 10 million Class B subordinate voting shares to BMO Nesbitt Burns, National Bank Financial and TD Securities for C$47.90 per share.

* Air Canada's Chief Executive Calin Rovinescu said he had faith that Boeing Co will be able to resolve the issues plaguing its 787 Dreamliner and believed in the benefits the plane will bring the country's largest carrier.

China

CHINA SECURITIES JOURNAL

--Analysts expect China's inflation to fall below 2 percent in January due to a high base from last year and as food prices have remained stable.

--China could cut its reserve requirement ratio twice at the beginning of this year with a reduction of 0.5 percent each time, the Bank of Communications said in its outlook report.

SHANGHAI SECURITIES NEWS

--Party Chief Xi Jinping took his campaign against corruption to the petty bureaucracy and minor infractions of low-level officials. Xi said it was just as important to go after junior officials as it was to tackle the seniors in the battle against graft. He called for a "disciplinary prevention and guarantee mechanism" to be set up to prevent corruption.

SHANGHAI DAILY

--Investors who lost money in a wealth management product sold in Hua Xia Bank have recouped their principal amount from the credit guarantee firm, a local TV station reported. Investors recently recovered their principal after Zhongfa Investment Guarantee Co stepped in to acquire the whole investment plan, Shanghai TV station said.

--The national security fund and foreign investors were the two biggest net buyers of Chinese mainland shares last year, the top securities regulator said.

CHINA DAILY (www.chinadaily.com.cn)

--China's State Development and Investment Corp (SDIC), the country's major investment holding company, saw profit grow 16 percent in the first eleven months of 2012 and plans to expand its overseas businesses, its chairman said. SDIC plans to raise the share of its overseas investment business, currently focused on fuel tank manufacturing, to 10 percent in the near future.

PEOPLE'S DAILY

--Turnover in China's land market fell 14 percent in 2012, the finance ministry said.

Fly On The Wall 7:00 am Market Snapshot

ANALYST RESEARCH

Upgrades

Alcatel-Lucent (ALU) upgraded to Neutral from Sell at Citigroup
Costco (COST) upgraded to Market Perform from Underperform at Bernstein
D.R. Horton (DHI) upgraded to Market Perform from Underperform at Raymond James
Honda (HMC) upgraded to Outperform from Neutral at Macquarie
IBM (IBM) upgraded to Hold from Sell at Societe Generale
KB Home (KBH) upgraded to Market Perform from Underperform at Raymond James
Middleby (MIDD) upgraded to Outperform from Neutral at RW Baird
Novartis (NVS) upgraded to Buy from Neutral at Citigroup
Platinum Group (PLG) upgraded to Outperform from Sector Perform at RBC Capital
Questar (STR) upgraded to Buy from Neutral at Citigroup
Spirit Realty (SRC) upgraded to Outperform from Market Perform at Raymond James
Unum Group (UNM) upgraded to Overweight from Equal Weight at Barclays
Verizon (VZ) upgraded to Buy from Hold at Canaccord

Downgrades

Ellie Mae (ELLI) downgraded to Market Perform from Outperform at William Blair
Ford (F) downgraded to Hold from Buy at Deutsche Bank
France Telecom (FTE) downgraded to Underperform from Market Perform at Bernstein
GrafTech (GTI) downgraded to Neutral from Buy at Davenport
Grupo Aeroportuario (ASR) downgraded to Equal Weight at Morgan Stanley
Hartford Financial (HIG) downgraded to Market Perform from Outperform at FBR Capital
Incyte (INCY) downgraded to Underweight from Equal Weight at Morgan Stanley
NewBridge (NBBC) downgraded to Market Perform from Outperform at Keefe Bruyette
Synovus (SNV) downgraded to Market Perform from Outperform at Bernstein

Initiations

Allot Communications (ALLT) initiated with an Overweight at Barclays
Avago (AVGO) initiated with an Outperform at RBC Capital
Emulex (ELX) initiated with a Neutral at Piper Jaffray
FIS (FIS) initiated with a Buy at UBS
Fiserv (FISV) initiated with a Neutral at UBS
Global Eagle Acquisition (EAGL) initiated with an Outperform at Imperial Capital
Harbinger Group (HRG) initiated with a Buy at Jefferies
Mellanox (MLNX) initiated with an Overweight at Piper Jaffray
QLogic (QLGC) initiated with a Neutral at Piper Jaffray
Starz (STRZA) initiated with a Neutral at ISI Group
Workday (WDAY) initiated with a Neutral at RW Baird

HOT STOCKS

Allergan (AGN) to acquire MAP Pharmaceuticals (MAPP) for $25 per share
IBM (IBM) said good opportunities to drive profit growth, margin expansion in FY13
Said 1H13 growth rate will be “slightly higher” than 2H13
Texas Instruments (TXN) CEO Templeton said demand environment still weak
Praxair (PX) said backlog will contribute 4%-6% growth in 2013
Reported $2.6B project backlog at FY12-end
Heinz (HNZ) made $60M earn-out payment to China business
First Cash Financial (FCFS) to open 75-85 new stores in 2013, majority in Mexico
Gannett's (GCI) USA TODAY, American Media announced partnership
Choice Hotels (CHH) and Bluegreen (BXG) announced strategic alliance

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
Air Products (APD), Wellpoint (WLP), Novartis (NVS), Texas Instruments (TXN), International Game (IGT), AMD (AMD), IBM (IBM), Celestica (CLS), Norfolk Southern (NSC), CA Technologies (CA), Google (GOOG), Cree (CREE)

Companies that missed consensus earnings expectations include:
Textron (TXT), Southwest Bancorp (OKSB), Praxair (PX), Baker Hughes (BHI), Woodward (WWD), Total System (TSS)

NEWSPAPERS/WEBSITES

The estimated $1.7T that American companies say they have indefinitely invested overseas is actually sitting right here at home. Some companies, including Google (GOOG), Microsoft (MSFT) and EMC Corp. (EMC), keep over three-quarters of the cash owned by their foreign subsidiaries at U.S. banks, held in U.S. dollars or parked in U.S. government and corporate securities, sources say, the Wall Street Journal reports
U.K. Prime Minister Cameron today pledged to hold a referendum on whether the country should remain a member of the EU within two and a half years of the next general election, due in 2015, the Wall Street Journal reports
Fewer investors are taking corporate America to court for fraud as the number of new federal securities fraud lawsuits seeking class-action status fell to a seven year low in 2012, according to a study by Stanford Law School and Cornerstone Research, Reuters reports
In 2007, the FAA cleared Boeing's (BA) use of a highly flammable battery in the 787 Dreamliner, deciding it was safe to let the lithium-ion battery burn out if it caught fire mid-air as long as the flames were contained, and smoke and fumes vented properly, according to documents reviewed by Reuters.That decision is now coming under scrutiny, Reuters reports
Clients of the largest U.S. banks withdrew funds this month at the fastest weekly pace since the September 11 attacks as a deposit-insurance program ended and customers tapped into a year-end cash hoard. Net withdrawals at the 25 largest U.S. banks totaled $114.1B in the week ended January 9, pushing deposits down to $5.37T, according to Federal Reserve data, Bloomberg reports
Global investors say the state of the U.S. government’s finances is the greatest risk to the world economy and nearly 50% are curbing their investments in response to continuing budget battles, according to a Bloomberg poll

SYNDICATE

Invesco Mortgage (IVR) files to sell 15M shares of common stock
KB Home (KBH) files to sell $100M in common stock; $150M in convertible senior notes
Numerex (NMRX) files to sell common stock
Senior Housing (SNH) files to sell 8M shares of common stock

Your rating: None

Gates and Tutu back hunger campaign

Microsoft founder Bill Gates and Nobel Peace Prize winner Desmond Tutu have thrown their weight behind a new campaign aiming to combat malnutrition and hunger in the developing world.

One hundred development and faith British charities have united behind the Enough Food For Everyone IF coalition, urging Prime Minister David Cameron to use the UK's G8 presidency in 2013 to tackle the causes of hunger in the developing world.

The campaign, being billed as the largest coalition of its kind in the UK since Make Poverty History in 2005, warns that the "scandal" of children growing up hungry will trap almost a billion young people in poverty by 2025 and cost the developed world £78 billion over the next 15 years.

Mr Tutu, the former Archbishop of Cape Town and a long-serving human rights campaigner, said: "Hunger is not an incurable disease or an unavoidable tragedy. We can make sure no child goes to bed hungry.

"We can stop mothers from starving themselves to feed their families. We can save lives.

"We can do all of this, if we are prepared to do something about it. If we challenge our leaders to take action. If they listen to us.

"It's time the world's decision-makers came to the right decision on hunger.

"It's time to end the unnecessary suffering caused by the failure of the current food system. We can make hunger a thing of the past if we act now."

Billionaire Mr Gates is also well-known for his philanthropic work through the Bill and Melinda Gates Foundation, most notably in combating malaria.

The IF campaign will be formally launched at Somerset House in London, at an event expected to feature celebrities including actors Bill Nighy, Keeley Hawes and Bonnie Wright, Senegalese musician Baaba Maal, former athletes Denise Lewis and Colin Jackson, and ex-England rugby captain Matt Dawson. Other events will take place across the UK.

Geoengineering Schemes: Destroying the Earth to Save It?

If world leaders refuse to follow the sane advice of climate scientists and innovators in sustainable energy and agriculture much longer, it should be noted that there's a group of people out in the margins willing to perform planetary experiments to halt the progress of climate change by whatever strange, outlandish or dangerous means necessary. Geoengineers.

Frontrunning: January 22

  • Geithner allegations beg Fed reform (Reuters)
  • BOJ Adopts Abe’s 2% Target in Commitment to End Deflation (BBG)
  • Bundesbank Head Cautions Japan (WSJ)
  • In speech, Obama pushes activist government and takes on far right (Reuters)
  • Atari’s U.S. Operations File for Chapter 11 Bankruptcy (BBG)
  • Israel goes to polls, set to re-elect Netanyahu (Reuters)
  • Apple May Face First Profit Drop in Decade as IPhone Slows (BBG)
  • EU states get blessing for financial trading tax (Reuters)
  • Indian Jeweler Becomes Billionaire as Gold Price Surges (BBG)
  • Europe Stocks Fall; Deutsche Bank Drops on Bafin Request (BBG)
  • Algeria vows to fight Qaeda after 38 workers killed (Reuters)
  • GS Yuasa Searched After Boeing 787s Are Grounded (BBG)
  • Slumping pigment demand eats into DuPont's profit (Reuters)

Overnight Media Digest

WSJ

* U.S. President Barack Obama began his second term on Monday by setting an agenda for the next four years built on bedrock Democratic social policies, in a provocative speech coming at a time of deep partisanship in the capital and lingering economic uncertainty across the country.

* Jonathan Baum, chairman and chief executive of Bank of New York Mellon Corp's mutual-fund unit, has left the firm, the company said Monday.

* International investigations into the battery malfunctions that grounded Boeing Co's 787 jet are accelerating, with U.S. and Japanese experts pursuing some new and possibly differing leads.

* Wal-Mart Stores Inc is warning suppliers that it is adopting a "zero tolerance policy" for violations of its global sourcing standards, and soon plans to immediately sever ties with anyone who subcontracts work to factories without the retailer's knowledge.

* Japan's central bank agreed to adopt a 2 percent inflation target and strengthened its monetary-easing program in a bid to rid the economy of long-running deflationary pressures.

* Bundesbank President Jens Weidmann warned Japan not to "politicize" its exchange rate by pursuing an overly aggressive monetary policy, reflecting mounting concern in Europe that other central banks may cheapen their currencies as a means of stimulating economic growth.

* Federal officials are expected to slap a Deutsche Bank AG unit with a $1.5 million penalty in coming days after concluding that its energy-trading arm extracted illicit profits from the California electricity marketplace in 2010.

* Mary Jo White, who made her name pursuing terrorists, mobsters and white-collar criminals as a federal prosecutor in New York, is the Obama administration's likely pick to lead the Securities and Exchange Commission, according to people familiar with the administration's search.

* House Republicans on Monday moved to extend U.S. borrowing authority until May 19, setting a timeline for the next phase of budget wrangling between the White House and Congress.

FT

RULES ON OFFICE-FLAT CONVERSION TO EASE Developers will be able to convert office buildings into blocks of flats without asking councils for permission under radical changes to the English planning system. (link.reuters.com/keh45t) WEIDMANN WARNS OF CURRENCY WAR RISK The erosion of central bank independence around the world threatens to unleash a round of competitive exchange rate devaluations, which leading economies have so far avoided during the financial crisis, the president of Germany's Bundesbank warned. (link.reuters.com/qeh45t)

OBAMA DEFENDS ROLE OF STRONG GOVERNMENT Barack Obama mounted a vigorous defence of interventionist government and the role of a social safety net in an uplifting and uncompromising speech that marked the formal opening of his second term as president. (link.reuters.com/seh45t) HEATHROW AND BA DID NOT ACT ON SNOW ALERT The operator of Heathrow and airlines led by British Airways decided against taking pre-emptive measures to deal with snow that could have prevented the airport's descent into chaos on Friday, the Financial Times has learnt. (link.reuters.com/heh45t)

GRADE TO STEP DOWN AS OCADO CHAIRMAN Online grocer Ocado will reveal on Tuesday that Michael Grade will step down as chairman later this year. Grade has been chairman of Ocado for seven years and brought the lossmaking company to market in an 800 million pound float three years ago. (link.reuters.com/geh45t)

HUAWEI IN PLEDGE TO DISCLOSE MORE INFORMATION Huawei has pledged to start disclosing more detailed financial and shareholding information as the Chinese telecoms equipment maker tries to dispel fears over suspected ties to the Chinese military, which are hampering its global expansion. (link.reuters.com/veh45t)

FRUIT FARMERS LOOK TO FOREIGN LABOUR INFLUX British ministers are under pressure to allow migrant workers from Russia, Ukraine and Turkey into the UK to mitigate a predicted shortage of fruit pickers which is threatening the 3 billion pounds a year horticulture industry. (link.reuters.com/duh45t)

NYT

* U.S. President Barack Obama ceremonially opened his second term on
Monday with an assertive Inaugural Address, arguing that "preserving our
individual freedoms ultimately requires collective action."

*
The Bank of Japan set an ambitious 2 percent inflation target and
pledged to ease monetary policy "decisively" by introducing open-ended
asset purchases, following intense pressure from the country's audacious
new prime minister, Shinzo Abe.

* As Facebook and Twitter
become as central to workplace conversation as the company cafeteria,
federal regulators are ordering employers to scale back policies that
limit what workers can say online. The agency has pushed companies
nationwide, including giants like General Motors, Target Corp and
Costco, to rewrite their social media rules.

* Aerospace
represents the latest frontier for China, which is eyeing parts
manufacturers, materials producers, leasing businesses, cargo airlines
and airport operators. The country now rivals the United States as a
market for civilian airliners. And the new leadership named has publicly
emphasized long-range missiles and other aerospace programs in its push
for military modernization.

* Atari's U.S. unit, Atari
Interactive, filed for Chapter 11 protection on Monday as part of an
effort to cleave itself from its French parent.

* After four
months of fierce bidding between two Asian tycoons, a
multibillion-dollar battle for control of Fraser & Neave appears to
have reached its end. A bidding deadline on Monday evening came and
went, meaning the victor will probably be TCC Assets, which is
controlled by Charoen Sirivadhanabhakdi of Thailand.

* The
Maloof family has agreed to sell a controlling stake in the Sacramento
Kings, one of the NBA's most troubled and well-traveled franchises, to
an investment group led by Christopher Hansen, a hedge fund manager who
intends to move the team to Seattle by next season and rename them the
SuperSonics.

* A report from the International Labor
Organization predicted jobless levels to rise to 202 million worldwide
this year, and said government budget-balancing was hurting employment.

*
Jeroen Dijsselbloem, the new president of the group of ministers
overseeing the euro, said on Monday he wanted to heal the rift over
austerity policies that had bred mistrust between southern and northern
nations using the currency

Canada

THE GLOBE AND MAIL

* The demand for university education is not slowing down, as high school students continue to apply to Ontario institutions in record numbers. Preliminary figures released by the Ontario Universities' Application Centre showed that the number of high school students applying to first-year programs in the fall climbed by 2.4 per cent over the previous year.

* Cable sweepers and "hydrophobic" coatings are part of the British Columbia government's new plan to winterize the Port Mann Bridge, where last month vehicles and motorists were pummelled with ice falling from overhead cables. More than 340 insurance claims have been filed since the Dec. 19 snowstorm, according to ICBC spokesman Adam Grossman.

Reports in the business section:

* Rona Inc's two largest shareholders are taking matters into their own hands, installing a turnaround expert who is familiar with reducing costs to lead the board of directors.

The hardware retailer named Robert Chevrier as executive chairman, replacing Robert Paré, a Montreal lawyer who took the chairman's role in May, but who had little retail or operational experience.

* Sun News Network is pinning its hopes for survival on a ruling by Canada's broadcast regulator. Canada's newest and most controversial news channel has argued its signal must be broadcast into every Canadian home if it is ever going to recover from losses that have already reached C$17 million a year.

NATIONAL POST

* Canadian Prime Minister Stephen Harper's government said on Monday it will not include Governor General David Johnston in any future policy discussions with First Nations, further clouding its battle of wills with aboriginal leaders.

* Dan Ross, the former assistant deputy minister of defence materiel, has blamed the Stephen Harper government's culture of secrecy and a lack of accountability at all levels for the failure of the F-35 stealth fighter program.

FINANCIAL POST

* Bank of Canada will deliver a one-two punch on Wednesday, combining its latest interest rate decision with the central bank's latest quarterly outlook for the domestic and global economies.

* The Alberta provincial government said on Monday that its March 7 budget for 2013-14 will make a course correction from big spending to big belt tightening as a shortage of pipeline space and competition in oil production in the United States have tempered the surge in global oil prices.

China

CHINA SECURITIES JOURNAL

--A total of 1,271 funds in 70 fund companies made profits of 104.6 billion yuan ($16.81 billion) in the fourth quarter of last year, from a loss of 179.6 billion yuan in the third quarter, data showed.

--China's National Development and Reform Commission said it will reduce credit card comissions next month, with analysts expecting it could help merchants save 4 billion yuan a year.

SHANGHAI SECURITIES NEWS

--A netizen has demanded U.S. fruit distributor Chiquita explain why slices of apples sold in FamilyMart stores in Shanghai fail to turn brown after 80 hours, sparking a debate online whether the steps Chiquita is taking to protect apple slices from oxidizing are unhealthy.

SHANGHAI DAILY (www.chinadaily.com.cn)

--Subsidised license plates for new energy vehicles in Shanghai received a lukewarm welcome, with only one customer applying for the plates on the first day they were made available.

CHINA DAILY (www.chinadaily.com.cn)

--Chinese vehicle exports topped 1 million units for the first time in 2012, up 29.7 percent.

--Shanghai saw a contraction in total trade in 2012, the first time in three years.

PEOPLE'S DAILY

--China's central government will invest 122.2 billion yuan to support the domestic spring ploughing industry, the finance ministry said.

Fly On The Wall 7:00 AM Market Snapshot

ANALYST RESEARCH

Upgrades

ASML (ASML) upgraded to Buy from Hold at ABN Amro
ASML (ASML) upgraded to Hold from Sell at Deutsche Bank
Bank of Kentucky (BKYF) upgraded to Outperform from Neutral at RW Baird
Goodrich Petroleum (GDP) upgraded to Outperform from Market Perform at BMO Capital
Precision Castparts (PCP) upgraded to Buy from Neutral at UBS
Research in Motion (RIMM) upgraded to Outperform from Sector Perform at Scotia Capital
Viacom (VIAB) upgraded to Buy from Neutral at Goldman
VimpelCom (VIP) upgraded to Overweight from Neutral at HSBC
WESCO (WCC) upgraded to Outperform from Neutral at Credit Suisse

Downgrades

ARM Holdings (ARMH) downgraded to Hold from Buy at Benchmark Co.
Amgen (AMGN) downgraded to Neutral from Outperform at Credit Suisse
Becton Dickinson (BDX) downgraded to Neutral from Buy at Mizuho
Diamond Offshore (DO) downgraded to Neutral from Outperform at Credit Suisse
F5 Networks (FFIV) downgraded to Hold from Buy at Needham
FirstEnergy (FE) downgraded to Underperform from Hold at Jefferies
Fortinet (FTNT) downgraded to Market Perform from Outperform at JMP Securities
LRR Energy (LRE) downgraded to Neutral from Outperform at RW Baird
Och-Ziff Capital (OZM) downgraded to Market Perform from Outperform at Keefe Bruyette
Open Text (OTEX) downgraded to Hold from Buy at Stifel Nicolaus
Roche (RHHBY) downgraded to Neutral from Outperform at Exane BNP Paribas
Trinity Biotech (TRIB) downgraded to Neutral from Buy at Roth Capital
Urban Outfitters (URBN) downgraded to Neutral from Overweight at Atlantic Equities
Uroplasty (UPI) downgraded to Market Perform from Outperform at JMP Securities

Initiations

ExactTarget (ET) initiated with an Outperform at Credit Suisse
LivePerson (LPSN) initiated with a Neutral at Credit Suisse
PBF Energy (PBF) initiated with a Hold at Deutsche Bank
PBF Energy (PBF) initiated with an Outperform at Credit Suisse
S&W Seed (SANW) initiated with an Overweight at Piper Jaffray
Verint Systems (VRNT) initiated with a Neutral at Credit Suisse

HOT STOCKS

Ericsson (ERIC) to acquire IT services capabilities from Devoteam in France
KKR (KKR), Blackstone (BX) said to be among those in talks for Life Technologies (LIFE), Bloomberg reports
Caterpillar (CAT) to record $580M goodwill impairment charge in Q4
Shaw Communications (SJR) reported Shaw family acquired 750,000 class B shares
SeaCube (BOX) to be acquired by Ontario Teachers' Pension for $23 per share
NeoPhotonics (NPTN) subsidiary to acquire OCU unit from LAPIS Seminconductor for $36.8M
BGI-Shenzhen extended tender offer for Complete Genomics (GNOM)
FDA approved Botox (AGN) to treat overactive bladder
FDA approved Mallinckrodt's (COV) Gablofen prefilled syringe
OM Group (OMG) divested Advanced Materials business for up to $435M (FCX)
DaVita (DVA) formed JV with RHC in Taiwan
Daimler AG (DDAIF) created subsidiary for innovative mobility services
Pearson (PSO) sees tough market conditions continuing into 2013

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
DuPont (DD), Signature Bank (SBNY), TAL Education (XRS)

Companies that missed consensus earnings expectations include:
Verizon (VZ), Sierra Bancorp (BSRR)

NEWSPAPERS/WEBSITES

International investigations into the battery troubles that grounded Boeing’s (BA) Dreamliner 787, are growing, with U.S. and Japanese experts pursuing some new and possibly differing leads, the Wall Street Journal reports
Apple’s (AAPL) future is getting harder to read. Their move into new markets and its more complex supply chain are making its growth prospects more difficult to understand and predict, say longtime investors and analysts, the Wall Street Journal reports
Microsoft (MSFT) CEO Steve Ballmer is not the right leader for the software company but holds his grip on it by systematically forcing out any rising manager who challenges his authority, claims former senior executive Joachim Kempin, who has written a book about his time at the company, Reuters reports
South Africa's Competition Tribunal today gave the green light to the proposed takeover of global miner Xstrata (XSRAY) by Glencore (GLNCY). But the tribunal attached some conditions to the $33B deal to limit the merger's impact on job losses in the mining sector, Reuters reports
Consumption of high fructose corn syrup, used to sweeten products from Coca-Cola (KO) to H.J. Heinz (HNZ) ketchup and linked to obesity, is falling in the U.S. as health-conscious consumers drink less soda, Bloomberg reports
The world’s biggest investors are moving away from allocating money to government bond markets based on their amount of debt, a strategy that has favored the largest borrowers for three decades, Bloomberg reports

BARRON’S

A $14 per share LBO undervalues Dell (DELL)
Rockwell Automation, ABB provide good opportunities for robotics (ROK, ABB, ADEP, CGNX)
Crocs' (CROX) operational shifts could raise 2013 EPS by 11% to $1.55
Fossil (FOSL) could reach over $120 per share as earnings are reported
Data usage providing return on LTE investment for Verizon (VZ), AT&T (T)
Intel's (INTC) “branch prediction” on hybrid PCs a risky move

SYNDICATE

Performant Financial (PFMT) files to sell 7M shares of common stock

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Chile, a Revolution Denied




This coming September 11 will mark the fortieth anniversary of the coup overthrowing the elected government of Chile, a country that, at the time, enjoyed the longest enduring tradition of electoral stability in South America. Despite the uninterrupted existence of a constitutional parliamentary system from 1932, the Chilean military—aided by US covert services—overthrew the President, Doctor Salvador Allende Gossens, and violently suppressed his supporters, installing a military junta that ruled for 26 years.

What prompted the US government and its traitorous allies in the Chilean military to destroy the fabric of Chilean civil society in 1973? What “sin” could possibly warrant the installation of a murderous, fascistic regime under the leadership of General Pinochet and his collaborators?

The answer is found in one word: socialism. Not the grafting of a tepid welfare safety net to the fringes of capitalism as promised by social democrats, not the “socialism” of workers’ token participation in management, not the bad faith of class collaboration or the regulation and management of a voracious and predatory profit system, but the real and robust pursuit of revolutionary and transformative change.

For Salvador Allende and Popular Unity-- the coalition of Communists, Socialists, and other worker and peasant organizations that backed his election in 1970, the vote was the opening steps on the unique “Chilean road to Socialism,” a road that would hopefully lead to working class political power and social ownership superseding the private ownership of the leading economic enterprises and giant agricultural estates.

The Allende government pressed forward with its agenda, nationalizing key industries and creating new and parallel organizations and institutions of local and workplace power. Of course this did not go well with the wealthy and powerful in Chile or unnoticed by their North American allies. Millions of our tax dollars were devoted to funding counter-revolutionary groups and actions in Chile. Provocative strikes were organized by middle-strata shop keepers, transportation owners, and managers to disrupt the economy. Demonstrations were instigated to bring sections of the middle strata—the “momios”—into the street in protest. Sabotage and vandalism were pressed. Even neo-Nazi terrorist groups were encouraged and funded by the CIA. And, of course, the US government did everything it could to isolate the Popular Unity government from international assistance, credits, and trade.

In the face of these provocations, Allende and his supporters urged workers and peasants to step forward in defense of the economy and the bourgeois democracy. And they did, in great numbers.

Thus, the expected rejection of Popular Unity in the elections of March, 1973 never materialized. Despite an unprecedented destabilization campaign, the Right was unable to muster enough votes to depose Allende. The only path left open to the enemies of popular power was the military coup. Six months later, Allende was dead and tens of thousands were about to be killed, jailed, tortured, disappeared or in hiding.

The Guzman Chronicles

It is rare to have a vivid and detailed account of such an important and tragic historical process. But thanks to the hours of video documentation secured by film maker Patricio Guzman, we can trace the powerful people’s movement that coalesced around Salvador Allende, the excitement and empowerment of the masses as they forged ahead, the hopes and disappointments of workers and the poor, and the betrayal and destruction of national aspirations. Guzman was a partisan of Popular Unity, yet open to recording the views and movements of the opposition. He captures the euphoria of workers and peasants finding their voices, the explosion of meetings and discussions of the formerly powerless, and the new-found confidence of the liberated.

His trilogy, The Battle of Chile (The Insurrection of the Bourgeoisie, The Coup d’Etat, and Popular Power) is available on DVD (Icarus Films) along with the 1996 film (Chile, Obstinate Memory) of his return to Chile to show his work in the post-Pinochet era.

Guzman’s prescient sense of the significance of Popular Unity seemingly put him on every corner, in every demonstration, in the mines and factories, and in the seats of governance. The visual imagery of workers, peasants, and ethnic minorities in the tens of thousands rallying to the cause of Popular Unity is unforgettable. Conversely, the faces of the “momios” and the military leaders reflect the ugliness of both their fear and their arrogance. Nor will one will ever forget the footage of a camera operator filming his own death at the hands of a soldier.

Far better than the many written accounts of the Chile tragedy, Guzman’s films expose the truths of class and ethnic divisions without adornment. In most cases, one can identify whether an interviewee on the streets of Santiago supports or opposes Popular Unity before he or she even speaks. Class identity is transparent.

Yes, it is class war, conscious class war. But class war that the long-ruling oligarchs, the industrialists, landlords and their minions could only win with the intervention of the military and their powerful friends to the north.  

While the popular forces lost the battle of Chile, the collective memory of the peoples’ rising had to be extinguished before Chile could be returned to anything close to a “normal” bourgeois republic. For some time after elections were restored, Chile still lay in the shadows of the Generals, fearful of their return.

When Guzman arrived to present The Battle of Chile for the first time in his native land, he recorded the responses of a group of youth, both before the showing and after. Before the viewing and with only modest exceptions, the students mouthed the views received from Pinochet-era textbooks and documentaries. They showed some sympathy for the conditions of the very poor that might move them to support Popular Unity, only to charge the partisans with impatience, irresponsibility, or poor judgment. The views expressed were remarkably similar to those one might encounter in an upper-middle class suburban school in the US.

When the lights came on after the screening, the students were visibly moved—some were reduced to tears, others spoke openly for the first time of relatives who were repressed.  Despite the concerted effort to remove the memory of Popular Unity, The Battle of Chile shocked the young people into a sympathetic encounter with their own history. This moment is captured vividly in Guzman’s Chile, Obstinate Memory.

A Vital Source

But the events of these three years, as revealed by the film and other chronicles, constitutes more than the nostalgia of those of us who placed so much hope in Popular Unity. Rather, the Chilean experience was a case study of the struggle to throw off the yoke of imperialism and capitalism. This episode bore many features unique to the conditions existing at that time and the pathway chosen by the movement’s leaders. At the same time, the Chilean revolutionaries faced adversaries and obstacles that are universal in any profound social change. In short, we have much to learn from Chile’s tragedy.

Today’s militancy, emerging slowly, but inexorably from the crushing impoverishment and stark inequities spawned by the global crisis, constitutes a new and promising assault on wealth and power. However, a new generation of the angry and defiant risk failure and disillusionment unless it draws lessons from the successes and failures of the past. History is cruel to those who turn away from those lessons.

Only those who are terminally jaded can but admire the energy of the “Occupy” militants in the US and the “Indignados” in Europe. But any who view The Battle of Chile will quickly recognize that powerful ruling classes with far-reaching police, a sophisticated intelligence apparatus, and a modern military at their beck and call are not readily moved to surrender power and position to forces organized in open-air general assemblies or in urban street encampments. Nor will they accommodate demands issued with the nobility of moral authority. Chile’s legacy reminds us that transformational change is about overcoming the nexus of economic and state power.

Recognition of the fusion of economic and state power in our time—what Marxists call “state-monopoly capitalism”—is essential to any credible assault on the fortress of wealth and privilege. To reach for state power, the majority must begin to disable the economic might wielded by the few. But to accomplish this, the many must act to take the power of the state that preserves and protects the economic basis of the ruling elites. 

Solving these two challenges simultaneously is the task of revolutionaries. In Chile, Popular Unity hoped to meet the challenges by establishing loci of peoples’ organizations in neighborhoods and workplaces and nationalizing the heights of the economy. They understood that presidential power was only a fragile link to state power and far from sufficient to neutralize the economic might of the Chilean capitalists and their courtiers and attendants. Our modern day would-be revolutionaries are well-advised to grasp these realities.

The Battle for Chile is cold water in the face of so many erstwhile advocates of social justice who have turned to timid or utopian schemes to address a capitalist social system that has only become more aggressive and rapacious since the era of Chile’s interrupted revolution. While the loss of a counter-force to the US and its allies—the European socialist community—has vastly strengthened the hand of global capitalism, it neither excuses nor justifies a retreat from an anti-capitalist program. We see alternative schemes emerging from those disillusioned with the politics of reformism, but uneasy with revolutionary politics; they advocate motley theories of “radical democracy,” cooperatives, “The New Economy,” various strains of anarchism and kindred rejections of “hierarchies,” among others.

Marx and Engels anticipated these developments over a century and a half ago when they wrote in the Communist Manifesto:

Historical action is to yield to their personal inventive action; historically created conditions of emancipation to fantastic ones; and the gradual, spontaneous class organisation of the proletariat to an organisation of society especially contrived by these inventors. Future history resolves itself, in their eyes, into the propaganda and the practical carrying out of their social plans.
In the formation of their plans, they are conscious of caring chiefly for the interests of the working class, as being the most suffering class. Only from the point of view of being the most suffering class does the proletariat exist for them.
The undeveloped state of the class struggle, as well as their own surroundings, causes [activists] of this kind to consider themselves far superior to all class antagonisms. They want to improve the condition of every member of society, even that of the most favoured. Hence, they habitually appeal to society at large, without the distinction of class... For how can people, when once they understand their system, fail to see in it the best possible plan of the best possible state of society?
Hence, they reject all political, and especially all revolutionary action; they wish to attain their ends by peaceful means, necessarily doomed to failure, and by the force of example, to pave the way for the new social Gospel.
Such fantastic pictures of future society, painted at a time when the proletariat is still in a very undeveloped state and has but a fantastic conception of its own position, correspond with the first instinctive yearnings of that class for a general reconstruction of society…
They, therefore, endeavour, and that consistently, to deaden the class struggle and to reconcile the class antagonisms. They still dream of experimental realisation of their social Utopias, of founding isolated “phalansteres”, of establishing “Home Colonies”, or setting up a “Little Icaria” — duodecimo editions of the New Jerusalem — and to realise all these castles in the air, they are compelled to appeal to the feelings and purses of the bourgeois…
They, therefore, violently oppose all political action…; such action, according to them, can only result from blind unbelief in the new Gospel.
Revolutionaries must and will put these “castles in the air” behind them as the struggle for social justice sharpens.

And ahead are the many obstacles underscored by the Chilean events chronicled in Guzman’s film. Two critical problems of revolutionary theory that loom large in the battle for Chile are (1) the question of the military and other “security” organs and (2) the question of the “middle class.”

Clearly, Popular Unity failed to solve the problem of the military in 1973, though its leaders certainly recognized it. In our time, the near-coup in 2002 against President Hugo Chavez in Venezuela demonstrates the continuing dangers from those social elements holding a near monopoly on physical force: the military. Like the police and other organs of social control, the military invariably align with those opposing change. Without Chavez’s uniquely strong links to long-cultivated and sympathetic elements of the military, the coup would have undoubtedly led to a bloody and uncertain outcome. Any real quest for transformative change must wrestle with this question.

The question of the “middle classes” is really the problem posed by those who occupy the social space between the ownership class (the 1%) and those consciousof their diminished status resulting from employment by or servitude to the ownership class. While those who occupy this space are, in reality, also subservient to the rich and powerful, they see their status as above the poor and working class and identify their aspirations with the fate of those who rule. Labor leaders and other image shapers foster illusions about a broad and inclusive “middle class.” They offer the fantasy that auto workers and bus drivers have the same class interests as corporate lawyers and bond traders. In this imaginary world, their lives intersect at the shopping mall, the stadium, and the television set. Of course they really don’t. Even arch conservatives like Charles Murray have concluded that this view is nonsense, but the view persists widely in the mainstreams of both the US and Europe.

The dangers of these illusions are demonstrated well in The Battle of Chile. The “momios” who provided a mass base for the opposition to Popular Unity would, by and large, have eventually benefited from the Chilean road to socialism. But seduced by the lure of consumerism, vulgar culture, crass individualism and the delusional promise of joining the ranks of the privileged few, they proved to be an enormous obstacle to advancing the Popular Unity program.

In the more prosperous capitalist countries, the problem of the middle strata is even more acute today. While Marx’s judgment that the “…individual members of this class… are being constantly hurled down into the proletariat…” may be somewhat affirmed by the global economic crisis, the fact remains that the middle-class world view is resilient and will persist for some time. Belief in personal exceptionalism, like belief in spirits, is a difficult deception to shed.

“To be young and a revolutionary is a biological imperative” was a piece of graffiti scrawled on a wall in Santiago and translated for me by my friend Kay when we visited Santiago in the fall of 1990. After Pinochet, this was a welcome inspiration for those of us who placed hope in the Chilean revolutionary process. But biology will only take revolutionaries so far without a study of history. In fact, without heeding the lessons of history—in this case the Allende government and its violent suppression—the imperatives and energy of youth will dissipate and give way to cynicism and disappointment. The Battle of Chile offers these hard lessons, but also profound inspiration.

Zoltan Zigedy
zoltanzigedy@gmail.com


Obama Inauguration Sponsors Spent Millions Influencing Government

Beyonce sings "The Star-Spangled Banner" during the presidential public swearing-in on the west front of the Capitol during the 57th inauguration in Washington, Jan. 21, 2013. (Photo: Chang W. Lee / The New York Times) Beyonce sings "The Star-Spangled Banner" during the presidential public swearing-in on the west front of the Capitol during the 57th inauguration in Washington, Jan. 21, 2013. (Photo: Chang W. Lee / The New York Times) President Barack Obama has long vowed to “take on” federal lobbyists, swearing off their campaign cash, curtailing access to his administration, and lately, directing his Presidential Inaugural Committee to reject their donations.

“We've always relied on each other, not Washington lobbyists or corporate interests, to build our campaign,” he wrote to supporters after launching his re-election campaign.

While Obama has banned donations to his second inaugural celebration from lobbyists, no such prohibition exists on donations from the corporations that employ them.

Donate they have: Obama’s inaugural festivities Monday are bankrolled by several of the nation’s most powerful corporate lobbying forces, which have collectively spent at least $158.6 million on lobbying since the president first took office, a Center for Public Integrity review of congressional disclosures indicates.

(A new list of sponsors current through Saturday pushes the total to $283 million, please see update.)

The ceremony on the steps of the U.S. Capitol, perhaps fittingly, falls squarely on the third anniversary of one of the most notable political influence developments in U.S. history — the Supreme Court’s Citizens United decision — which Obama decried as a “huge victory” for special interests and their lobbyists and a “powerful blow to our efforts to rein in corporate influence.”

Chief among corporate inaugural donors: AT&T Inc., Microsoft Corp., energy giant Southern Co., biotechnology firm Genentech and health plan manager Centene Corp. Together, more than 300 registered lobbyists worked on the five companies’ behalf to influence legislation and government policy, according to their latest federal filings covering January through September.

Among numerous other influence efforts, Southern Co. lobbied the Executive Office of the President to curtail environmental regulations. AT&T pressed the Treasury Department to extend research and development tax credits and lobbied heavily — and unsuccessfully — to win regulatory approval of a merger with rival T-Mobile. Microsoft targeted the Justice Department, Federal Communications Commission and U.S. Copyright Office for support in strengthening online piracy and intellectual property regulations.

Together, the companies last year hired a constellation of K Street’s top lobbying firms to supplement in their own in-house advocates. The firms include Akin Gump Strauss Hauer & Feld, Alston & Bird, BGR Group, Capitol Counsel, Cassidy & Associates, Crossroads Strategies, Patton Boggs, Prime Policy Group, Van Scoyoc Associates and Wiley Rein.

Former members of Congress and high-ranking state politicians now employed by the influence industry pepper their ranks. They include Senate Majority Leader Trent Lott, R-Miss.; Sens. John Breaux, D-La., Jim Slattery, D-Neb. and Don Nickles, R-Okla.; Reps. Vic Fazio, D-Calif., Jim McCrery, R-La. and Henry Bonilla, R-Texas; and Mississippi Gov. Haley Barbour, a Republican.

Second term, no limits

Obama banned corporate contributions to the committee organizing his first inauguration and limited individual donations to $50,000. But for his second inauguration — a somewhat scaled-down affair expected to attract hundreds of thousands fewer revelers — most corporations and individuals are allowed to contribute unlimited amounts of money.

For both inaugurals, Obama barred contributions from political action committees, foreign governments, political parties, registered foreign agents or anyone under the age of 16 and federally registered lobbyists.

The committee is also not accepting individual or corporate sponsorships and companies that haven’t yet repaid Troubled Asset Relief Program funds are likewise blacklisted.

The inaugural committee released a statement in response to questions about the shift in contribution policies.

“The inaugural is a civic event and our guidelines aren’t just consistent with the law — they are consistent with the president’s commitment to transparency and to reducing the influence of PACs and lobbyists in Washington.”

The inaugural committee, which fundraises for and coordinates events including the inaugural parade, concerts, official balls and a prayer service, has maintained a twice-updated list of contributors on its website.

As of early Friday, it included eight corporations, although that list may soon grow.

Other businesses sponsoring the inaugural include United Therapeutics Corp., a pharmaceutical firm; Financial Innovations, Inc., a marketing firm that produced Obama campaign promotional products and Stream Line Circle LLC, which is controlled by Jon Stryker, a businessman and gay rights activist who last year donated $2 million to pro-Obama super PAC Priorities USA Action.

Stryker Corp., a medical products company of which Stryker is a minority owner, has spent more than $816,000 on federal-level lobbying since Obama became president, including lobbying the White House against a medical device tax, federal disclosures show.

The roughly 1,000-name online list, which the committee says is slated to again be updated Friday, provides significantly less information than a similar list published online by Obama’s 2009 inaugural committee, which wrote of its desire to “provide the most open and accessible inauguration in history” and the president’s “commitment to change business as usual in Washington.”

Current inaugural policy also illustrates the sometimes wild swings in donor disclosure levels from inaugural to inaugural, which is largely determined by the committee itself, not the federal government.

While it’s known which companies and individuals are making contributions to support the event, how much they gave remains a mystery. Nor does the inaugural committee provide information beyond a company or person’s name. This makes it difficult, if not impossible, to confirm the identities of contributors such as “Timothy Adams,” “Michael Johnson” and “Ryan Smith.”

Gone for Obama is the voluntary, pro-inaugural disclosure of donors’ location, Zip codes, occupations and employers — disclosure levels somewhat akin to those of President George W. Bush’s inaugural committees.

Don’t wait up late for Obama’s information, either. His committee isn’t required to provide a full and public accounting of its finances to the Federal Election Commission until 90 days after the inauguration.

‘Pleased to participate’

Some corporate inaugural donors say they are driven by civic responsibility, even though, arguably, their money could have greater political effect if given to super PACs or, for that matter, used to hire more lobbyists.

Southern Co.’s donation, which the company confirms is worth $100,000, was made to support “the celebration of the presidency and the activities of the inaugural committee,” spokesman Tim Leljedal said. “This is always a very special time for our country and we are pleased to participate.”

In a statement, Genentech said it aims to play a “positive role in the communities in which we live and operate” and “is proud to provide support for the presidential inauguration.”

Microsoft officials refused to comment about the company’s contribution, while officials for AT&T, Centene Corp., United Therapeutics, Financial Innovations Inc. and Stream Line Circle LLC did not reply to repeated requests for comment.

Microsoft and AT&T are also federal contractors, as USA Today noted, and while it’s illegal for such contractors to influence federal elections, they’re not banned from donating to inaugural committees unless the committee itself does the banning.

Meanwhile, Obama’s inauguration donor policies and practices have managed to agitate an eclectic cross-section of politicos, liberal and conservative.

David Bossie, president of Citizens United, the conservative activist group that prompted the eponymous Supreme Court decision, called the president’s decision to accept corporate cash “cynical” and “hypocritical.”

“He talks out of both sides of his mouth,” Bossie said. “I’ll be interested to look back to see what those companies are getting back in return.”

Some, at least, will receive an immediate return on their investment, as the committee confirmed that companies donating at least $1 million will receive a variety of inauguration day perks including choice viewing seats and inaugural ball tickets.

Corporations contributing at least $100,000 level also get ball tickets.

For Bruce Freed, president of the Center for Political Accountability, which aims to “bring transparency and accountability to corporate political spending,” corporations donating to Obama’s inaugural committee have “tremendous interests and influence and want to be heard in D.C.

“The administration,” Freed said, “should be very sensitive to opening up the door to corporate influence like this and the perception and risks associated with it.”

Monte Ward, president of the American League of Lobbyists and head of Advanced Capitol Consulting, says he’s “very disappointed” that Obama would accept unlimited contributions from corporations that lobby but not from individual lobbyists themselves.

Even commemorative inaugural tchotchkes — from a $20 baby onesie to a $7,500 medallion set featuring the likenesses of Obama and Vice President Joe Biden — are off-limits to the registered influence industry set because paying for them is considered a donation.

“He’s still singling out lobbyists. It’s unfounded. But we wouldn’t expect anything less,” said Ward, ticking off Obama’s perceived affronts to professional lobbyists, from prohibiting them from volunteering on executive branch advisory committees to signing a presidential order tightly restricting their hiring for administration jobs.

The president’s battle against lobbyists – donations from corporate lobbying entities or not — doesn’t appear to be over, either.

In May, Obama campaign Chief Operating Officer Ann Marie Habershaw boasted that it didn’t accept “any money from Washington lobbyists or corporate-interest groups — not a dime. We don't want them owning any piece of this campaign or expecting any special consideration.”

And on the still-active Obama website Change.gov, a forerunner to WhiteHouse.gov, the ethics section prominently features a quotation from the president made while campaigning in 2007.

“I am in this race to tell the corporate lobbyists that their days of setting the agenda in Washington are over,” Obama said. “I have done more than any other candidate in this race to take on lobbyists — and won. They have not funded my campaign, they will not run my White House, and they will not drown out the voices of the American people when I am president."

Corporate Party Favors at the Inaugural Shindig

President Obama's 2013 Inauguration store website. (Image: Whitehouse.gov)President Obama's 2013 Inauguration store website. (Image: Whitehouse.gov)If you’re one of those who equate the worlds of Washington and Hollywood — the standard joke: “Politics is show business for ugly people” — then a presidential inauguration is the Oscars, Golden Globes and Emmy Awards combined, right down to the parties, balls, extravagant wardrobes and goody bags stuffed with swag.

Just check out the online “57th Presidential Inauguration Store“, peddling more tchotchkes than the vendors outside a Justin Bieber concert — from shot glasses, T-shirts and tube socks to an Obama portrait by the artist Chuck Close and a $7500 set of official medallions.

The company behind this marketing behemoth — as it was during the 2012 campaign, when at times it appeared the Obama team was running a big box store rather than a presidential race — is Financial Innovations, Inc., which also happens to be one of a handful of corporations donating money to underwrite this year’s inaugural celebration. Its owner, Democratic fundraiser Mark Weiner, was an Obama bundler, raising as much as half a million dollars for the president’s re-election. According to Matea Gold at the Los Angeles Times, analyzing data from the Federal Election Commission, Financial Innovations “was paid more than $15.7 million by two Obama campaign committees to produce and mail campaign merchandise.”

Four years ago, the committee for President Obama’s first swearing-in proudly announced that no corporate cash would be accepted for the festivities, presenting the decision as “a commitment to change business as usual in Washington.” Nor was money taken from registered lobbyists and foreign agents, non-U.S. citizens or political action committees. What’s more, individual contributions were capped at $50,000.

This year, there’s a new attitude and a new push for dollars — the goal is set at $50 million. The rules against lobbyists, PACs and non-citizens are still in effect, but now, contributions of as much as a million are being solicited from individuals as well as businesses (although you’re banned from giving if you received taxpayer bailout money from the Troubled Asset Relief Program – TARP — and haven’t paid it back!).

“Sources close to the planning said the decision was born out of pragmatism,” Politico reported in December. There were just a few weeks post-election “to raise tens of millions of dollars to celebrate a victory that Democratic supporters already spent hundreds of millions of dollars to win thanks to the rise of unlimited outside money in campaigns this year.” Nonetheless, as the Associated Press noted, “The changes are part of a continuing erosion of Obama’s pledge to keep donors and special interests at arm’s length of his presidency.”

According to records released by the official Presidential Inaugural Committee (PIC), so far, fewer than a thousand individuals and only eight corporations have contributed money for the long weekend of parties, balls and ceremonies (On January 17, ExxonMobil announced that it, too, was chipping in, to the tune of $250,000.)

Most of these companies have ties to the federal government. Restrictions on government contractors giving money to politicians don’t apply to the inaugural. They should.

Fredreka Schouten at USA Today writes that among them are:

Telecom giant AT&T, which spent more than $14 million lobbying Congress and federal agencies during the first nine months of 2012, [and] has been awarded more than $101 million in federal contracts in the current fiscal year, federal contracting data show. Microsoft, which spent nearly $5.7 million on lobbying, has been awarded nearly $4.6 million in technology contracts with Homeland Security, the White House and several other agencies so far during this fiscal year…

“Another corporate donor, Centene Corporation, manages health insurance programs for more than a dozen states. Those programs include Medicaid, the federal-state health insurance system for the poor, and the Children’s Health Insurance Program. The Congressional Budget Office estimates insurance coverage will be expanded to 7 million more Americans in both programs next year as the new federal health care law takes effect.”

The other five businesses on PIC’s official list are the aforementioned Financial Innovations, the electric utility Southern Company Services, biotech companies Genentech and United Therapeutics, and Stream Line Circle, which the Los Angeles Times said was “an entity tied to philanthropist and gay rights activist Jon Stryker.”

Southern Company Services, described by the watchdog Sunlight Foundation as “a major lobbying powerhouse,” received stimulus money under the Obama administration’s Recovery Act –a $165 million Smart Grid Investment Grant to modernize electrical infrastructure.

Genentech is an active health care lobbyist in Washington and regularly seeks Food and Drug Administration approval of drugs (just last month the FDA okayed the use of Genentech’s Tamiflu influenza medication for the treatment of infants.)

United Therapeutics seeks FDA approval for an oral version of an injectable drug used to treat pulmonary arterial hypertension, a lung disorder. Sunlight’s Keenan Steiner reported, “The company faced a setback in October when the FDA did not approve the new drug. Its CEO vowed at the time to continue seeking approval ‘within the next four years.’”

The next four years? What a coincidence. All the more reason to seize every opportunity to glad hand at inaugural events where there might be a moment or two to slip in a good word as the price for your generosity. United Therapeutics covers its bases. Steiner continued: “The company does not have a political action committee but emerged as a surprising major donor to the Democratic National Convention in September, when it gave $600,000 to the effort, the fifth-biggest donor behind the likes of Bank of America and AT&T.”

But for all this, we only know the names of donors and nothing else — not their location or, most important, how much they’ve given (although Southern Company did tell the Sunlight Foundation that its donation was $100,000). In another departure from four years ago, the committee won’t reveal that information until reports are filed with the Federal Election Commission in late April.

This secrecy had led to speculation as to what the Presidential Inaugural Committee plans to do with any money left over after all the confetti is thrown and the last dance danced. The Capitol Hill newspaper Roll Call reports , “Theories range from the claim that Obama is getting a jump-start on funding his presidential library to conjecture that leftover campaign cash will prop up his grass-roots organizing operation, reportedly to be renamed Organizing for Action. Some say that it may even line the pockets of loyal campaign consultants.”

In a recent op-ed, Sheila Krumholz, executive director of the Center for Responsive Politics, wrote of inaugural fundraising, “Obama’s policy in 2009 bested those of all recent occupants of the Oval Office and went way beyond the law’s requirements. It appeared he’d set a new precedent for higher standards in transparency. That makes the backsliding this year especially disheartening. In fact, by comparison, this year’s process feels like a snub.”

But those with money to buy nice things — or exclusive government access — won’t feel snubbed at the inauguration. Despite reports of corporate and other high rollers offended at alleged aloofness and a lack of perks from the White House during the first term, this time, they’ll be welcomed with open arms. The president said it himself — he likes a good party.

An Antipoverty Contract for 2013?

This past year I’ve had the opportunity to cover the antipoverty movement—and I do believe it’s a movement—it’s just a little too much of a well-kept secret right now. (Photo via equityblog.org)

But I think in 2013, the people and groups at the forefront of antipoverty thinking and action are poised to reach a much wider audience, and gain far greater popular support.

That’s in part because the movement is led by organizations and individuals who have been fighting poverty for decades, and they offer solutions that are grounded in empirical data and the every day experiences of millions of working Americans and families.

In contrast, the opposition to antipoverty reform relies largely on tired stereotypes, myths, and prejudices—that low-income people are lazy and don’t want to work; that they only want handouts, or to live off of welfare; that antipoverty policies have failed; and, most recently, that we can’t afford these investments. 

But an economy that is short on opportunity and concentrates wealth in the hands of a few is coming into focus. The interests of low-income people and a shrinking middle-class are converging—everyone wants fair pay, a shot at a good education, and an economy defined by opportunity and upward mobility.

People are beginning to recognize that we have a proliferation of low wage work— over 25 percent of the jobs in the nation pay less than the poverty line for a family of four, and 50 percent pay less than $34,000 a year.  It’s no wonder that 28 percent of all workers last year earned wages below the poverty line, and that more than 70 percent of low-income families and half of all families in poverty were working in 2011.  (Low-income defined as living on less than 200 percent of the poverty line, or less than approximately $36,000 annually for a family of three—which now constitutes 106 million people, more than 1 in 3 Americans; poverty defined as living on less than $18,000 annually for a family of three, which now describes more than 46 million Americans.)  People are looking for answers.

Currently, the antipoverty movement is largely in sync as it tries to protect programs that are vital to basic human needs during the fiscal debate.  But I think there are things it can do in 2013—after the budget debate—to reach a wider audience and bring more people into its fold.

One possible change—or more like a tweak: many seem to focus on the lack of will in our political leadership to fight poverty; instead the primary focus might be on what the movement itself is doing to create political will. 

What is it doing to make itself more visible?  How is it creating new relationships between low-income and higher-income people? At any given conference on poverty-related issues, are the people who know poverty first hand presenting, leading, educating, and organizing?  At a Congressional or local hearing on food stamps, TANF, SSI, or childcare—is the movement doing whatever it can to ensure that the people who have actually experienced the system are testifying?  Are the more “white collar” organizations in the movement going into low-income communities to join people and groups who are organizing on the ground?  Are these organizations showing up and also providing resources to protect homes, strengthen schools and neighborhoods, and stand with low-wage workers for better jobs?  How are we coming together—rich, poor, and in between—and how are we working in silos?  How are we speaking—or failing to speak—with a unified voice? 

I also believe if the movement can coalesce around a simple, clear and concise antipoverty agenda—an Antipoverty Contract for 2013—it can engage new audiences and grow significantly.  Choose four or five key policies that are easily grasped and in sync with most people’s values, and forge new alliances around them.  Whether or not the contract includes a group’s particular issue, hopefully groups will take a leap of faith and help push it forward, knowing that it might lead to a stronger movement and broader and deeper reforms down the road.

Below is one possible Antipoverty Contract for 2013.  I have no idea if these are the right choices—and there are some notable absences—on full employment, housing and education, to name a few.

But I hope this draft serves as a conversation starter among organizations, community groups, and people at the forefront of these fights—and that a core might emerge to coalesce and organize around a clear, focused antipoverty contract this year that might serve as a compelling organizing tool.

Raise the Minimum Wage

Americans generally believe that people who work hard should be able to pay for the basics, including food, housing, healthcare, and education.

As Peter Edelman notes in his book, So Rich, So Poor, for most of the 1960s and 70s the minimum wage paid enough to lift a family of three above the poverty line, about $18,000 today.  Not so anymore.   It has been raised only three times in the past thirty years and now stands at $7.25 per hour, which results in sub-poverty earnings of approximately $15,000 for a year-round, full-time employee.

The minimum wage for tipped workers is even worse—a stunning $2.13 per hour, and it’s been locked there since 1991.  As a result, food industry servers in the US are three times more likely than the general workforce to be paid sub-poverty wages and twice as likely to need food stamps.

If Congress had indexed the minimum wage to inflation—as they did for, say, individual campaign contribution limits or the new estate tax threshold—it would be $10.58 per hour today. 

Of course, any attempt to raise the wage floor is met with claims from opponents that it will result in massive job losses.  This has been shown repeatedly to be complete bunk.  Further, a recent report by the National Employment Law Project found that 66 percent of low-wage employees work for large companies, not small businesses, and that more than 70 percent of the biggest low-wage employers have fully recovered from the recession and are enjoying strong profits.

The Fair Minimum Wage Act of 2012, introduced by Senator Tom Harkin and Representative George Miller, would raise the federal minimum wage to $9.80 by 2014, index it to inflation, and boost annual earnings to $19,600—above the poverty line for a family of three. It would also raise the tipped minimum wage to $6.85 over five years, and it would be fixed to 70 percent of the full minimum wage.

The Economic Policy Institute estimates the Harkin-Miller proposal would generate more than $25 billion in new consumer spending, which would lead to the creation of more than 100,000 new full-time jobs. It would also increase wages for nearly 30 million Americans—roughly one-fifth of the workforce—because raising the wage floor improves pay for workers who earn at or just above the minimum wage.

Paid sick and family leave for all workers

Americans know that someone should not have to choose between their own health—or caring for a sick child or relative—and a job.  They believe that paid sick days are “a basic worker’s right.”

More than 40 percent of people in the private sector workforce—including 81 percent of low-wage workers—don’t receive a single paid sick day.  Millions more lack paid leave to care for a sick child or family member. Nearly 25 percent of workers polled said that they have lost a job or were told they would lose a job for taking time off to deal with a personal or family illness.

The US is virtually alone among other high-income countries in not setting a minimal standard for paid sick days, and is in the minority in not providing paid leave to care for a family member. For families in or near poverty, this is especially critical, since a few days’ lost pay makes the struggle to provide the basics—like food—that much harder.

Across demographic and political backgrounds, 75 percent of Americans favor a law providing a “minimum number” of paid sick days for all workers, including 69 percent who strongly favor providing workers with 7 paid sick days per year.

The Healthy Families Act would allow workers in businesses with 15 or more employees to earn up to seven job-protected paid sick days each year—to recover from their own illnesses, access preventative care, or provide care for a sick family member. 

This would be a significant leap forward in protecting all workers and their families.

Affordable Child Care for Working Families

Americans believe that parents should be able to work without spending exorbitant amounts on childcare. 

Half in Ten recently reported that the average cost of full-time child care ranges from $3,600 to $18,200 annually per child.  Since there are 7.8 million families with children under age 6 that live below 200 percent of the poverty line—on less than about $36,000 annually for a family of three—that’s just unacceptable (and it’s unacceptable for the middle-class too). 

Edelman reports that federal child care assistance currently reaches about one in seven children who qualify for it, the National Women’s Law Center (NWLC) puts the number at one in six—either way it’s bleak.  Last year, only 1.7 million children received a federal child care subsidy, and Helen Blank, director of Childcare and Early Learning at NWLC, predicted that the number would fall to 1.5 million—the fewest children served since 1998.

The economy can’t afford this lack of investment in working people and children.

“Child care plays two critical roles that support our economy,” said Blank.  “It helps children access the high-quality early learning environments they need to succeed, and it helps parents work.”

In fact, in 2010 poverty rates for families headed by a single mother dropped from 40.7 percent to 14 percent when the mother had full-time, year-round employment—and child care is key to that equation.   Research shows that low-income mothers who receive childcare subsidies are more likely to be employed, work more hours, and work standard schedules compared to mothers without subsidies.

But instead of bolstering childcare assistance we are moving in the opposite direction.  It’s funded primarily through the Child Care and Development Block Grant (CCDBC)—a fixed federal block grant so funding hasn’t risen with increased demand—and it now faces serious cuts.  Blank points to growing waiting lists—75,000 children in Florida, over 20,000 in Maryland, and 36,000 in Massachusetts.  She said that in North Carolina, about one out of four families on the state’s waiting list had lost or needed to quit their jobs while waiting for child care assistance.

Blank said child care needs a reauthorization with “significant new funds” so that children are in the kind of early-learning settings they need and deserve, and parents are able to work.  Peer countries are able to provide affordable childcare, why can’t we?  

End Childhood Hunger

Americans intuitively recognize that there is no excuse for any child to go hungry in the wealthiest nation in the history of forever.

In a 2011 poll commissioned by Tyson Foods and the Food Research and Action Center (FRAC), 80 percent of respondents said they “strongly agree” with the statement that “in the United States of America, no one should go hungry.”

And yet it is our most vulnerable population—children— that are particularly suffering from hunger.  More than 16 million live in food insecure households, including nearly 25 percent of all children under age 6, despite the fact that the parents of hungry children typically have full-time jobs. Hunger has a tremendous impact on young children’s health, future potential, and cognitive, social and emotional development.

“There are lifelong implications,” says Dr. Mariana Chilton, associate professor at Drexel University School of Public Health and co-principal investigator for Children’s HealthWatch.  “Children in food insecure households have more health problems, are more likely to be hospitalized, and have developmental delays.  Young kids who are food insecure may arrive at kindergarten unprepared and never catch up with their peers.”

In 2009, FRAC laid out seven steps to ending childhood hunger by 2015 that are still relevant today.  They include a range of measures such as: raising the minimum wage; creating jobs with better wages for lower-income workers; improving the SNAP benefit (which averaged $4.30 per person per day in 2010); increasing participation in the school lunch, breakfast, after school and summer meal programs; improving WIC; engaging all federal agencies that interact with low-income children—whether it’s the DOJ which funds afterschool programs, Treasury which does outreach to families regarding the Earned Income Tax Credit, or others; and creating a national stream of grants and loans to make sure there are decent grocery stores in low-income communities. 

TANF: a path to good jobs for those who can work, assistance for those who can’t

Americans are told TANF is a program that leads to self-sufficiency.  It isn’t.

The Temporary Assistance to Needy Families (TANF) program created in 1996 was touted as assistance that would help families on a path towards self-sufficiency.  It’s tough to overstate what a bill of goods the American people are being sold when both parties claim it has been a success.

If success means reducing the number of families with children in poverty that receive cash assistance—from 68 for every 100 families in poverty, to 27 for every 100 over the past 16 years—then, yeah it was successful.  But then why not just throw everyone off?

If it means not indexing TANF assistance to inflation, so that the benefit is now less than 30 percent of the poverty level in most states (less than $6000 annually for a family of three)… then it was successful. 

If it means keeping TANF recipients in any kind of job in order to receive this meager TANF benefit and no actual wage—whether it’s cleaning toilets, working in a cemetery, sweeping a county garage, or filing folders at an office—rather than helping people acquire the education and skills needed to secure family-supporting wages… then it was successful.

If it means cutting people with significant barriers to employment off of assistance because they reached an arbitrary, state-determined time limit or failed to meet a work requirement (no matter their individual circumstances)—then indeed the program has been successful.  It has directly contributed to the fact that 20.4 million people are now living in deep poverty—at less than half of the poverty line, or less than $9,000 for a family of three—up from 12.6 million people in 2000.  This number includes over 15 million women and children (nearly 10 percent of all children). 

If success means virtually 50 different welfare systems—for the purpose of “state flexibility”—so that Wyoming provides assistance to just 4 families for every 100 with children in poverty, Mississippi reaches 10, and California 66… then it was successful.

The antipoverty community should fight for a TANF that meets some basic standards regarding who should receive it; supports people in work or education programs that lead to family-supporting rather than dead-end jobs (including through a vehicle like the TANF Emergency Fund that placed 260,000 unemployed low-income parents and young adults in subsidized jobs during the recession and enjoyed bipartisan support from governors); and that addresses the needs of families living in deep poverty—which are usually headed by people with the most significant barriers to employment, including mental and physical health challenges, lack of a high school diploma, caring for a child with special needs, or living with domestic violence—rather than simply throwing families off of assistance.

One possible piece of legislation to rally around is Wisconsin Congresswoman Gwen Moore’s RISE Act.  Among the changes it calls for are adjusting each state’s block grant for inflation so it’s no longer frozen at 1996 funding levels; allowing education to count towards work requirements; providing childcare for all work-eligible parents; and prohibiting time limits of less than 60 months. 

Even if the antipoverty community were to win on subsidized jobs alone that would be a significant victory.

Conclusion

An Antipoverty Contract for 2013 wouldn’t guarantee a win on one or any of these five issues this year.  But it could engage people who currently aren’t being reached by the antipoverty movement; demonstrate why the movement’s policies are good for the entire nation; and offer an opportunity for people to work together for these and deeper reforms moving forward.  I would be interested in constructive comments below, as well as in emails to weekinpoverty@me.com.

© 2012 The Nation

Greg Kaufmann
Greg Kaufmann is a Nation contributor covering poverty in America.  He has been a guest on NPR, including Here & Now and Radio Times with Marty Moss-Coane, and various local radio programs including the Matthew Filipowicz Show.  His work has also appeared on Common Dreams, Alternet, Tikkun.org, NPR.org, CBSNews.com, and MichaelMoore.com.  He previously worked as a staffer for the Kerry campaign, a copywriter and speechwriter for various Democrats in national and local politics, and as a screenwriter.  He serves as an advisor for the Economic Hardship Reporting Project.

AppleSoft: No, It Was Not Different This Time

Back in late August, we presented a chart whose foresight and accuracy turned out to be so spot on, it scared even us. We asked: "With Apple overtaking Microsoft's 'peak-market-cap' and becoming the most 'valuable' company ever traded, we thought a re...

Frontrunning: January 17

  • Obama's Gun Curbs Face a Slog in Congress (BBG)
  • Euro Area Seen Stalling as Draghi’s Pessimism Shared (BBG)
  • China Begins to Lose Edge as World's Factory Floor (WSJ)
  • EU Car Sales Slump (WSJ)
  • Fed Concerned About Overheated Markets Amid Record Bond-Buying (BBG)
  • Australia Posts Worst Back-to-Back Job Growth Since ’97 (BBG)
  • Abe Currency Policy Stokes Gaffe Risk as Amari Roils Yen (BBG)
  • Japan Opposition Party Won’t Back BOJ Officials for Governor (BBG)
  • Fed Reports Point to Subdued Economic Growth (WSJ)
  • China Set to Exit Slowdown by Boosting Infrastructure (BBG)
  • Greece not out of woods, must stick to reforms: finance minister (Reuters)
  • Russian Rate Debate Flares Up as Cabinet Seeks Growth (BBG)

Overnight Media Digest

WSJ

* The Federal Aviation Administration on Wednesday ordered a halt to flights of Boeing Co's 787 Dreamliner, an unprecedented rebuke to the plane maker after two major battery malfunctions on its flagship jets.

* JPMorgan Chase & Co's directors cut Chief Executive James Dimon's pay by 50 percent for 2012, as the board took management to task for a trading debacle that cost the nation's largest bank more than $6 billion.

* Goldman Sachs Group Inc and Morgan Stanley agreed to pay a combined $560 million to settle allegations of foreclosure abuses, the latest setback in the banks' costly foray into subprime mortgages.

* Citigroup Inc has asked regulators for permission to repurchase just enough stock to counter dilution from routine share issuance, according to people familiar with the company's plans.

* Two bidders have emerged as leading contenders for ThyssenKrupp AG's steel operations in the Americas. ArcelorMittal SA submitted a $1.5 billion bid for a plant in Alabama, while Brazil's Companhia Siderúrgica Nacional submitted a $3.8 billion bid for that plant and a majority stake in a Brazilian mill, people familiar with the matter said.

* Hewlett-Packard Co has received expressions of interest from potential suitors for its Autonomy Corp business, the division that the technology giant has alleged engaged in accounting improprieties before HP acquired it in 2011, according to people familiar with the discussions.

* EBay Inc's revenue rose 18 percent in the latest quarter as business in the company's online marketplace and PayPal units continued to improve.

* Chipotle Mexican Grill Inc expects higher food costs to dampen fourth-quarter earnings, despite continued strength in its underlying sales trends.

* European retailer Metro AG said it is pulling out of the Chinese consumer-electronics business after two years of testing.

* China is losing its competitive edge as a low-cost manufacturing base, new data suggest, with makers of everything from handbags to shirts to basic electronic components relocating to cheaper locales like Southeast Asia.

FT

Dozens of expatriate workers have been kidnapped from an Algerian natural gas facility operated by BP and Statoil .

Business Secretary Vince Cable will say in a speech that the debate over Britain's EU membership and a possible referendum is terrible timing, creating uncertainty for investors.

Opposition leader Ed Miliband said in an interview that Cameron's inability to guarantee that Britain will be in the EU in five years' time would be destabilising for investment.

Goldman Sachs cut its bonuses in the fourth quarter, boosting it to its highest profit level in three years.

Germany's Bundesbank is planning to repatriate 54,000 gold bars worth 27 billion euros from Paris and New York between now and 2020.

New rules that force British banks to hold more capital against loans secured on commercial property are resulting in higher costs and scrapped projects for developers.

NYT

* Long seen as one of the most careful banks on Wall Street, JPMorgan Chase & Co on Wednesday drew back a curtain on a rare breakdown, showing traders acting on their own and concealing losses while managers seemingly turned a blind eye. In a 129-page internal report dissecting a bad bet on credit derivatives that cost the bank more than $6 billion, the bank confessed, in painstaking detail, to widespread "failures."

* The Federal Aviation Administration said on Wednesday it was grounding all Boeing Co 787s operated by United States carriers until it can determine what caused a new type of battery to catch fire on two planes in nine days.

* Hewlett-Packard Co has received a number of inquiries from would-be buyers for its Autonomy and Electronic Data Systems units in recent weeks, though the technology company isn't interested in selling at the moment, a person briefed on the matter said.

* Goldman Sachs Group Inc on Wednesday released financial results that demonstrated it was not only benefiting from cost-cutting, but it also finally had a significant rebound in its core businesses. It reported a fourth-quarter profit of $2.89 billion, or $5.60 a share.

* To combat a rise in cybercrime, the European Commission is considering a plan to require companies that store data on the Internet - like Microsoft Corp, Apple Inc, Google Inc and International Business Machines Corp - to report the loss or theft of personal information in the 27-nation bloc or risk sanctions and fines.

* A new type of flu vaccine won regulatory approval on Wednesday, and its manufacturer said that limited supplies are expected to be available this winter.

* After an estimated 500,000 patients in the United States have received a type of artificial hip that is failing early in many cases, the Food and Drug Administration is proposing rules that could stop manufacturers from selling such implants.

* Robert Wolf, a top Wall Street rainmaker who left UBS AG last summer, has hired Austan Goolsbee as a "strategic partner" for his new firm, 32 Advisors, the two men have told friends in recent weeks, according to people briefed on the matter.

* Nearly half of Germany's gold reserves are held in a vault at the Federal Reserve Bank of New York - billions of dollars worth of postwar geopolitical history squirreled away for safe keeping below the streets of Lower Manhattan. Now the German central bank wants to make a big withdrawal - 300 tons in all.

Canada

THE GLOBE AND MAIL

* Canada's energy and mining companies are facing new challenges from First Nations that are demanding the right to approve all resource projects on traditional territories and to participate in the revenues.

* French President François Hollande has personally asked Canadian Prime Minister Stephen Harper to extend Canada's contribution of a heavy-lift cargo plane for Mali, and to offer more transport help, testing Harper's efforts to set strict limits on Canada's military assistance.

Reports in the business section:

* Air Transat will cut $20 million in annual operating cost as part of its parent company's efforts to restore profitability in the face of toughening competition.

Executives told employees on Wednesday that the airline needs to realize the savings in order to operate a fleet of Boeing 737 aircraft and replace those flown under subcontract by Nova Scotia-based Canjet since 2009.

* H&R Real Estate Investment Trust on Wednesday offered to buy Primaris Retail Real Estate Investment Trust for nearly C$3 billion ($3.04 billion), or C$28 a share, just above a hostile C$26 per share bid put forward in December by a consortium led by KingSett Capital.

NATIONAL POST

* An Ontario bodyguard who worked for Saadi Gaddafi -- the son of slain Libyan leader Muammar Gaddafi -- provided "invaluable assistance" to the Libyan dictatorship as it attempted to brutally crush an anti-regime uprising in 2011, the Canada Border Services Agency said.

* A new study has indicated that overdose deaths have risen in close parallel with Canada's soaring consumption of prescription narcotics and the painkillers have become the country's most dangerous drugs after tobacco and alcohol, a leading addiction researcher of Simon Fraser University said.

FINANCIAL POST

* Calgary-based Sunshine Oil Sands Ltd has agreed to share oil sands exploration technology with a division of China's CNOOC Ltd.

The one-year "cooperation" agreement comes roughly one month after the federal government approved the sale of oil sands producer Nexen Inc to CNOOC for $15.1 billion.

* Lululemon Athletica Inc has its sights on growing its share in menswear, CEO Christine Day said at the ICR XChange investor conference in Miami on Wednesday, a rare bright spot in last year's apparel market.

A little over a year and a half ago, menswear represented 8 percent of sales at the Vancouver-based retailer. while on a year to date basis the category has hit 12 percent with the holiday season peaking at 15 percent, Day said.

China

CHINA SECURITIES JOURNAL

--The yuan's real effective exchange rate (REER), which measures the currency's value against a trade-weighted basket after adjustments based on inflation, hit a record high of 110.16 in December, Bank for International Settlements (BIS) data showed.

SHANGHAI SECURITIES NEWS

--In the first two weeks of January, new loans from China's "big four" banks hit 270 billion yuan ($43.43 billion), with industry insiders expecting that the total new loans are likely to hit one trillion yuan in January.

PEOPLE'S DAILY

--China's tax revenue rose 11.2 percent to 11.7 trillion yuan in 2012, data from the state administration of taxation showed.

Fly on the Wall 7:00 AM Market Snapshot

ANALYST RESEARCH

Upgrades

Adtran (ADTN) upgraded to Neutral from Sell at Citigroup
Bio-Rad (BIO) upgraded to Outperform from Underperform at CLSA
GT Advanced (GTAT) upgraded to Hold from Underperform at Jefferies
Infinera (INFN) upgraded to Overweight from Neutral at JPMorgan
Juniper (JNPR) upgraded to Overweight from Neutral at JPMorgan
Medtronic (MDT) upgraded to Outperform from Neutral at Credit Suisse
Mercury General (MCY) upgraded to Outperform from Neutral at Macquarie
Mohawk (MHK) upgraded to Outperform from Underperform at Macquarie
PerkinElmer (PKI) upgraded to Buy from Outperform at CLSA
Rio Tinto (RIO) upgraded to Buy from Neutral at Citigroup

Downgrades

Adtran (ADTN) downgraded to Sell from Neutral at UBS
Agilent (A) downgraded to Outperform from Buy at CLSA
BNY Mellon (BK) downgraded to Sector Perform from Outperform at RBC Capital
Boeing (BA) downgraded to Underweight from Hold at BB&T
Celsion (CLSN) downgraded to Sell from Hold at Brean Capital
Cisco (CSCO) downgraded to Underweight from Neutral at JPMorgan
Columbia Sportswear (COLM) downgraded to Underperform from Buy at BofA/Merrill
Corning (GLW) downgraded to Sector Perform from Outperform at RBC Capital
Cree (CREE) downgraded to Underperform from Buy at Jefferies
Itron (ITRI) downgraded to Hold from Buy at Jefferies
Leap Wireless (LEAP) downgraded to Underperform from Hold at Jefferies
RBC Bearings (ROLL) downgraded to Market Perform from Outperform at William Blair
Regal-Beloit (RBC) downgraded to Perform from Outperform at Oppenheimer
Regeneron (REGN) downgraded to Hold from Buy at Brean Capital
SAP (SAP) downgraded to Neutral from Buy at Citigroup
VIVUS (VVUS) downgraded to Sell from Hold at Brean Capital
Waters (WAT) downgraded to Market Perform from Outperform at Wells Fargo
Williams-Sonoma (WSM) downgraded to Market Perform from Strong Buy at Raymond James
Williams-Sonoma (WSM) downgraded to Neutral from Buy at Goldman

Initiations

Alkermes (ALKS) initiated with a Neutral at Credit Suisse
Approach Resources (AREX) initiated with an In-Line at Imperial Capital
Asset Acceptance (AACC) initiated with a Neutral at Janney Capital
Concho Resources (CXO) initiated with an Outperform at Imperial Capital
Eli Lilly (LLY) initiated with a Sell at CLSA
Encore Capital (ECPG) initiated with a Buy at Janney Capital
Portfolio Recovery (PRAA) initiated with a Neutral at Janney Capital
Stillwater Mining (SWC) initiated with an Outperform at Wells Fargo
U.S. Silica (SLCA) initiated with a Sector Perform at RBC Capital
Vanda Pharmaceuticals (VNDA) initiated with an Outperform at JMP Securities

HOT STOCKS

FAA ordered Boeing (BA) to temporary cease operations of all U.S. 787 Dreamliners jets, Bloomberg reports
Rio Tinto (RIO) said CEO Albanese stepped down after charges
Expects non-cash impairment charge of $14B
Stryker (SYK) acquired Trauson Holdings for $764M in cash
Sun Life Financial (SLF), Khazanah Nasional Berhad to purchase CIMB Aviva for C$586M
Treasury Department hired Citigroup (C), JPMorgan (JPM) to sell General Motors (GM)  shares, Bloomberg reports
Nokia (NOK) to cut 300 jobs, transfer 820 others amid changes in IT
AT&T (T) to enable FaceTime over Cellular (AAPL) for all iOS devices at no extra charge
CBS (CBS) began converting its Outdoor Americas division into a REIT, and will pursue a divestiture of its Outdoor operations in Europe and Asia
A. M. Castle (CAS) announced restructuring plan, will reduce workforce by 10%
eBay (EBAY) said Europe still “sluggish,” said Latin America an “important growth opportunity”
Said PayPal-Discover partnership to go live at end of Q2
K-Swiss (KSWS) to be acquired by E.Land World for $4.75 per share in cash

EARNINGS

Companies that beat consensus earnings expectations last night and today include: Fifth Third Bancorp (FITB), Insteel (IIIN), BlackRock (BLK), Huntington Bancshares (HBAN), Virginia Commerce (VCBI), BB&T (BBT), H.B. Fuller (FUL), Bank of the Ozarks (OZRK), Clarcor (CLC), SLM Corp. (SLM), eBay (EBAY), Nautilus (NLS)

Companies that missed consensus earnings expectations include:
CVB Financial (CVBF), Plexus (PLXS), Kinder Morgan Energy (KMP), Kinder Morgan (KMI), Boston Private Financial (BPFH)

Companies that matched consensus earnings expectations include:
UnitedHealth (UNH), Pacific Continental (PCBK)

NEWSPAPERS/WEBSITES
Investors are grappling with what could be a watershed moment for Apple (AAPL). In many fund managers' eyes, the recent decline could mark Apple's transformation from a growth stock—one that is seen as risky but whose growth prospects could lead to big gains—to a more plodding value stock—one that trades at a low price relative to earnings and offers regular payments such as dividends, the Wall Street Journal reports
The power that U.S. baby boomers have exercised for some 50 years over the auto industry is starting to wane. Auto industry executives at the North American International Auto Show in Detroit this week made it clear with their designs for coming models that they are pivoting their attention—and their product strategies—toward the 20, 30 and 40-something consumers collectively known as Generations X and Y, the Wall Street Journal reports
PC makers, trying to beat back a tablet mania that's hurting their sales, are making what may be a last attempt to sway customers by mimicking the competition, Reuters reports
Airbus (EADSY) reported a 43% drop in orders and lost its title as the world's largest plane maker to Boeing (BA) in 2012, as it predicted improvements in orders and deliveries for 2013 as airlines look to reduce fuel costs. Adjusted for cancellations, Airbus had 833 net orders, while Boeing led on net orders with 921 aircraft, Reuters reports
Fed officials are increasingly concerned that record-low interest rates are overheating markets for assets from farmland to junk bonds, which could heighten risks when they reverse their bond purchases, Bloomberg reports
Treasuries fell, as 10-year notes halted a four-day advance, before Commerce Department data forecast to show U.S. housing starts rose last month, adding to signs the U.S. economy is improving, Bloomberg reports

SYNDICATE
Aveo Pharmaceuticals (AVEO) commences offering of common stock
CVR Refining (CVRR) 24M share IPO priced at $25.00
Imation (IMN) files to sell 3.32M shares of common stock for holders
Northern Tier (NTI) commences offering of 9M common units by holders

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Frontrunning: January 17

  • Obama's Gun Curbs Face a Slog in Congress (BBG)
  • Euro Area Seen Stalling as Draghi’s Pessimism Shared (BBG)
  • China Begins to Lose Edge as World's Factory Floor (WSJ)
  • EU Car Sales Slump (WSJ)
  • Fed Concerned About Overheated Markets Amid Record Bond-Buying (BBG)
  • Australia Posts Worst Back-to-Back Job Growth Since ’97 (BBG)
  • Abe Currency Policy Stokes Gaffe Risk as Amari Roils Yen (BBG)
  • Japan Opposition Party Won’t Back BOJ Officials for Governor (BBG)
  • Fed Reports Point to Subdued Economic Growth (WSJ)
  • China Set to Exit Slowdown by Boosting Infrastructure (BBG)
  • Greece not out of woods, must stick to reforms: finance minister (Reuters)
  • Russian Rate Debate Flares Up as Cabinet Seeks Growth (BBG)

Overnight Media Digest

WSJ

* The Federal Aviation Administration on Wednesday ordered a halt to flights of Boeing Co's 787 Dreamliner, an unprecedented rebuke to the plane maker after two major battery malfunctions on its flagship jets.

* JPMorgan Chase & Co's directors cut Chief Executive James Dimon's pay by 50 percent for 2012, as the board took management to task for a trading debacle that cost the nation's largest bank more than $6 billion.

* Goldman Sachs Group Inc and Morgan Stanley agreed to pay a combined $560 million to settle allegations of foreclosure abuses, the latest setback in the banks' costly foray into subprime mortgages.

* Citigroup Inc has asked regulators for permission to repurchase just enough stock to counter dilution from routine share issuance, according to people familiar with the company's plans.

* Two bidders have emerged as leading contenders for ThyssenKrupp AG's steel operations in the Americas. ArcelorMittal SA submitted a $1.5 billion bid for a plant in Alabama, while Brazil's Companhia Siderúrgica Nacional submitted a $3.8 billion bid for that plant and a majority stake in a Brazilian mill, people familiar with the matter said.

* Hewlett-Packard Co has received expressions of interest from potential suitors for its Autonomy Corp business, the division that the technology giant has alleged engaged in accounting improprieties before HP acquired it in 2011, according to people familiar with the discussions.

* EBay Inc's revenue rose 18 percent in the latest quarter as business in the company's online marketplace and PayPal units continued to improve.

* Chipotle Mexican Grill Inc expects higher food costs to dampen fourth-quarter earnings, despite continued strength in its underlying sales trends.

* European retailer Metro AG said it is pulling out of the Chinese consumer-electronics business after two years of testing.

* China is losing its competitive edge as a low-cost manufacturing base, new data suggest, with makers of everything from handbags to shirts to basic electronic components relocating to cheaper locales like Southeast Asia.

FT

Dozens of expatriate workers have been kidnapped from an Algerian natural gas facility operated by BP and Statoil .

Business Secretary Vince Cable will say in a speech that the debate over Britain's EU membership and a possible referendum is terrible timing, creating uncertainty for investors.

Opposition leader Ed Miliband said in an interview that Cameron's inability to guarantee that Britain will be in the EU in five years' time would be destabilising for investment.

Goldman Sachs cut its bonuses in the fourth quarter, boosting it to its highest profit level in three years.

Germany's Bundesbank is planning to repatriate 54,000 gold bars worth 27 billion euros from Paris and New York between now and 2020.

New rules that force British banks to hold more capital against loans secured on commercial property are resulting in higher costs and scrapped projects for developers.

NYT

* Long seen as one of the most careful banks on Wall Street, JPMorgan Chase & Co on Wednesday drew back a curtain on a rare breakdown, showing traders acting on their own and concealing losses while managers seemingly turned a blind eye. In a 129-page internal report dissecting a bad bet on credit derivatives that cost the bank more than $6 billion, the bank confessed, in painstaking detail, to widespread "failures."

* The Federal Aviation Administration said on Wednesday it was grounding all Boeing Co 787s operated by United States carriers until it can determine what caused a new type of battery to catch fire on two planes in nine days.

* Hewlett-Packard Co has received a number of inquiries from would-be buyers for its Autonomy and Electronic Data Systems units in recent weeks, though the technology company isn't interested in selling at the moment, a person briefed on the matter said.

* Goldman Sachs Group Inc on Wednesday released financial results that demonstrated it was not only benefiting from cost-cutting, but it also finally had a significant rebound in its core businesses. It reported a fourth-quarter profit of $2.89 billion, or $5.60 a share.

* To combat a rise in cybercrime, the European Commission is considering a plan to require companies that store data on the Internet - like Microsoft Corp, Apple Inc, Google Inc and International Business Machines Corp - to report the loss or theft of personal information in the 27-nation bloc or risk sanctions and fines.

* A new type of flu vaccine won regulatory approval on Wednesday, and its manufacturer said that limited supplies are expected to be available this winter.

* After an estimated 500,000 patients in the United States have received a type of artificial hip that is failing early in many cases, the Food and Drug Administration is proposing rules that could stop manufacturers from selling such implants.

* Robert Wolf, a top Wall Street rainmaker who left UBS AG last summer, has hired Austan Goolsbee as a "strategic partner" for his new firm, 32 Advisors, the two men have told friends in recent weeks, according to people briefed on the matter.

* Nearly half of Germany's gold reserves are held in a vault at the Federal Reserve Bank of New York - billions of dollars worth of postwar geopolitical history squirreled away for safe keeping below the streets of Lower Manhattan. Now the German central bank wants to make a big withdrawal - 300 tons in all.

Canada

THE GLOBE AND MAIL

* Canada's energy and mining companies are facing new challenges from First Nations that are demanding the right to approve all resource projects on traditional territories and to participate in the revenues.

* French President François Hollande has personally asked Canadian Prime Minister Stephen Harper to extend Canada's contribution of a heavy-lift cargo plane for Mali, and to offer more transport help, testing Harper's efforts to set strict limits on Canada's military assistance.

Reports in the business section:

* Air Transat will cut $20 million in annual operating cost as part of its parent company's efforts to restore profitability in the face of toughening competition.

Executives told employees on Wednesday that the airline needs to realize the savings in order to operate a fleet of Boeing 737 aircraft and replace those flown under subcontract by Nova Scotia-based Canjet since 2009.

* H&R Real Estate Investment Trust on Wednesday offered to buy Primaris Retail Real Estate Investment Trust for nearly C$3 billion ($3.04 billion), or C$28 a share, just above a hostile C$26 per share bid put forward in December by a consortium led by KingSett Capital.

NATIONAL POST

* An Ontario bodyguard who worked for Saadi Gaddafi -- the son of slain Libyan leader Muammar Gaddafi -- provided "invaluable assistance" to the Libyan dictatorship as it attempted to brutally crush an anti-regime uprising in 2011, the Canada Border Services Agency said.

* A new study has indicated that overdose deaths have risen in close parallel with Canada's soaring consumption of prescription narcotics and the painkillers have become the country's most dangerous drugs after tobacco and alcohol, a leading addiction researcher of Simon Fraser University said.

FINANCIAL POST

* Calgary-based Sunshine Oil Sands Ltd has agreed to share oil sands exploration technology with a division of China's CNOOC Ltd.

The one-year "cooperation" agreement comes roughly one month after the federal government approved the sale of oil sands producer Nexen Inc to CNOOC for $15.1 billion.

* Lululemon Athletica Inc has its sights on growing its share in menswear, CEO Christine Day said at the ICR XChange investor conference in Miami on Wednesday, a rare bright spot in last year's apparel market.

A little over a year and a half ago, menswear represented 8 percent of sales at the Vancouver-based retailer. while on a year to date basis the category has hit 12 percent with the holiday season peaking at 15 percent, Day said.

China

CHINA SECURITIES JOURNAL

--The yuan's real effective exchange rate (REER), which measures the currency's value against a trade-weighted basket after adjustments based on inflation, hit a record high of 110.16 in December, Bank for International Settlements (BIS) data showed.

SHANGHAI SECURITIES NEWS

--In the first two weeks of January, new loans from China's "big four" banks hit 270 billion yuan ($43.43 billion), with industry insiders expecting that the total new loans are likely to hit one trillion yuan in January.

PEOPLE'S DAILY

--China's tax revenue rose 11.2 percent to 11.7 trillion yuan in 2012, data from the state administration of taxation showed.

Fly on the Wall 7:00 AM Market Snapshot

ANALYST RESEARCH

Upgrades

Adtran (ADTN) upgraded to Neutral from Sell at Citigroup
Bio-Rad (BIO) upgraded to Outperform from Underperform at CLSA
GT Advanced (GTAT) upgraded to Hold from Underperform at Jefferies
Infinera (INFN) upgraded to Overweight from Neutral at JPMorgan
Juniper (JNPR) upgraded to Overweight from Neutral at JPMorgan
Medtronic (MDT) upgraded to Outperform from Neutral at Credit Suisse
Mercury General (MCY) upgraded to Outperform from Neutral at Macquarie
Mohawk (MHK) upgraded to Outperform from Underperform at Macquarie
PerkinElmer (PKI) upgraded to Buy from Outperform at CLSA
Rio Tinto (RIO) upgraded to Buy from Neutral at Citigroup

Downgrades

Adtran (ADTN) downgraded to Sell from Neutral at UBS
Agilent (A) downgraded to Outperform from Buy at CLSA
BNY Mellon (BK) downgraded to Sector Perform from Outperform at RBC Capital
Boeing (BA) downgraded to Underweight from Hold at BB&T
Celsion (CLSN) downgraded to Sell from Hold at Brean Capital
Cisco (CSCO) downgraded to Underweight from Neutral at JPMorgan
Columbia Sportswear (COLM) downgraded to Underperform from Buy at BofA/Merrill
Corning (GLW) downgraded to Sector Perform from Outperform at RBC Capital
Cree (CREE) downgraded to Underperform from Buy at Jefferies
Itron (ITRI) downgraded to Hold from Buy at Jefferies
Leap Wireless (LEAP) downgraded to Underperform from Hold at Jefferies
RBC Bearings (ROLL) downgraded to Market Perform from Outperform at William Blair
Regal-Beloit (RBC) downgraded to Perform from Outperform at Oppenheimer
Regeneron (REGN) downgraded to Hold from Buy at Brean Capital
SAP (SAP) downgraded to Neutral from Buy at Citigroup
VIVUS (VVUS) downgraded to Sell from Hold at Brean Capital
Waters (WAT) downgraded to Market Perform from Outperform at Wells Fargo
Williams-Sonoma (WSM) downgraded to Market Perform from Strong Buy at Raymond James
Williams-Sonoma (WSM) downgraded to Neutral from Buy at Goldman

Initiations

Alkermes (ALKS) initiated with a Neutral at Credit Suisse
Approach Resources (AREX) initiated with an In-Line at Imperial Capital
Asset Acceptance (AACC) initiated with a Neutral at Janney Capital
Concho Resources (CXO) initiated with an Outperform at Imperial Capital
Eli Lilly (LLY) initiated with a Sell at CLSA
Encore Capital (ECPG) initiated with a Buy at Janney Capital
Portfolio Recovery (PRAA) initiated with a Neutral at Janney Capital
Stillwater Mining (SWC) initiated with an Outperform at Wells Fargo
U.S. Silica (SLCA) initiated with a Sector Perform at RBC Capital
Vanda Pharmaceuticals (VNDA) initiated with an Outperform at JMP Securities

HOT STOCKS

FAA ordered Boeing (BA) to temporary cease operations of all U.S. 787 Dreamliners jets, Bloomberg reports
Rio Tinto (RIO) said CEO Albanese stepped down after charges
Expects non-cash impairment charge of $14B
Stryker (SYK) acquired Trauson Holdings for $764M in cash
Sun Life Financial (SLF), Khazanah Nasional Berhad to purchase CIMB Aviva for C$586M
Treasury Department hired Citigroup (C), JPMorgan (JPM) to sell General Motors (GM)  shares, Bloomberg reports
Nokia (NOK) to cut 300 jobs, transfer 820 others amid changes in IT
AT&T (T) to enable FaceTime over Cellular (AAPL) for all iOS devices at no extra charge
CBS (CBS) began converting its Outdoor Americas division into a REIT, and will pursue a divestiture of its Outdoor operations in Europe and Asia
A. M. Castle (CAS) announced restructuring plan, will reduce workforce by 10%
eBay (EBAY) said Europe still “sluggish,” said Latin America an “important growth opportunity”
Said PayPal-Discover partnership to go live at end of Q2
K-Swiss (KSWS) to be acquired by E.Land World for $4.75 per share in cash

EARNINGS

Companies that beat consensus earnings expectations last night and today include: Fifth Third Bancorp (FITB), Insteel (IIIN), BlackRock (BLK), Huntington Bancshares (HBAN), Virginia Commerce (VCBI), BB&T (BBT), H.B. Fuller (FUL), Bank of the Ozarks (OZRK), Clarcor (CLC), SLM Corp. (SLM), eBay (EBAY), Nautilus (NLS)

Companies that missed consensus earnings expectations include:
CVB Financial (CVBF), Plexus (PLXS), Kinder Morgan Energy (KMP), Kinder Morgan (KMI), Boston Private Financial (BPFH)

Companies that matched consensus earnings expectations include:
UnitedHealth (UNH), Pacific Continental (PCBK)

NEWSPAPERS/WEBSITES
Investors are grappling with what could be a watershed moment for Apple (AAPL). In many fund managers' eyes, the recent decline could mark Apple's transformation from a growth stock—one that is seen as risky but whose growth prospects could lead to big gains—to a more plodding value stock—one that trades at a low price relative to earnings and offers regular payments such as dividends, the Wall Street Journal reports
The power that U.S. baby boomers have exercised for some 50 years over the auto industry is starting to wane. Auto industry executives at the North American International Auto Show in Detroit this week made it clear with their designs for coming models that they are pivoting their attention—and their product strategies—toward the 20, 30 and 40-something consumers collectively known as Generations X and Y, the Wall Street Journal reports
PC makers, trying to beat back a tablet mania that's hurting their sales, are making what may be a last attempt to sway customers by mimicking the competition, Reuters reports
Airbus (EADSY) reported a 43% drop in orders and lost its title as the world's largest plane maker to Boeing (BA) in 2012, as it predicted improvements in orders and deliveries for 2013 as airlines look to reduce fuel costs. Adjusted for cancellations, Airbus had 833 net orders, while Boeing led on net orders with 921 aircraft, Reuters reports
Fed officials are increasingly concerned that record-low interest rates are overheating markets for assets from farmland to junk bonds, which could heighten risks when they reverse their bond purchases, Bloomberg reports
Treasuries fell, as 10-year notes halted a four-day advance, before Commerce Department data forecast to show U.S. housing starts rose last month, adding to signs the U.S. economy is improving, Bloomberg reports

SYNDICATE
Aveo Pharmaceuticals (AVEO) commences offering of common stock
CVR Refining (CVRR) 24M share IPO priced at $25.00
Imation (IMN) files to sell 3.32M shares of common stock for holders
Northern Tier (NTI) commences offering of 9M common units by holders

Your rating: None

‘Aaron was killed by the government’ – Robert Swartz on his son’s death

The father of information activist Aaron Swartz blames US prosecutors for his son’s death, RT’s Andrew Blake reports from an emotional Tuesday morning funeral outside of Chicago.

Aaron Swartz, 26, was found dead on Friday of a reported suicide. Swartz had been instrumental in designing software that aimed to make the Internet easy and open for everyone, and also co-founded both Reddit.com and Demand Progress — one of the most visited sites on the Web and an highly touted activism organization, respectively.

But while friends, family and loved ones recalled Swartz’ compassion for technology and his utter selflessness during Tuesday’s service, those in attendance did not shy away from acknowledging the tremendous legal trouble that plagued the activist in recent years.

In 2011, federal prosecutors charged Swartz with a series of counts under the Computer Fraud and Abuse Act, crimes that could have sent him away to prison for upwards of 35 years if convicted. Swartz, said the government, entered a building at the Massachusetts Institute of Technology and downloaded millions of academic and scholarly papers from the service JSTOR with presumably the intent of distributing them for free.

“Aaron did not commit suicide but was killed by the government,” Robert Swartz said during Tuesday’s service at the Central Avenue Synagogue in Highland Park, Illinois. “Someone who made the world a better place was pushed to his death by the government.”

During the funeral, which lasted little less than 90 minutes, phrases such as “Googled,” “Anonymous,” “hackers” and “the Computer Fraud and Abuse Act” were spoken so nonchalantly it was as if including them in the service was simply to be expected. Taren Stinebrickner-Kauffman, Swartz’s partner, said amidst laughter and tears that one of her fondest memories of Aaron as of late was an early-morning moment from only weeks earlier when he insisted she help him spend hours analyzing an advanced algebraic math equation he was determined to solve.

In her eulogy as well as those offered by others, the take-away by and large was that Swartz, to the ones closest to the computer genius, was adamant on social change.

“Aaron meant more to our people than I think anyone else we know,” said Stinebrickner-Kauffman, who met Swartz through a tight-knit circle of activists from New England.

“Aaron wanted so badly to change the world,” she said, more so than acquiring wealth or fame.

Despite those intentions though, loved ones said the looming possibility of a felony conviction complicated matters for Swartz since his indictment in 2011.

“He was so tired” in recent weeks, Stinebrickner-Kauffman recalled. “He said to me, ‘Am I always going to feel that way?’”

With Swartz’ passing, though, his partner said it was now up to his colleagues and peers to push forward with the advocacy that Aaron was so incredibly passionate about.

“There’s nothing Aaron would want more than for us to take this moment and change the world,” she said, calling for the community Swartz was a part of to continue rallying for justice without him. If the community can combine forces and further his advocacy, she said, “prosecutors can stop going after innocent young people” like Aaron.

Elsewhere during her eulogy, Stinebrickner-Kauffman spoke harshly of the Massachusetts attorney general that filed charges against Swartz, as well as the institution that some say could have stopped the federal government from following up with the hacking case but did not.

That “false characterization” spearheaded by the Massachusetts Attorney General’s office, said Swartz’ dad, was likely the cause of his son’s death. Whereas the public applauds computer icons like Bill Gates and Steve Jobs as visionaries, Robert Swartz said his son was much more innocent in the eyes of the world at large, just not the federal government.

Before his days with Apple, recalled Mr. Swartz, Jobs and his business partner Steve Wozniak “used to criminally defraud the phone company” by selling small “blue box” devices that allowed anyone in the country to conduct long-distance calls for free. Gates’ development of Microsoft’s BASIC, Swartz said, was “sketchy” at best.

“These are people who are lionized,” he said, and “treated like idols in our culture.”

“How is that Aaron did something that legally wasn’t illegal — and he was destroyed by it,” he asked.

Mr. Swartz also had harsh words for MIT, who, unlike JSTOR, was relentless in their pursuit of the alleged criminal hacker.

“We tried and tried to get MIT to help and show compassion,” he said, but “their institutional concerns were more important than compassion.”

Following Swartz’ passing, members of the hacktivist group Anonymous gained unauthorized access to MIT’s servers and posted a tribute that was cited during Tuesday’s service, which also included eulogies from some of the most respected figures of Internet culture.

Tim Berners-Lee, a British scientist responsible for developing the World Wide Web, called Aaron Swartz “an elder” of the computer and information community during the funeral. When Berners-Lee first met Swartz, the young prodigy was all of 14 years old.

“I have no met anyone else so ethical,” Berners-Lee said. “He knew by writing code . . . he could change the world.”

“Up until the end, he was fighting for right,” he said.

Lawrence Lessig, an academic and political activist who knew Aaron Swartz for over a decade, called the government’s attempt to prosecute his friend pointless and an example of “idiocy” during the service. Elliot Peters, Swartz’ attorney in the JSTOR case, said his client’s peers are now without someone whose “passion for freedom and fairness” and a “mistrust for power” was unmatched. Peters echoed that same mistrust in his eulogy, which condemned the federal prosecutors that he suggested were at least partially responsible in his client’s death.

“Aaron, sadly, provided them the opportunity to make a case,” he said. “Something they could brag about.”

“They didn’t care who Aaron really was, or what he was doing,” Peters said. Meanwhile, he considered Swartz a “young, diminutive and oh so brilliant client” and compared his advocacy against the government to that of the American patriots during the US revolution.

“Aaron still lives as a voice for good,” his father said as the ceremony neared ending. “He spent his short life selflessly trying to make the world a better place for everyone.”

“Selfless” was an adjective used countless time during the funeral by several persons who cited Swartz’ insistence on putting himself first perhaps his most powerful trait.

“Your grief should not be equal to his work, because then your sorrow will never end,” Peters said at one point to quote Shakespeare’s Macbeth.

“As much as we despair, and we all do, we must know that we do all change the world. And we must never stop,” Mr. Swartz said before the ceremony concluded.

Memorial services for Swartz across the country are currently being planned. Hundreds are expected to gather in New York City later this week for a tribute planned in Times Square.

Three Monopolies We Need to Keep an Eye on

Who doesn’t use Google? Shop on Amazon? Own, or covet, some Apple device? Who doesn’t give thanks to this triumvirate of technology companies for the ways in which they add to our lives?

But is it possible that these companies are well on their way to becoming too big for their, and our own, good?

1. Google: As dominant as ever when we’re searching the Internet

Last week, after a two-year investigation, the FTC absolved Goggle of violating anti-trust laws for favoring its own services in its lucrative search engine. At issue was how Google produces its search results via its top-secret algorithm which, the company maintains, it cannot disclose for competitive reasons.

In its ruling, the FTC said that it found that “Google’s primary purpose … [is] to improve the user experience.” Google itself contends that it is “unbiased and objective” and that its search results are “the best we know how to produce.” But given that its enormous revenue is derived from this very source, questions remain.

Google made an all-out offensive to lobby Washington, a lesson learned from studying the 1990s experience of Microsoft, which was charged with monopolization for tying its Internet Explorer browser to closely go with its Windows operating system. From this, some critics think the FTC let Google off too easy  though, as Ars Technica points out, more than a few of those who have been expressing displeasure at the FTC’s ruling are precisely Google’s rivals including Microsoft.

The European Commission is to issue a ruling on Google soon and is expected to be less lenient. The reason is that “American antitrust regulators tend to focus on whether a company’s dominance harms consumers; the European system seeks to keep competitors in the market,” says the New York Times. Another factor is that Google holds an 83 percent share of the European search market, vs. 67 percent of the U.S.’s. It could be only a matter of time before the “antitrust rap” could catch up to Google — or maybe not.

2. Amazon: Poised to become the only store on earth

Holiday sales at Barnes and Noble were down 12 percent from last year’s. While there been reports of some independent bookstores thriving (hooray!), Amazon, for all that it does not make a profit (indeed, its profit was down by 96 percent in the second quarter of 2012) inexorably continues its domination as the world’s online purveyor of seemingly everything from clothes to food to books (real and electronic).

Amazon’s prices are always hard to beat and every time you turn around it seems Amazon’s added yet another business, be it streaming movies or its cloud service. Who hasn’t heard of an independent book or other store that closes its doors because it couldn’t compete with Amazon? Yet we still keep going back.

3. Apple: Does any tablet beside the iPad matter?

The iPad’s touchscreen and size made it the device I (and quite a few others) had been looking for. It was the first device my teenage autistic son could use on his own to hear music, watch videos, look at photos after years of deep frustration trying, unsuccessfully, to use a computer mouse. The iPad’s design was the answer.

The iPad’s marketshare has declined from an all-time high in August due to competition from Google’s Android and Amazon’s Kindle. Analysts are predicting that increased adoption by businesses will help Apple to reconquer the market; Germany could even be called “Appleland” due to the popularity of the company’s products there, says the Frankfurter Allgemeine.

Back in June, Microsoft’s Surface tablet was announced with much fanfare but has since been little heard from and sales of software for PCs have been in decline, as well as sales of PCs themselves. It’s certainly harder and harder not to think of the iPads and tablet computers as one in the same.

It took someone with a novel way of thinking to design the iPad and other Apple devices that have made a big difference. But we can’t expect one company to keep producing all the innovative ideas. Just at the end of last week, Pinterest announced that it was taking over recipe site Punchfork. This is probably not the greatest loss or saddest occasion in the history of either the Internet or of corporate mergers. But as Alex Hern writes in the New Statesman, the annexation (ok, swallowing up) of Punchfork by Pinterest means that another idea, another novel way of doing something, will no longer exist.

It’s a loss of diversity on the web perhaps comparable in some ways to the shrinking biodiversity of wildlife as more species of animals and plants face extinction. A world of only McDonalds, Starbucks and Walmart sounds hardly appealing — a world in which Google, Amazon and Apple are the only big players would be just as poor.

A New Sheriff (Make That Business Model) Is Coming to Town For US Wireless...

This is one of those pieces where, after reading it you say "Damn, why didn't I think of that!".. By demonstrating how Google is transforming the telecomm landscape, I may actually save up to $5,700 for at least a quarter of the readers who are perusing this blog. Yes, it's for real, and its a benefit of the "knowlege how" mentality that I described in my previous pieces on education. You'll see where I'm coming from once you get to the long graphic below...

T-Mobile has had a serious problem competing with the big boys of US wireless carriers. They are the only one not to carry the iPhone. This, in my opinion, was a wise move for the subsidy game has been a money loser from the get go, and although the iPhone is still selling like hotcakes, those hotcakes are looking much cooler as Andrioid sales have taken off. Still, T-Mobile doesn't seem content, so it decided to do what most of the carriers should have done a long time ago. T-Mobile is breaking the wireless carrier contract hegemony and offering pure service without the BS. For ANYONE who can count, this makes the decision to go with T-Mobile as brainless a decision as the sneeze is a reflex reaction. Let me count the ways...

Rip Up The Contract & You Reduce The Risk For Both The Carrier & The Consumer. As A Matter Of Fact, Only Fat Margined Hardware Vendors Have Anything To Fear - Oh Yeah, As Well As Those Carriers That Still Rely On Contracts!

The grand disruptor, Google, has been trying to break the grip the carriers have had on the smartphone industry for years, starting with the introduction of the Nexus phone which it sold direct to consumers online. The propeller heads at Google figured they would offer a better product at a lower price and people would simply flock in to buy it. Said propeller heads apparently didn't understand people. They won't always do what's best for them, but they will buy what is sold to them. So this time around, with 3rd (or 4th?) iteration of the Nexus phone, Google has paired with a major carrier in addition to selling it direct. Now, Google sole the last Nexus through Verizon, but Verizon crippled the device in attempt at carrier lock-in - an old school, naive and ultimately self destructive move, in my humble opinion.

Now, T-Mobile will be offering the device (it's already in stores, just not officially selling yet) and will offer it unlocked, off contract, for its original (not inflated like other carriers) price of $299, and with its original capabilities. This device is state of the art, btw, and blows the iPhone 5 out of the water in practically every way. Keep in mind that an iPhone 5 would retail at your local carrier retail store for $200 to $300, subsidized, tied to a 2 year contract. You can buy a far superior device outright for just about the subsidy downpayment of an iPhone.

One of the best devices on the market, approximately  1.5x the device the iPhone 5 is for roughly half the price! $299

Google Now. Amazing Photo Sphere camera. Totally wireless... OR you can pick up a very good Chinese phablet for even less....

ZOPO ZP950

Short Description

- 5.7 inch HD screen, 1280*720 pixel display
- 1GB RAM + 4GB ROM
- 1GHz dual-core MTK MT6577 processor
- Support 3G network: GSM 850/900/1800/1900 & WCDMA 850/2100 MHz
- 8MP rear camera + 2MP front camera

Price: $279

OR you can pick up a smaller form factor for over $100 less...

Zopo ZP500 Libero ICS SMARTPHONE

These are actually very good devices , without compromise. They are, in my opinion, more desirable in terms of functionality than the iPhone 5. For less than the contract sign up price for an iPhone of ATT/Sprint/Verizon late model phone, you can fully purchase one of these devices and pay for the first month of service - contract free, free to leave the county, and free to change carriers or quiet at will. That's not the gist of it...

A Smart Mentality For Dumb Pipes

 T-Mobile may actually profit where other companies take a loss by eliminating the expensive and risk subsidy/contract trap. In addiion, it will pull head of the pack by recognizing what it is, and being aware of what it is not. T-Mobile, like the other carriers (they just don't know it yet) is a utility. It's a dumb pipe through which Goog;e's customers pump data. It is not a software programmer or development house like Microsoft (so it has finally stopped trying to skin Android), and it is not a transaction company (so it has stopped trying to compete with Google Wallet). It is not a content company (so it does not attempt to compete with Netflix, Amazon or iTunes). Unfortunately, the other carriers haven't realized this yet. As a result, although they are bigger and better funded, the new T-Mobile is posed to change the industry. In recognizing that it is a dumb pipe that should compete on data throughput, volume and quality, it is on the road to creating a new business model of being a smart pipe - just as handset makers moved from dumb phones to smart phones. In order to do that though, they will need a change in mindset.

The Performance Trap: Is LTE Really the next big thing or just a thing carriers use to charge you more?

Verizon, Sprint, Metro PCS (a MVNO reseller) and AT&T all market their 4G LTE services heavily. They also charge accordingly. I purchased a Galaxy 3 LTE phone and ran up a $150 bill within 18 days (that's right, I was just over halfway through the monthly billing cycle), without even trying. I called customer service, and they offered me a $50 credit, but the damage was done. I returned the phone forthwith. T-Mobile offers its HSPDA+ service as 4G, and it is actually quite fast for what is considered an antiquated technology. As excerpted from Fiercewirelss.com and Rootmetrics:

RootMetrics: Average download and upload speeds

To the average user, T-Mobile's speeds will barely noticeable in terms of difference from AT&T. Uploads may be noticeably slower, though. Verizon seems to blow them both out of the water, but there is this real life consideration of cost  real life perofrmance issues that comes into question. With that, the equation changes considerably. The battery life on T-Mobile's HSPDA+ is practically twice that off the same devices running LTE. Until better tech is released, LTE is not a valid all day, battery operated solution IMO. Then there's the issue of cost. Uh Oh!!!!...

Price vs. Performance

Let's look at the monthly cash flows.... Yes! You actually SAVE $5,500 per bi-annual cell phone contract. Read carefully and thank me later... Click to enlarge...

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I will hold an interactive video chat on this topic at approximately 9:45 am, Friday the 11th in the Valuable Knowledge Community on Google+. I welcome all to attend.

Who ultimately benefits? 

First, you, the consumer. Thsi competition is very good. The second beneficiary also happens to be the one that started this mess in the first place, Google! You see, Google is a data company, and data companies need bandwidth. The more cheap bandwidth you have access to, the more data you will be prompted to move, access, save, search for, request and engage with. The cheaper the hardware, the more hardware you will use. The more advanced the hardware, the more you will do with it. "Do what", you ask? Do data! Do Google! This is what Android is truly all about. This is why its free! This is why Google is poised to take over the (data) world. All of those armchair pundits and silly sell side guys who constantly quip about Google not making money on Android sound similar to those who scream, "But that damn fox is not making a dime on the free trips the chicken taxi is making to the chicken coops!" "'Hens R Us' makes more fare on transporting those chickens to the fox hole than Mr. Fox does!" Yeah! Think about it for a few seconds. That's all it takes in terms of critical thought to comprehend the Google business model. Yes, sometimes it is hard to see that forest with all of the tree bark in the way...

Industry Leading, Subscription Based Google Research

All paying subscribers should download the Google Q1-2012 Valuation Summary, wherein we have updated the valuation numbers for Google using a variety of metrics. Click here to subscribe or upgrade

Professional/institutional subscribers can actually access a subset of the model that we used to create the sensitivity analysis above to plug in their own assumptions in case they somehow disagree with our assumptions or view points. Click here for the model: Google Valuation Model (pro and institutional). Click here to subscribe or upgrade.

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Billionaires Gain as Living Standards Fall

Government of the Rich, by the Rich and for the Rich

The world’s 100 richest people added $241 billion to their combined wealth in 2012, according to the Bloomberg Billionaires Index. The top 100 controlled an aggregate $1.9 trillion as calculated by the prices on world stock markets December 31, for an average of nearly $20 billion apiece.

If the top 100 were a separate state, their combined wealth would outstrip the Gross Domestic Product of all but eight countries. They would rank behind Italy, but ahead of India and Russia. Of course, being billionaire capitalists, the top 100 don’t actually produce anything. They own, and they reap the benefits of the labor of others.

The main driver in the increasing wealth of the super-rich was the rise in global stocks, up 13.2 percent worldwide, as measured by the MSCI World Index; up 13.4 percent in the US, as measured by the S&P 500. The Stoxx Europe 600 index is up 19.6 percent since June, when investors judged that the Greek debt crisis would not bring about the immediate collapse of the eurozone.

The United States accounted for nine of the top 12 billionaires and 37 of the top 100, with the combined holdings of American multibillionaires comprising half the total. Europe including Russia followed with 34, while Asia accounted for 14 and Latin America for 11.

The biggest single gainer among the top 100 was Amancio Ortega of Spain, the 76-year-old founder of the Inditex SA retailer, operator of the Zara clothing chain, whose fortune rose from $35.3 billion to $57.5 billion. This vaulted him into third place in the global index, passing American investor Warren Buffett, and trailing only the two who have headed the index for many years: Mexican banking, telecommunications and media mogul Carlos Slim, and Microsoft chief Bill Gates.

Ortega was part of a trend, as retail proprietors among the billionaires showed the biggest gains for the year, up 20 percent. Other retailers include IKEA founder Ingvar Kamprad, 86, the world’s fifth-richest man, at $42.9 billion; Jeff Bezos of Amazon.com; and the four direct heirs of Sam Walton, the founder of Wal-Mart.

This increase was all the more remarkable since consumer spending has essentially stagnated since the 2008 Wall Street crash. The retail bosses are increasing their fortunes not so much because sales are rising, as because their smaller competitors are being ruined by the crisis, giving the biggest companies monopoly profits. Bezos, for example, added $6.9 billion to his net worth in 2012, in the wake of the collapse of rival Borders, which led to the elimination of 20,000 jobs.

The divergence between the rising fortunes of the billionaires and the declining living standards of the masses is an essential feature of global capitalism. Nowhere is the contrast starker than in Spain, where Senor Ortega, the founder of Inditex and its 1,600 Zara stores, increased his fortune by $22.2 billion in the course of 2012.

The capitalist crisis has brought disaster for Spanish working people. Household wealth has fallen by 8 percent on average, second only to depression-ravaged Greece among European countries, while both overall unemployment and youth unemployment set records at 26.6 percent and 56.5 percent, respectively. The right-wing government headed by Prime Minister Mariano Rajoy has announced a series of massive cuts in public spending, devastating public education and other essential services.

But while the Spanish working class suffers through the worst economic conditions since the Great Depression, one Spanish billionaire possesses a personal fortune greater than the total amount of the cuts announced by the Rajoy government. At $57.5 billion, Ortega’s wealth would have allowed him to carry out last month’s $52 billion bailout of the Spanish banking system, which effectively wrecked Spain’s national budget, and have billions left over.

In recent months, Spain has been the scene of social tragedies unheard of since the depths of Franco fascism, including suicides by victims of foreclosure, and unemployed workers and the elderly picking through garbage dumps for food.

When in the human body a small group of cells begins to multiply and grow without limit, at the expense of other cells and the organism as a whole, medical science has a specific term for the phenomenon: it is called a cancer. In the social organism of 21st century capitalism, the super-rich play that fundamentally pernicious and destructive role.

In the sphere of health care, the prescribed response is to destroy the cancer through a variety of treatments, in order to save the human being. In capitalist society, however, the growth of the super-rich is hailed as the source of all progress, the social cancer is dubbed the “job creator” and the entire political system bows down before it.

Billionaires, Ballots and a State Budget Crisis Drive Education Reform in Washington State: A...

Up until November 6th, Washington was one of eight states that did not have a charter school within its borders, and by all accounts it didn't seem like that was going to change anytime soon. Voters had rejected charter initiatives three times - in 1996, 2000 and 2004.

But that was before millionaire donors like Bill Gates, Paul Allen and Alice Walton of Walmart fame poured millions of dollars into Ballot Initiative 1240, opening the state up to charter schools for the first time.

In the case of Washington State, a coalition that included well-known education reform groups like Stand for Children and Democrats for Education Reform hired people to gather enough signatures to get the initiative on the ballot, bought TV air time and sent canvassers door-to-door urging residents to vote yes on 1240.

When 1240 passed, despite opposition from the governor, many lawmakers and the teachers union, it was the closest vote among state initiatives in the 2012 election.

Big Money, Big Plans

The story of Washington is symbolic of where the fight for public education is playing out - with shrinking funds at the local level and big money coming in from the outside.

After the third failure to pass legislation on an initiative that would allow charter schools into Washington,  the well-funded education reform groups decided to take matters into their own hands.

The group behind the initiative called itself Yes on 1240 - now The Washington Coalition for Public Charter Schools. The initiative will bring as many as 40 new charter schools into Washington over the next five years.

It took only 18 days from the time the group got the go-ahead from a judge to collect signatures for a ballot initiative, to when they had exceeded the minimum 250,000 signatures.

DC Charter School.(Photo: U.S. Department of Agriculture / Flickr)Washington is one of few states that allows paid signature-collectors, and by July 2012 the group had signed up 350,000 people in favor of the ballot.

"We really looked at what are the different ways in which we can bring charter schools to Washington," said Jana Carlisle, executive director of Partnership for Learning, a Washington-based education nonprofit that worked with Yes on 1240. "There was a general consensus that doing it during a general election made a lot of sense. That is kind of the genesis of the initiative - it was an outgrowth of prior legislative attempts to provide innovative schools for struggling kids in particular."

As in many school districts around the country, Washington's low-income population is disproportionately minority. According to data from the American Community Survey, 28 percent of the state's white children under the age of18 were living in poverty, while 60 percent of African-American children were living at or below the poverty line. A majority of American Indian and Hispanic children were also in poverty.

The statewide high school drop-out rate was 4.4 percent, according to Washington's Office of the Superintendent of Public Instruction, while for American Indians it was 10.7 percent; 6.9 percent for African-American students and 5.9 percent for Hispanic students in the 2010-2011 school year.

By the time Yes on 1240 had turned in their signatures to get the initiative on the ballot, they also had amassed a large portion of their donations. According to a Truthout analysis of financial disclosure records, between June 5, 2012, and July 6, 2012, Yes on 1240 had raised more than $2 million.

In total, the group raised more than $10.8 million in just under five months, from 181 donors. Donors included Bill Gates, who gave $3 million; Walmart heiress Alice Walton gave $1.7 million; Paul Allen, a co-founder of Microsoft, gave $1.6 million and Connie Ballmer, wife of the CEO of Microsoft, gave $500,000.

The money from the No on 1240 campaign, collected over four months, totaled a little more than $15,000, from 86 donors.

"It was a very clear picture of education reform and business versus parents and community," said Melissa Westbrook, a public education activist and chair of the No on 1240 campaign. "Because of the amount of money they have, they get to dominate the conversation. There might be other things that have to get done, but people follow the money."

Glenn Anderson, a Washington State representative listed on the Yes on 1240 web site as in favor the measure, did not respond to a request for comment.

As the donations rushed in for the Yes on 1240 campaign, Washington was embroiled in a state supreme court case about school funding. In January 2012, the court ruled that Washington was failing to do its duty in funding K-12 education. Nearly a year later, in December, the court said too little progress had been made in putting more funding toward education.

"Steady progress requires forward movement. Slowing the pace of funding cuts is necessary, but it does not equate to forward progress," said Chief Justice Barbara Madsen in the court's December opinion.

In the past ten years, according to the Associated Press, education spending has gone from nearly 50 percent, to just above 40 percent of the state budget. In the 2009-2011 state budget, investments in early learning were cut by $12 million (8.8 percent) and the budget for K-12 was cut by $1.6 billion (10.3 percent).

Lawmakers need an estimated $1 billion to $1.5 billion to fulfill their obligations in the court case.

Opponents of 1240 have said the new initiative will drain public schools of even more resources, which they argue could better be used for arts, music and new technology.

This also was a concern that Washington Gov. Chris Gregoire had expressed.

“The governor's main concern was that we don't have the funding right now to support charter schools,” said Karina Shagren, a spokeswoman for the governor's office. “We have a proven record with other alternative schools here that have had success, so the governor didn't see the need right now to encourage new charter schools, especially when there is no record to prove that they are highly successful.”

Shannon Campion, spokesperson for Yes on 1240 and the executive director of Stand for Children in Washington, told The Nation that funding will not be an issue, because funding follows a student when they move from one public school to another.

“Public charter schools are cracking the code in how to serve at-risk and struggling students,” she said.

The Washington Charter School Commission has been created as an independent state agency to oversee the initiative.

The state teachers union also has filed a lawsuit against the charter measure, and speculation continues in Washington as to whether the state schools superintendent also will sue.

UNDERSTANDING THE CRISIS




For a student of Marxist political economy, one of the last year’s highlights was the seven-part discussion of the global economic crisis, its causes, and consequences which was featured in Socialist Voice, the excellent monthly publication of the Communist Party of Ireland. Beginning in January with the review of a book on the crisis, two interlocutors—identified as NC and NL-- surveyed the landscape of radical and Marxist explanations of economic crises and their meaning for the working class movement.

Several features of the discussion were remarkable.

First, the discussion was conducted in a comradely and respectful manner. Much of the academic “Marxist” dialogue is about scoring points and splitting hairs. The SV exchange, on the other hand, sought to construct and unify.

Second, the articles were free of jargon and pretension. Too often self-styled Marxist economists feel compelled to package their views in fashionable or “sophisticated” language to create an aura of profundity.

Third, the dialogue owes little to bourgeois economics. Outside of a few distinguished Marxists like Maurice Dobb, Ronald Meek, and Victor Perlo, in the English-speaking world, training in mainstream bourgeois economics has been more of a hindrance than a help in grasping and advancing Marxism. Likewise, formalism—the fetish of mathematical and logical constructs-- has elevated issues like the so-called transformation problem or the “Okishio Theorem” to center stage at the expense of pursuing and elaborating the insights of Marx, Engels, and their successors. In most cases, the formalists and academicians would be well advised to return to a study of the opening chapters of Capital, an exercise that would render much of their exercises pettifoggery.

The Socialist Voice contributions cover briefly, but clearly and seriously, the theories of crisis ranging from the tendency-of-the-falling-rate-of-profit through underconsumptionism, stagnation, long cycles, and the general crisis of capitalism. They draw on a diverse group of theorists from Andrew Kliman and the Monthly Review adherents through Nikolai Kondratiev and Hans Heinz Holz.

The articles are to be found in the January, April, May, June, October, November, and December issues of Socialist Voice or online at:     http://www.communistpartyofireland.ie/sv/index.html.

I urge everyone interested in Marxist political economy to read them. Hopefully, this discussion will generate further research and debate over the many issues addressed. Developing a clear and full Marxist account of the current crisis is a work in progress. My own thoughts, offered in the same comradely spirit, are below:

SYSTEMIC CRISIS
1. Capitalist economic crises are of two types: cyclical and systemic. In the course of capitalist economic activity, imbalances occur between various departments of production, between suppliers and producers, between production and consumption, etc. These imbalances result in slumps or slowdowns in productive activity. Bourgeois economists refer to these as “business cycle” events, meaning that they are cyclical or self-correcting; recovery is on the horizon, perhaps the distant horizon, but on the horizon. Generally, bourgeois politicians apply conventional nostrums—interest rate adjustments, state spending, incentives or inducements—to adjust these cycles to their political ends. Even though these are episodic events, the ensuing damage generally falls on the backs of working people.

2. Systemic crises, on the other hand, are reflective of deep contradictions inherent in the capitalist system. As such, they are not subject to either patience or the usual menu of remedies. Capitalism, like a perpetual motion machine, violates the laws of nature. A system cannot continue forever that depends upon increasing complex social interactions while awarding the riches produced by those interactions to a few who are dissociated from the same social processes. In the long run, the accumulation of private, concentrated wealth tends to choke off the further accumulation of that wealth.

3. Systemic crises do not pass, but are temporarily suppressed or resolved through transformative change. That is, policy makers may blunt or postpone the harshest consequences of systemic crises, but eventually systemic changes are necessitated to exit the crisis. For example, despite New Deal boasts about resolving the Great Depression in the US, the Depression’s demise only came with the vast systemic changes that accompanied a world war— socialist-like economic planning, organization, investment, and production in war supplies and the massive destruction of material assets. In our time, the full impact of the 2001 technology crisis was suppressed only to exacerbate the 2008 crisis. The underlying dynamics of capitalist crisis remained, and still remain. 

4. Systemic crises are, in the final analysis, crises of accumulation. What cripples the mechanism of capitalism most decisively is the inability to generate sufficient profit. Conversely, those factors which restrain the growth of accumulation-- retard the rate of profit-- largely account for systemic crises. Thus, broadly speaking, crises are caused by a tendency within the system for the rate of profit to fall.

5. Basing systemic crisis on failing accumulation and not imbalances or unrealized consumption has the following political consequence: it cannot be overcome with liberal or social democratic panaceas. Wealth redistribution, public sector jobs programs, social insurance etc. will not directly restore profitability unless these programs are actually subterfuges for surplus transfer. Only the restoration of profit growth will stabilize the economy. We saw this in the US after mid-2009 when profits rebounded sharply (generated by intensified exploitation!). But even then earnings began to recede again by mid-2012. Thus, for the working class, the choice is really only between helping the capitalists restore profit or working to eliminate the capitalist system!

6. Paradoxically, the crisis exists because the accumulation process is overwhelmed by the huge pool of surplus in the hands of the few, the owners of the means of production, distribution, service, and finance. Just as before the Great Depression, investment opportunities in productive activities are outstripped by the sheer weight of accumulated surplus. The rate, as well as the expected rate, of profit sinks against the aggregate capital held by corporations, banks, and the rich.  They turn to speculation in scarce resources, property and financial schemes, the ever-active “hunt for yield.” And they take on debt which amplifies the folly of this ceaseless search for a return on available capital.

7. The systemic crisis should not be understood as foretelling an ultimate breakdown of the system. Henryk Grossmann’s pioneering work on Marx’s tendency of the falling rate of profit—because of its strict logical exposition—mistakenly led some to believe that capitalism would implode by its own logic. Similarly, academic Marxists divorced from the working class movement lean heavily on projected stagnation to force the departure of capitalism from the world stage. But capitalism always has extreme measures to fall back on for its self-preservation: a re-shuffling of the cards through war, forced-march capitalism through fascism, and many forms of direct and indirect enslavement. The only escape from capitalism is through the efforts of the most advanced, organized elements of the working class armed with an understanding of capitalism. 

MONOPOLY AND STATE-MONOPOLY-CAPITALISM

1. The theorists at Monthly Review are correct to persistently point to the never-ending concentration of capital into fewer and fewer hands as evidence for the rise of monopoly capital. Mergers and acquisitions, bankruptcies, and integration ensure that leading corporations grow stronger and fewer. At the same time, they understate the resiliency of capitalism to create and re-create new arenas of competition. Frederick Engels stated it well in the very first Marxist tract on political economy (Outlines of a Critique of Political Economy): “Competition is based on self-interest, and self-interest in turn breeds monopoly. In short, competition passes over into monopoly. On the other hand, monopoly cannot stem the tide of competition—indeed, it itself breeds competition…” It is this seemingly small point that eludes the “Monopoly Capital” (MC) school associated with Monthly Review.

2. Even in a hugely capital-intensive industry and a paragon of monopoly like automobile production, competition persists with new producers entering the industry through new technologies (e.g., electric cars) or national initiatives (Japan, Korea, and today China and India). While price competition persists (contrary to the MC school), competition is also expressed through technological features, fuel consumption, performance, warranty protection, and a host of other differences. Moreover, these differences are based in the techniques of production and costs of production and not merely sloughed away as “the sales effort” as Sweezy and Baran do in Monopoly Capital. They equally sidestep the competition between old and new, mainstream and alternate industries.

3. Despite the persistent concentration of capital, competition among capitalists and the thirst for a return on capital stocks will always steer the system towards systemic crisis.

4. Of greater use to the working class movement is the theory of state-monopoly-capitalism. While monopolization may bend, but not break the logic of capitalism, enormous monopoly corporations have succeeded in merging their interests with the functions of the state. The enormous power and reach of monopoly enterprises have commandeered all organs of the state and harnessed the state’s actions to the promoting of capital accumulation. While the theory of state-monopoly-capitalism has been dismissed in left circles since the demise of European socialism, the priority by the state given to the US/European bank bailouts surely underscores its validity and makes the critics pause to reconsider. The theory is an essential tool for understanding the behavior of EU and US policy-makers through the course of the crisis.

“FINANCIALIZATION” AND DEBT

1. “Financialization” is an unfortunate term—fashionable, but adding little light to our understanding. The growing role of finance has been noted since before the time of Lenin. The process culminated in finance accounting for over 40% of corporate profits in the US by the early twenty-first century—in part by its increasing absorption of stampeding surplus and in part by the decline and departure of manufacturing that formerly accounted for a far greater share of US profits.

2. Unquestionably finance took on a leading role in the US, the UK, and a few other advanced capitalist countries with the creation of a vast new pool of low-wage workers available to manufacturing after the destruction of Eastern European socialism, its socialist-oriented allies and the PRC’s opening to global markets. This reflected the new national division of labor in the global economy— manufacturing and export in the East and South and finance, management, and services in the West and North.

3. As the leading financial center, the US became the Mecca for those with pockets overflowing with cash and fewer investment opportunities in an era of low interest rates and cheap money.

4. Unlike in the world of commodity production where value is produced in real time, finance offers opportunities to appropriate future value through contractual instruments like mortgages, bonds, futures, and, in our era, even more exotic creations. These instruments trade in future value, hence challenging capitalism to find even more marginal investment opportunities to absorb surplus and potential surplus.

5. Debt—the offspring of easy credit and low interest rates—serves as an amplifier of financial investment, the critical bridge to ever-more reckless speculation. Thus, finance served up its many “innovations” designed to absorb the ocean of surplus accumulated over decades and in search of another round of accumulation in an environment of diminishing returns. In this manner, the tendency for accumulation to retard its own re-production found its expression in the financial crisis that broke out in the US in 2007-2008.      

OTHER CRISIS THEORIES

1. Wave theory-- the notion that economic activity exhibits a wave-like trajectory from boom to bust and back to boom again—enjoys an almost mystical, spiritual attraction for many. Associated with the views of Nikolai Kondratiev in Marxist circles, the theory of a regular, periodic wave—long or short—is flawed for two distinct, but fatal reasons.

2. From an empirical perspective, it is impossible to settle on those features of economic history that are decisive in expressing the upturns and downturns of regularcycles. That is to say, the dependent variables are illusive and hazy. Moreover, when they are clearly stipulated—GDP, labor productivity, profits, etc—no incontrovertible pattern is revealed. Instead, only intuitive patterns are seen by those already disposed to see them.

3. From a theoretical point of view, there is no candidate for an independent variable that demonstrates a consistent and regular wave-like behavior throughout economic history (or the history of capitalism). Neither technological innovation, cultural or demographic change, nor any other candidate for the cause of cycles exhibits the kind of wave-like nature that would account for regular, periodic waves in the historic record. And where we find wave-like motion in nature (eg. Lunar cycles), there is no obvious causal connection with economic life.

4. In short, long cycles are impossible to discern without appealing to Rorschach-like impressionism and impossible to explain without assuming what it sets out to illustrate. When you want to see a face on the moon, you’ll see one.

5. We owe a great debt to Hans Heinz Holz, the late German Marxist philosopher, who brought new life to the long-standing Communist concept of the General Crisis of Capitalism (GCC). As Holz points out, Soviet social science mechanically and empirically attached the GCC to the historical stages ushered in by the Bolshevik revolution and the Second World War. This was a misleading interpretation dissolved by the setbacks to socialism.

6. Holz is correct in rehabilitating the GCC as a truly general crisis generated by capitalism’s internal mechanisms independently of important, but external events. He is correct to conceive of the GCC as a total crisis, not limited to the economic sphere but including social life, culture, ideology, and all other human relations.

7. Thus the GCC is not a theory of economic crisis. Instead, the systemic crisis of capitalism is one element—one causal element-- in the General Crisis of Capitalism.

8. Much more work needs to be done in developing a full theory of the GCC with its consequences in every aspect of everyday life.

Zoltan Zigedy
zoltanzigedy@gmail.com

It’s Back!!!




Red-baiting lives!

Actually it never waned. Like most evils, it lurks in the shadows and under rocks until it is called on again to serve the rich and powerful. Like racism, red-baiting is a tool of division and distraction. It is designed to separate those who are weak or wavering from those determined to change a malignant political and social system. Red-baiting harnesses fear to tarnish those seeking social justice. Red-baiters sow cynicism, dampen ardor, nurture doubts and dissolve unity.

A renewed and virulent strain of anti-Communism has surfaced in the US, stretching from the imbecilic film Red Dawn to the rabid media bashing of Oliver Stone’s ten-part television series, The Untold History of the United States.

Red Dawn, currently showing in hundreds of theaters, has grossed over $31 million in revenue through December 2. Based on a moronic plot of an invasion of the Pacific Northwest by troops of the Peoples’ Democratic Republic of Korea, the movie postures young patriots as forging a resistance movement against their Asian aggressors. Only in Hollywood could writers craft a plot that features a relatively poor country of twenty-five million people mounting a naked, distant aggression against the most economically powerful country in history with well over ten times the population. What next, an invasion of the Southwest from Nicaragua?

Oh, sorry, that movie was made in 1984! Actually, the current Red Dawn, found its dubious inspiration in the Reagan-era movie with the same title and an equally virulent commitment to red-baiting. We have John Milius, and his equally demented Hollywood colleagues, to thank for the fear-mongering of Red Dawn I.  Screenwriter/Director Milius bears responsibility for such stupid --though less politically dishonest – movies like Magnum Force and Conan, the Barbarian. But where those movies only enshrined ugly politics and employed right-wing icons, Red Dawn Iadvanced the political agenda of US imperialism and crudely served to prod domestic reaction. At a time when the struggle for international peace and détente was at a critical juncture, the film was heartily welcomed by opponents of rapprochement.

Today, Red Dawn II emerges not as a counterforce to the left, but as a pre-emption of a feared rising of the left. Even with most of the US left’s leaders chained to the Democratic Party or mired in opportunism, the rich, the powerful, and their minions recognize that the profoundly wounded economy and the dysfunctional political system provide both the seeds and fertile soil for a powerful peoples’ movement. And they hope to pollute it with red-baiting before any sprouts arise. Even with its crude, wildly implausible plot, Red Dawn II is meant to discredit any “red” or even “pink” movement before it matures.

Likewise, Oliver Stone’s new TV series on Showtime has been met with furious bashing on the part of the professional anti-Communist toadies of the mainstream media. Setting out to correct the “official” high school civics class histories of the Cold War period, Stone and his historian collaborator, Peter Kuznick, produced a ten-part serial that challenges knee-jerk anti-Communism and seeks to balance the slanders of Cold Warriors. The Untold History of the United States proposes a counter history, an account built around a number of “what ifs…” that chart a different historical trajectory absent a rapacious and predatory military-industrial complex and a destructive CIA.

Of course this does not set well with the rabid guardians of the anti-red canon. As Peter Kuznick chronicles in a recent appeal to Historians Against the War, the red-baiters are out in force.

Ronald Radosh – famous for crafting a career from equating Reds or “fellow travelers” with NKVD or MVD agents—makes an astonishing leap to connect Stone and Kuznick to the long-departed Soviet security agencies. He claims to detect similarities just short of plagiarism (leaving his claim just short of libelous) between The Untold History and a book by the late Carl Marzani, We Can Be Friends. To square his circle, Radosh proffers that Marzani “…told this very story in We Can Be Friends. A secret member of the American Communist party who had worked during the war in the OSS, Marzani later was proved by evidence from Soviet archives and Venona decryptions to have been a KGB (then the NKVD) operative. His book was published privately by his own Soviet-subsidized firm. It was the first example of what came to be called “Cold War revisionism.”

Thus, by association—a favorite tactic of red-baiters—Stone/Kuznick becomes linked to the KGB through the alleged operative, Carl Marzani. Others have shown how fast and loose Radosh has toyed with the charges of “operative” or “agent” based on the thin evidence of “association.” But Marzani’s “secret” or open identification with Communism in 1952 is of no relevance to the truth conveyed by We Can Be Friends or The Untold History. Marzani argues for the following:

The next step to peace is to sit down around a conference table and negotiate. Negotiations, it should be emphasized, do not require friendship. Negotiators can sit down unsmiling and bargain grimly, yet both sides are aware that a settlement must be reached.(p.369)
If Marzani’s simple, but sane formula for improving US/Soviet relations was inspired by the NKVD, then credit to the NKVD!

We Can Be Friends was published by Topical Book Publishers. For those Reds with something to say in 1952, self-publication was often the only route. In the teeth of McCarthyite repression, leftists could not get mainstream publishers to even consider their manuscripts. Outside of the exceptional renegade publishers like Cameron and Associates, left-wing authors were forced to turn to funding a few hundred copies, as did Howard Fast with his now celebrated historical novel, Spartacus. The dark ages of the 1950s were certainly made brighter, if it was necessary for the NKVD to subsidize these fine books!

The quality of Radosh’s scholarship can be judged by his emphatic claim that We Can Be Friends “…was the first example of what came to be called ‘Cold War revisionism.’” A casual glance at my tattered old copy reveals a bibliography that cites earlier writers like Frederick L. Schuman and I. F. Stone who decisively rejected the Cold War canon well before Marzani’s book arrived on the scene.

Following Radosh’s lead, other rabid anti-Communists like Michael Moynihan joined the fray in attacking Stone and Kuznick. And to its shame, The New York Times unleashed its slime merchant hireling, Andrew Goldman, to mount a bizarre ad hominem against Oliver Stone. Goldman had just served his four-week suspension for publicly inquiring of two female interlocutors whether they had slept their way to the top of their professions. Sadly, this attack well represented the level of integrity shown by most of these ruling class courtiers.

To these professional red-baiters must be added the host of professors who peddle lurid books on the “Evil Empire.” Most active is Anne Applebaum, journalist turned academic, who authors books portraying the Soviet and socialist Eastern European experience as wholly oppressive and thoroughly unpopular. Her current book, Iron Curtain, enjoys wide circulation and copious publicity from the corporate media. Applebaum’s ideological bias (her husband is Minister of Foreign Affairs in the ultra-nationalist Polish government) and selective scholarship are seldom challenged by her colleagues.

Applebaum’s work indirectly suggests that Soviet “evil” is on a par with Nazi evil or, as she and her ilk crudely put it, “Stalin’s crimes were the same or worse than Hitler’s crimes.” Yale professor, Timothy Snyder, shares no such hesitation. His popular book, Badlands, boldly embraces the equation of Hitler and Stalin. Indeed, his current career seems based upon his widely speculative, broadly calculated, and poorly evidenced victim calculation. For Snyder, there would seem to be no natural deaths in the Soviet Union or socialist Eastern Europe. In his energetic counting, victims of the Warsaw insurrection in 1944, urged by the Polish government-in-exile to rise, arguably belong on the Soviet side of the ledger since the Red Army didn’t rescue them. Of course the victims of natural famines are also laid at the Soviet doorstep. Snyder pursues his head counting with an almost perverse determination and a theological certainty.

The revival of open and widespread red-baiting is ignored by liberals at their own peril. Like the inquisitions of old, the immediate object may be the dissidents, the ideological deviants, but the real design is to terrorize the majority into submission and conformity. In the US, anti-Communism and its counterpart, racism, directly target ideological and ethnic minorities, but prove to be of even greater use in fracturing, distracting, and deluding the majority. Rampant racism and rabid anti-Communism serve the rich and powerful well by closing avenues to unity and social justice. Surely the red-baiting charges of “socialism” leveled at right-centrist Obama underline this point and send a clear message to liberals of the dangers lurking in accommodating the alarm of “Reds!” 

Zoltan Zigedy
zoltanzigedy@gmail.com


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Human Rights or Imperial Partnership?




Amnesty International has a bee under its bonnet.

A human rights advocate, educator, and labor attorney, Dan Kovalik, mustered the audacity to challenge the world’s most prominent and highly regarded rights-based advocacy group. Claiming over three million members since its birth in 1961, AI is the poster child for modern “non-governmental organizations” or NGOs, the hundreds of thousands of hazy entities that play an ever-growing, influential role in international affairs.

Despite AI’s sterling reputation among middle class liberals in the English-speaking world, Kovalik was troubled by AI’s stance on the war in Libya and its role in cheer leading US and NATO involvement. After his October 23 Counterpuncharticle “Libya and the West’s Human Rights Hypocrisy” appeared, AI launched a counter attack authored by AI official, Sunjeev Bery. Bery’s response circulated widely among the AI-friendly internet community as an example of “getting it wrong” on AI’s principles and goals.

Kovalik demonstrates that he is more than capable of answering Bery in a November 8 Counterpunch response. He shows with even greater clarity how AI helped crack open the door for outside intervention in Libya and, knowingly or unknowingly (it’s hard to imagine how anyone could notknow), offered dubious but influential justification for that intervention.

AI and other advocates for a similarly narrow and myopic interpretation of human rights have a long and discreditable history of service to those on the wrong side of the struggle for justice. By ignoring material inequities, power imbalances, and class and ethnic oppressions, they dilute the question of justice to matters of individual conscience and a conservative set of negative rights. That is not to say that these concerns are wrong, but that they touch on only a corner of the concerns of the vast majority of the world’s people. In fact, they loom largest for those least touched by the ravages of predatory capitalism and its military enforcers—those in the most developed countries and those most privileged within its middle and upper strata.

When AI was founded in 1961, much of the world was engaged in an intense struggle for independence from imperialism and neo-colonialism. From Algeria to Vietnam, from the Republic of the Congo to Cuba, from the segregated deep south of the US to South Africa and the Portuguese African colonies, millions of people were committed to resolute battles for self-determination. Under the yoke of the rich and powerful, the peoples of Asia, Africa, the Middle East, and the ghettos and barrios of the First World were rising against their oppressors. The UN recognized this powerful movement, certified its authenticity, and attested to its legitimacy with the 1960 Declaration on the Granting of Independence to Colonial Countries and Peoples that declared the following:  


1. The subjection of peoples to alien subjugation, domination and exploitation constitutes a denial of fundamental human rights, is contrary to the Charter of the United Nations and is an impediment to the promotion of world peace and co-operation.
2. All peoples have the right to self-determination; by virtue of that right they freely determine their political status and freely pursue their economic, social and cultural development.
3. Inadequacy of political, economic, social or educational preparedness should never serve as a pretext for delaying independence.
 4. All armed action or repressive measures of all kinds directed against dependent peoples shall cease in order to enable them to exercise peacefully and freely their right to complete independence, and the integrity of their national territory shall be respected.

Perhaps it was a coincidence, but just as these struggles took center stage, AI chose to take human rights questions in a different direction, away from the rights of subjugated people to the rights of individuals, vetted and dubbed “prisoners of conscience” by the AI establishment. By the mid-sixties, internationally recognized leaders of anti-colonial independence movements like imprisoned Nelson Mandela were ruled out as “prisoners of conscience” because they advocated armed resistance against their oppressors. At the same time, artists, writers, and other dissident intellectuals in the socialist and less developed countries seemed to be the most common candidates for AI’s attention, especially by its US and Western European affiliates.

Whether by collaboration or happenstance, the wrongs targeted by the AI leadership were readily embraced by the major capitalist media and fully congruent with the foreign policy positions of the US and its European Cold War allies. The few reports on alleged Western human rights violations gained no traction, while claims against governments in the East or South played a greater and greater role in Western diplomacy and intervention. Even AI’s founder, Peter Benenson, expressed concerns in the mid-sixties that the organization was unduly influenced by British intelligence.

In the Cold War battle of ideas, AI proved to be a great asset to the US and its allies, crafting issues that became pillars of policy and levers of negotiation. The narrow interpretation of the Final Act of the Helsinki Conference of 1975—an interpretation that elevated Article Seven over the other nine Articles and all other provisions—marked the most important collaborative victory of Western human rights organizations and Western governments in the Cold War. Most rights and social justice activists in Amnesty International’s areas of influence would be hard pressed to identify any other provision beyond the endorsement of an indistinct freedom of conscience.

Especially Article Six, the principle of non-intervention in the affairs of other governments, was neither acknowledged nor respected by Western rights groups or governments. Constructing their efforts around Article Seven, capitalist governments mounted a massive human rights offensive against socialist and anti-imperialist countries, overshadowing the national liberation, anti-nuclear, and anti-war movements of gravest concern to most of the less affluent world at that moment. Much of the credit for shaping this agenda can be laid at the doorstep of the human rights organizations. Their narrow, facile approach to social justice baited them into a calculated campaign against the tide of socialism so apparent in the mid-seventies.

Of course the positive rights of equality, education, leisure, shelter, peace, etc. were swept aside as well before the celebration of individuality and self-expression—what Marx called “…the rights of egoistic man, of man separated from other men and from the community.”

After the Cold War

With the demise of the European socialist community and the establishment of a new balance of power favorable to Western capitalist powers, imperialism further co-opted the human rights cause, contorting it into a justification for wars of aggression. With no one to advocate or enforce the rights of nations to self-determination, the US and its NATO allies cynically crafted a predatory foreign policy around protecting or promoting human rights and democracy, a policy used to justify overt armed intervention in the Balkans and the Middle East and covertly in dozens of other countries. And the Western human rights community said nothing.

Emboldened by the efficacy of the human rights cover, the US and its allies sponsored hundreds of “human rights” and “democracy” NGOs claiming to promote higher values while subverting governments hostile to US and NATO goals. Funded by USAID and other government agencies and carrying innocuous names like “Republican” and “Democratic” Institutes, they meddle in elections, foment coups, and manipulate oppositions in countries like Ukraine, Lebanon, Venezuela, and many others. Slipping into the human rights tent, these organizations exploited the Western regard for individual human rights against the rights guaranteed by the 1960 UN Declaration and other Declarations affirming the right of self-determination. And the Western human rights community said nothing.

If the leading lights in human rights circles—organizations like AI and Human Rights Watch— are to claim any moral legitimacy, they must resolutely dissociate their campaigns from those seeking to use them for predation and aggression. But they have not.

Kovalik and other critics of “humanitarian intervention” and the duplicity of human rights organizations are correct in perceiving an odor of hypocrisy. As Kovalik points out, the “even handedness” espoused by AI in regard to belligerent forces completely obscures ever-present power inequities.

Within the insular bubble of rights-based moral calculation, asymmetries of power, wealth, or development count for nothing. The rural guerrilla in sandals and armed with a rifle must respect the same etiquette of war as the foreign interloper astride a 70-ton tank. In the strange universe of the human rights industry, it doesn’t matter whether a regime’s opponents are paid by the CIA or patriotically motivated; their rights to dissent have equal legitimacy.

And the same respect for human rights is expected of a popular regime (for example, Cuba or Venezuela) under overt and covert threat from powerful foes as is expected of a country (like the US) devoid of any serious external or internal peril. One would think that a serious “human rights” organization would hail the direction of civil rights in countries like Cuba and Venezuela that have improved the health and well being of the disadvantaged in order to fully enjoy rights while condemning a country like the US that has moved dramatically toward a police state. But that is not the case. 

Nor does history extenuate the force of human rights standards as held by Western human rights organizations. Countries emerging from the civil distortions of colonial occupation, suffering the legacy of feudal social and economic relations, or holding to non-Western traditions are held to the same human rights standards by AI as the Euro-American countries that forged those standards over two centuries ago. This lack of understanding and tolerance too often reveals gross cultural and ethnic chauvinism. 

With the US and its NATO allies hijacking its principles, human rights organizations like Amnesty International and Human Rights Watch have to answer for a lot. While millions of their members honestly want to help those deserving solace, they can no longer ignore the harm that comes from the coalescence of the institutional human rights agenda and the malignant foreign policy of the US and its allies. And the naïve notion that the sins of the victim are no less grave than the sins of the bully is untenable and morally cynical.   

Zoltan Zigedy
zoltanzigedy@gmail.com

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Where have All the Profits Gone?




Mid September marked the fourth anniversary of the Lehman Brothers bankruptcy, widely viewed as the final trigger of the global economic collapse, a shock that remains the dominant factor in global economic life. Friday, October 19 brought a dramatic drop in US equity values, caused, commentators speculate, by dismal reports of US corporate earnings. The most observant of these commentators did not fail to point out that Friday was also the twenty-fifth anniversary of the largest US one-day percentage drop in stock values. The fact that such an anniversary came to mind reflects a general and widespread fear that more economic turbulence is forthcoming.

The growing gloom overshadows the glowing September report of retail sales released earlier in the week. Despite stagnant or slipping incomes, the US consumer turned to the credit card to boost purchases at retail stores, online, and in restaurants. Signs of an improving housing market also fueled optimism.

Opinions change quickly. A week earlier---Tuesday, October 9---the International Monetary Fund released its World Economic Report. While raising fears of a global downturn, the report cut the probability of a US recession by nearly a quarter from its April forecast!

Taken together, the sentiments of the last two weeks demonstrate widespread confusion and uncertainty.

Big Problems, Little Ideas

Most of the conversation about the global economy, about capitalism, is shaped by ideological bias, academic dogma, distorted history and wishful thinking.

The global economy has never “recovered” from the shock of 2008. Nor does it teeter on the edge of another recession. In fact, it is fully in the grip of a profound systemic crisis, a crisis that has no certain conclusion. In this regard, the crisis is very much like its antecedent in the 1930s. The popular picture of The Great Depression as a massive collapse followed by the New Deal recovery is myth. Instead, like our current economic fortunes, it was like climbing a metaphorical grease pole— repeatedly advancing a few feet and then slipping down. Serious students of the Great Depression understand that its “solution” was World War II, with its state-driven, planned, military “socialism.”

Of course war itself is no solution, but the organized, collective, and social effort that capitalism only countenances for violence and aggressionis a solution. Similarly, the success of the People’s Republic of China in sidestepping the harsh edges of the 2008 collapse is due to the remaining features of socialism—public ownership of banks, state enterprises, and economic planning. Never mind that much of the PRC leadership hopes to jettison these features, the advantages are there for all to see. Yet few see.

Distorted history begets foolish theory. The two ideological poles that dominate economic discussion—classical liberalism and Keynesianism—both owe their claimed legitimacy to favored, but mistaken views of the source and solution to the Great Depression. While expressions of these poles are found across the political policy spectrum, classical liberalism—often called neo-liberalism—is generally associated with the political right. 

Political liberals and the left, on the other hand, often advocate for the analyses and prescriptions of the school associated with the views of John Maynard Keynes.

Since classical liberalism has been the dominant economic philosophy governing the global economy for many decades, common sense would dictate that, after four years of economic chaos and general immiseration, neo-liberalism would be in disrepute. But thanks to the tenacity of ruling elites and the profound dogmatism of their intellectual lackeys, the market fetish of neo-liberalism still reigns outside of Latin America and a few other outliers. 

But Keynesianism—broadly understood as central government intervention in markets—enjoys a growing advocacy, particularly with liberals, leftists, and, sadly, “Marxists.” Centrist Keynesians advocate intervention in markets from the supply side, most often through credit mechanisms and tax cuts that encourage investment and corporate confidence. Liberal and left interventionists argue for stimulating economic recovery and stability by generating consumption and expanding demand from government-funded projects or government-funded jobs.

The panic of 2008 turned most policy makers toward flirtation with supply-side intervention and generally meager demand-based stimulus, a fact that liberal Keynesians like Paul Krugman are fond of pointing out. Only China adopted a full-blown demand-oriented stimulus program. Yet that tact also brought a host of new contradictions in its wake.

Austerity versus Growth

Pundits like Krugman and politicians like Francois Hollande posture the theoretical divide as one between austerity and growth, a choice between rational growth stimulation and the irrationality of shrinking government spending to reduce debt. In an idealized classless world, this point would be well taken—austerity is an enemy of growth. However, it is naïve and misleading to fantasize such a world.

In our era of global capitalism, the idea of cutting government spending and lowering taxes makes all the sense in the world to the ownership class. The resultant transfer of value counts as a significant element in restoring profit growth and expanding accumulation. In a real sense, the popular and apt anti-austerity slogan-- “we will not pay for your crisis”-- tells only half the story. The other half should be “we will not pay for your recovery.”

In the end, it is profit that determines the success and failure of the capitalist system. Accumulation of economic surplus—the value remaining after the bills are paid--is the engine of capitalism, necessary for its motion and its trajectory. The dramatic drop in the Dow Jones industrial stock averages resulting from poor earnings this past Friday only underscores this point. Those who see consumption as the critical element in growth and recovery should recognize that this loss of momentum is independent of, as well as more decisive than, the September report of strong retail demand. 

The Tendency of the Falling Rate of Profit

The central role of profit, its growth and momentum in understanding capitalism and its recurrent structural crises has been overshadowed, even among most Marxists, by the infection of left thought with Keynes’ crisis theory. Theories of crisis that rest on underconsumption, overproduction, or imbalances reflect this infection and reduce political economy to the study of business cycles and avoidable and terminable economic hiccups—consumption can be expanded, production can be regulated, and balance can be restored. These are the assumptions of social democratic theory and what divides it from revolutionary Marxism.

Marx saw crisis as fundamentally embedded in capitalism’s structure. Processes in the capitalist mode of production unerringly bring on crises. And he locates the most basic of these processes is the mechanism of accumulation, a process that tends to restrain the growth of the rate of profit.

While it is good to see a rebirth of interest in and advocacy of Marx's law of the tendency for the rate of profit to fall, most of its worthy supporters remain needlessly confined to Marx’s expository formulae that serve well in revealing the anatomy of capitalism, but less so in exposing its disorders.

Yet the intuition behind Marx’s law is easily grasped. When unmediated by the encroachment of working class forces, the capitalists’ accumulation of surplus results in the extreme concentration of wealth, a concentration that reduces the opportunities to gather the expected return in the next and each successive cycle. Whether restrained by the physical limitations of workers, the potential length of the work day, diminished return on physical investment, rapacious competition, super-inflated investment reserves, or the myriad other possible forces or factors, the rate of profit is under constant and persistent duress.

Leading up to the 2007 economic slowdown that presaged the 2008 collapse, the enormous pool of capital available for profitable investment was acknowledged by all reporters. Its sheer volume alone depressed interest and profit rates in the face of limited productive investment opportunities. The desperate search for a rate of return drove investors toward riskier and riskier ventures that generated the financial collapse which has been well documented. It was the pressure on profits—an expression of the tendency—that drove the investor class to a lemming-like indulgence in arcane financial wizardry.

The neglect of Marx’s tendential law since the popularity of Keynes and underconsumption/overproduction crisis theories has retarded Marxist and Communist understanding of capitalist crisis while bolstering reformist policies within the Communist movement. Happily, there is a renewed interest in Marx’s law, though a full and satisfactory understanding of its application to and operation within contemporary capitalism is yet to be given.

At any rate, the decline of earnings now emerging in the latest financial news indicates that counter-crisis and counter-tendency measures are now exhausted in the US. Despite the euphoria of rising consumption spending and housing sales, the profit-driven engine of US capitalism is slowing, likely allowing the US economy to drift closer to the whirlpool already drowning the European economies.

Tough times are ahead, but a fertile period to plant the seeds of socialism. 

Zoltan Zigedy
zoltanzigedy@gmail.com   


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Hypocrisy, Cynicism, Corruption and the Persecution of the Cuban Five




Toronto, Canada in late September was the setting for a Peoples’ Tribunal established to secure justice for the five Cuban patriots victimized by the US criminal justice system. Appropriately dubbed “Breaking the Silence,” the tribunal sought to bring attention to a gross injustice largely ignored or distorted by the North American media.

Held over the September 21-23 weekend, the tribunal drew several hundred participants to a review of the bogus case brought against five Cuban agents planted in the midst of the virulently anti-Communist, Miami-based Cuban defector community. As instruments of Cuban State Security, the Cuban Five were charged with ferreting out violent plots concocted to overthrow the Cuban government and harm the Cuban people and their friends. Necessarily operating clandestinely, they were essential counterweights to the US government's long established and deep engagement with organized criminal elements freely operating out of South Florida with CIA support.

To not employ all available means, including infiltration, would have been tantamount to abandoning the Cuban revolution. No honest person could but see the intervention of the five Cubans in the Miami cesspool of reaction and crime as anything other than an act of national defense and internationalist vigilance.

The Peoples’ Tribunal drove these points home. Speakers developed a detailed case supporting the existence of a dangerous nest of violent, reactionary ex-Cubans organizing in the Miami area with the knowledge and support of US security agencies. Reports to the tribunal established a long history of subversion and assassination on the part of Miami-based paramilitary organizations with the complicity of US officials. Testimony left little doubt of both the reasonableness and urgency of infiltrating these organizations. Nothing underscored the unchecked violence of the Miami murderers more movingly than the testimony of Livio Di Celmo, the brother of Italian tourist, Fabio Di Celmo, who was killed in a brutal bombing of a Havana hotel. The attack was orchestrated by the US government agent and career assassin, Luis Posades Carriles. Carriles bragged openly to the media that “The Italian was in the wrong place at the wrong time.” 

Further, tribunal witnesses exposed the hand of the US government in railroading these patriots with exaggerated charges, a polluted political atmosphere, extra-judicial pressure, and corrupted evidence. A clear picture emerged that nothing even approaching a fair trial landed the Five in Federal penal facilities, an unjust incarceration that has taken 14 years of freedom from them.

Speaker after speaker stressed the necessity of building an international campaign for their freedom. As Elizabeth Labañino, wife of imprisoned Ramón Labañino, stated so eloquently, “We don’t trust in this system, we trust in solidarity.”

Serving on a panel of “magistrates of conscience”-- de facto jurors-- in the proceedings were fourteen distinguished figures including leading US anti-war activist, Cindy Sheehan, and noted US filmmaker, Saul Landau. Adding gravity to the panel were leaders of the Canadian labor movement: Marie Clarke Walker (Vice-President of the Canadian Labor Congress), Denis Lemelin (National President of the Canadian Union of Postal Workers), Ken Neumann (National Director for Canada of the United Steelworkers), and Naveen Mehta (General Council of United Food and Commercial Workers Canada). Joining the panel from the UK was Tony Woodley (Former Joint General Secretary and current Head of Organizing of the 1.5 million members of UNITE the UNION). 

The panel asserted that “…this Peoples’ Tribunal concludes that the Cuban Five were unjustly detained, unjustly prosecuted, and unjustly sentenced, all contrary to international and U.S. domestic law including the U.S. Constitution.  This Peoples’ Tribunal proposes the convictions be quashed, and that Gerardo Hernández, Ramón Labañino, Antonio Guerrero, Fernando González Llort and René González be set free immediately, without any restrictions on their liberty.”

But the tribunal served as more than an urgent call for solidarity with the Cuban Five; it also exposed the corruption, hypocrisy and cynicism of the US government.

Judicial Corruption: The collusion of the highest levels of government with the judicial frame-up demonstrated what should be in no need of demonstration, namely, that the US judicial system answers to the needs of the rich and powerful. There are no broad interests of the US people served by maintaining a nest of violent anti-Communist thugs in Southern Florida. Nor do the US people support them anymore than they support an internationally abhorred, legally unsanctioned blockade of Cuba. Judicial rulings are fitted to conform to the interests of the US ruling class, just as they were in the Citizens United vs Federal Election Commission Supreme Court decision.

The Hypocrisy of “Terrorism”: The term “terrorism” has been appropriated by colonial and imperial powers to demonize the resistance of subjugated or weaker peoples. Whenever the oppressed rise up, they are labeled “terrorists.” Whether it was the anti-colonial Mau Mau movement, the Algerian National Liberation Front, or the African National Congress in South Africa, those audacious enough to defy British or French imperialism or colonial settlers were tagged as agents of terror. Perhaps the original “terrorists” were the aboriginal peoples of the New World who refused to acquiesce to those stealing their lands.

It is deemed “unsporting” of the weak to use extreme or unorthodox methods in the face of the powerful, overwhelming killing machines of bullies. Hence, they are guilty of terror!

It is another story when powerful states or their agents slaughter defenseless civilians or political adversaries. The North American and European media never saw terrorism when the Indonesian military killed over a million civilian Communists and their supporters. Nor do they see terrorism in the daily violence against Palestinian civilians by the Israeli Defense Force. And, of course, the capitalist media is incapable of finding terrorism in the acts of the Miami mafia and their bombings, assassinations, and intimidation at the behest of US security agencies. It was left to the Cuban Five to expose these dangers and work to prevent their realization. Every day the fear-mongering of a hypocritical “War on Terror” justifies another act of terror inflicted on innocent civilians in some far-away country by the US military.

The Cynicism of Human Rights: One of the most inviolable of rights is the right of self-defense, a right that applies equally to a person or a state. Through most of the twentieth century, aggression against another country, regardless of how illegitimate the government or how odious the country's internal policies, was recognized as a violation of the country’s sovereign rights. Conversely, any victim of aggression had a right to respond in self-defense. While Western “democracies” often fell short in aiding those exercising this right against aggression (Abyssinia, Spain, etc), they enshrined the doctrine as an essential condition of peace in both the League of Nations and the United Nations. Recently—especially since the demise of the Socialist bloc as a counter force—the US and its NATO allies have openly and often violated the right under the cynical and illegal excuse of “humanitarian intervention.” At the same time, the US shamelessly embraces its own right of self-defense with its global and perpetual “War on Terror,” a war that has brought death and destruction throughout Asia, Africa, and the Middle East.

But the violations of sovereignty in the former Yugoslavia, Libya, and Syria and other victims of Western “humanitarianism” are preceded by the example of Cuba. Since the revolution, the US and its Cuban-renegade mercenaries have used invasion, infiltration, bombings, assassinations, sabotage, and other forms of aggression to undermine and destroy the revolutionary government. The US and its allies have trampled Cuba’s right of self-defense, but the revolution has persevered. The judicial persecution of the Cuban Five is another instance of the denial of Cuba’s right to self-defense against outside aggression.

There is no excuse for the North American media silence or popular hesitation in defense of the Cuban Five. These brave, selfless and principled fighters have suffered 14 years of imprisonment for values that any fair-minded person would acknowledge. Their honor is secure, standing up to the corruption, hypocrisy, and cynicism of a ruthless imperial power.

Zoltan Zigedy
zoltanzigedy@gmail.com


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An Electoral-Season Note to My Liberal Friends





Well into the silly season, the heat is turned up on the Left to fall in line and support the Democratic Party. On one hand, the independent Left is diminished by not being “in the game.” On the other hand, the Left is still excoriated for having been “in the game” with Nader during the Gore-Bush Presidential race of 2000.

Specious arguments pile on top of specious arguments for why the spurned progressive, liberal, and labor voter should reward those who have disregarded their interests and broken their campaign promises. The arguments come in every size and shape, but always from self-described “friends” and “committed leftists.” Oddly enough, they feel no compunction to explain why their past admonitions or their previous enthusiasms produced no real change in the political landscape when Democrats took power.

They smugly ask if independent-thinking leftists actually believe that there are no differences between the two parties. Only an idiot would respond defensively to this deceptive, distracting tact. Of course there are differences, just as there are differences between Pepsi and Coke. But the relevant question is: Are there any differences that matter, any differences that -- in the dynamics of two-party governing-- will effectively alter the plight of the majority of the US population for the better?

If the Democrats hold the Presidency, there is every reason to believe that they will do no more than they did when they had the rare dominance of all three governing branches. Indeed there is every reason to believe that Obama would relish compromising with the Republican agenda, an approach that he previously embraced even when he had no reason to do so.

On the other hand, should the Republicans gain the Presidency, the Democrats will, as they have in the past, show much more eagerness to demonstrate differences with Republicans and more vigorously attack Republican initiatives. They will offer a more leftward agenda since there is no danger of having to implement progressive policies. And they will embrace the Left insofar as it will mount the sharpest and most coherent attack on Republican policies, while doing so in a loud and demonstrative way.

A Democratic Party out of power is a belligerent, feisty party that will even spread some cash around to support left and progressive causes. Of course, that financial link secures a certain loyalty that perhaps explains the 
enthusiasm shown for the Democrats by many of our progressive brothers and sisters in every election cycle.

For decades, we have been warned of the dangers wrought by Republican victories: an unfriendly supreme court, an attack on welfare, Social Security, Medicare, and Medicaid, war mongering and aggression, etc. Yet despite the handing of power back and forth for nearly forty years, the dangers have continued to deepen—the US has suffered a constant rightward drift since the middle of the Carter administration. Apparently, the “Vote Democratic” argument is only an argument about the pace of that drift.

But the greatest victims of the Democratic Party love-fest are truth and honesty. Take Paul Krugman, for example. His soap box in The New York Times has served to excoriate the Obama administration for doing far too little to bring the US economy back from the grip of crisis. On many occasions, he has warned of the dangers of closing the stimulus program and embracing austerity, policies that he acknowledges Obama has endorsed. Reviewers of his new book note the dominant theme of political inaction and the dangers that ensue.

Yet Krugman holds his nose and delivers a ringing endorsement of Obama’s economic policies in a recent column: “But is the mess really getting cleaned up [by the Administration]? The answer, I would argue, is yes… So, as I said, the odds are that barring major mistakes, the next four years will be much better than the past four years… So Bill Clinton basically had it right: For all the pain America has suffered on his watch, Barack Obama can fairly claim to have helped the country get through a very bad patch, from which it is starting to emerge.”

Following the lead of the old huckster, Bill Clinton, Krugman dutifully salutes the President with approval of the Administration’s economic program contrary to his often-voiced disparagement. Krugman gets kudos for loyalty to the Party, but shame for despoiling honesty. If the next four years “will be much better” under Obama’s stewardship, then why should we take Krugman’s constant dire warnings at all seriously?

Democratic partisans will cry foul. For them, criticizing Krugman’s waffling is another example of left “purity.” But truth and honesty do not allow for shadings or gradations. The people deserve better. And they want better, as opinion polls consistently show.

The corruption of politics in the US is neither an aberration nor an accident. Instead it is the logical evolution of a political system in the era of state-monopoly capitalism operating freely and without the counter force of a strong, independent working class movement. The process of that evolution is revealing.

Looking Back

It is easy to forget that not so long ago there were currents and trends in the Democratic Party that represented more than the authority of markets, the interests of corporations, and the enthusiastic approval of military adventure. That is not to say that the Democratic Party was not a bourgeois party, a party of capitalism. It is and always has been. But there was a time when the party’s course was disputed terrain; a variety of interests wrestled for its direction.

The Democratic Party’s defeat in the 1980 election was presaged by an enormous fund-raising advantage by the Republicans. The Republican Party as a whole raised $130.3 million in the 1979-80 period over the Democrats' meager $23 million. Perhaps more than any other factor in the Reagan victory, this glaring inequity cast the mold for the future Democratic course. In addition, organized labor’s decline and the falling electoral participation of poor and working people spurred new rightist trends in the Party.

Going into the 1984 election, the Democratic Party found itself torn between three ideological currents. While all agreed that an answer to the successful extreme right victory in 1980 was critical, factions differed on how to respond. These differences were fought out in the primaries.

Walter Mondale represented old-school Cold War liberalism. While drifting to the right to accommodate Reaganism, Mondale claimed to uphold New Deal values, though without offering any new social programs. He drew support from the entrenched leadership of the New Deal coalition: labor, minorities and liberals.

A new trend emerged around the candidacy of Gary Hart. Appealing to the well-off middle strata that moved into the Democratic Party in large numbers after the Nixon debacle, Hart proposed a “third way” (prescient of the Blair/Clinton developments to come) between traditional liberalism and the Reagan/Thatcher rightist turn. Hart and his ilk saw themselves as social liberals and fiscal conservatives, combining lifestyle tolerance with corporate friendliness and market-based policies. This third way promised to retain the cultural veneer of liberalism while gutting its Keynesian, welfare-state directed policies that supported and bolstered the well-being of workers and the poor. A not inconsequential bonus was that business-friendly policies would draw greater campaign contributions from corporations and the wealthy.

Some in the Party recognized the rightward drift of the old guard and viewed the launching of the new Reagan-lite model with alarm. Jesse Jackson, in a letter to former progressive flag-bearer, George McGovern, wrote: “Too many Democrats have gone along with Republicans on every Reagan policy.” In response, Jackson launched a national primary campaign to win the Democrats away from the right turn that he correctly anticipated. With a base in the long-neglected African-American community, Jackson reached out to labor and other progressive constituencies.

Despite deeply embedded racism and Democratic Party sabotage, Jackson waged an impressive campaign garnering almost 20% of the vote and winning 5 primaries, all without substantial funding and Party support.

Nonetheless, Mondale won the nomination and went on to lose overwhelmingly to Ronald Reagan.

Ignoring  the strong showing of the progressive Left, the Democratic leadership moved forward with what The Nation magazine previously dubbed “Reaganism with a human face” (6-26-1982).

The new direction for the Democratic Party was sealed with the creation of a wide-ranging policy statement in August of 1986. Entitled “New Choices in a Changing America,” the slick, comprehensive document gave the imprimatur of the Party leadership to the path of economic conservatism, market-based policies, and limited government action. The Democratic leadership had heard the gospel of Reagan and found a way to call it their own. The answer to unemployment, poverty, and declining living standards was partnership with the private sector, rising worker productivity, and clearing the regulatory barriers to growth. While conceding that the working class and the poor had seen their living standards devastated since 1970 (including six years of Reaganism), the Democrats chose to march hand-in-hand with the Reaganauts.

Writing in September of 1986 (People’s Daily World), Si Gerson, the Communist Party’s long respected and experienced electoral expert, wrote:

Certain right-wing factions, supported largely by big money people, are particularly unhappy about the results [progressive wins in Senatorial primaries] and, above all, by the rising popular movement for peace and the increasing militancy of labor and its allies… They want the Democratic Party leadership’s rightward drift to be set in concrete… They have… codified it in a 71-page statement released last week by the Democratic Policy Commission. Entitled “New Choices in a Changing America,” the statement on basic questions simply parrots Reagan—even on points he has begun to mute somewhat… The underlying theory of the document is that the country has gone to the right and if the Democratic Party is to win the Senate in 1986 and the White House in 1988 it too must go to the right.
Gerson was correct to recognize this effort by the Democratic Party leadership to turn their party into a carbon-copy of Reagan’s party. He recalled a previous warning by a venerated figure among Democrats:

Perhaps the clearest answer to this manifesto was delivered months ago by someone who can hardly be called a left-wing Democrat. Arthur Schlesinger Jr., the historian who was a fixture in the Roosevelt New Deal, branded as “Reaganite fellow-travelers” those who say “me-too” to Reagan policies. Writing in the New York Times of July 6, Schlesinger said: “Today me-tooism is an infection within the Democratic Party. It finds expression in quasi-Reaganite formations like the Democratic Leadership Council and the Coalition for a Democratic Majority… One can only add that for the Democrats' me-tooism is a recipe for disaster,” 

Unfortunately, ”Me-tooism,” the strategy of shadowing the Republican Party and maintaining a position ever-so-slightly closer to the center, won the day and remains the approach of Democratic Party leaders to this day.

Notably, the Left mounted a noble effort in 1988, again behind the primary candidacy of Jesse Jackson. The campaign charged ahead, winning primaries and caucuses and surprising the old guard. But when the campaign began to draw significant and militant labor support, a stealth campaign of slander and racial fear diminished the outcome. Nonetheless, Jackson and the Left captured nearly seven million votes.

Like the quixotic Progressive Party campaign of 1948, the Jackson campaign was smothered by the effort of a Democratic Party resolute in following a path blazed by the extreme right and scandalizing the opposition with red- and race-baiting. Through fear and intimidation, Democratic leaders denied the emergence of a viable left bloc, a counter force to the domination of monopoly capital.

Lessons?

With the victory of corporate Democrats—fiscally conservative, socially liberal—the problem of fund-raising has been solved. In the 2008 election, corporate Democrats actually raised more than their corporate Republican counterparts. In this election cycle, they may well fall behind the Republicans. But they will never know again the vast inequity of 1980. Their fealty to monopoly capital ensures some measure of campaign-fund parity.

At the same time, the dominance of corporate Democrats and the Democratic Party leadership’s comfort with this relationship, denies any insurgency within the Party, not that rebellion would be countenanced in any case. Those who continue to argue for “inside/outside” strategies will continue to find themselves outside—neither “in the game” nor with a coherent political strategy.

The only viable force capable of changing this regular exercise in futility is the labor movement or some subset of it. Organized labor has the resources and apparatus to launch a new, independent political vehicle that would neither be beholden to corporate power nor restrained by false friends. Necessarily, labor must stop throwing these resources at the feet of the Democratic Party; labor leaders must reject their current vassalage to Democratic Party officials. It’s a tough challenge to work for these changes, but one far more worthy than hustling for political swindlers.

In the mean time, don’t bother asking, I’m enthusiastically voting for Jill Stein of the Green Party. She was arrested recently trying to stop home foreclosures in Philadelphia. And your candidate? 

Zoltan Zigedy
zoltanzigedy@gmail.com


 

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All Hail Google

Target: Google


by William Anderson

[Posted on Tuesday, December 13, 2005] [To receive the Daily Article in your inbox, go to email services, and tell others too!]
It was only a decade ago that the Clinton Administration had decided that Microsoft was an Enemy of the People and tried (mostly unsuccessfully) to litigate the company into oblivion. While the principals in that set of lawsuits have gone on to other things, the "anti-monopoly" propaganda machines are turning their sights elsewhere. It seems that Google, the powerful and innovative Internet search engine, now enjoys the title of "Most Hated Company."

Now, if this were an article criticizing the 6.7 million "Hate Google" links that have sprung up (yes, you can use Google to find anti-Google sites ), it would be quite short. Those people who don't like Google can use Alta Vista, Yahoo, or some other search engine, and that should be the end of it. And if they wish to spend a good part of their day blasting Google on blogs or in emails, that is their business.

Google is no longer just a search engine of course. It offers premium email, instant messageing with voice, online books and media, maps and directions, web-use analytics, advertising programs, among a hundred other fast-changing, super-innovative ideas. For years now, it has been on the cutting edge, and the company shows no sign of slowing down. The competition seems constantly on the defensive. Many people believe that if the Windows OS is ever taken down a peg or two, it will be because of some Google innovation.

Its success is driven entirely by the consumer's evaluation of its quality. Google innovates but it is the market that renders the verdict.

When it comes to the law, however, I fear that we are not at the end, but rather the beginning, and the people at Google should be worried. If Microsoft's error was not being politically astute when the Clinton Administration took aim at the software company, then perhaps Google's big "mistake" is being aligned closely with the political party that happens to be out of power.

According to CNN, 98 percent of political contributions from Google employees went to candidates who were Democrats, and Google's search policies are decidedly left-wing. (For example, Google refused to run an advertisement for Candice E. Jackson's book Their Lives, which is critical of Bill Clinton's behavior toward women.)

In the libertarian view of things, Google has (and should have) the right to run those things they wish to run and extend its right of refusal to whatever it chooses. The politics of Google, its CEO, and its employees are irrelevant in the larger scheme of things and are private matters. However, politicians are not the sort of people to permit individuals to live and work as their conscience dictates, and I would not be surprised if the Bush Administration decides to use antitrust law (a term that in my view is an oxymoron) to punish the company.

Granted, the suit would have no legal or economic merit (although one can say that about any antitrust case), but searching 90-year-old grandmothers in wheelchairs who are trying to board planes has no merit, either, yet the government does it.

The vindictiveness against Google stems from the fact that people choose to use that particular search engine more than they do other searchers. Other people don't like the way that Google ranks websites, which means that a site that someone may think is the Most Important Website in the World is buried deep among the many other sites on the same subject.

But the biggest current complaint against Google is that it is just "too big." We hear things like "Google controls 80 percent of the market" for search engines, yet that statement is nonsense. Google does not "control" anything on the Internet. People have to choose to avail themselves of Google's services. No one is forced to use the Internet at all and, thus, can avoid Google altogether if that is their choice.

These things should be obvious to anyone, yet antitrust law is not based upon what is obvious. In fact, antitrust law does not even constitute good law, since the violations of the law, such as "restraint of trade" or "monopolizing a market" are not readily defined. "Recognizing" a "monopoly" depends upon how one chooses to delineate the term.[1] That fact alone should make one recognize the political nature of antitrust "enforcement."

The vagueness of antitrust law makes it easy for government to heap abuse upon those firms that are out of favor at any given time, as no real legal proof is needed for the courts to act against the alleged "monopolist." All that is needed is an allegation and a friendly judge, and prosecutors and the news media will perform the rest of the job.

As Dominick Armentano, one of the world's best experts on the subject of antitrust, writes:

There is much historical evidence (especially at the state level) to suggest that the laws were intended by business and agricultural interests to restrict and restrain efficient competition, much like tariffs and quotas still do in international trade.

But regardless of original intent, any objective study of antitrust cases would reveal that the laws have never been used to protect consumers from monopoly power. On the contrary, they have been used by government and private plaintiffs (90% of all antitrust cases are private) to attack and destroy successful companies while protecting their inefficient competitors.

He continues:

It's no accident that in all of the classic antitrust cases in business history, the indicted firms were expanding output, innovating rapidly, and lowering their prices. Antitrust has never been consumer friendly and the antitrust establishment's protestations to the contrary simply won't wash with the facts.

Thus, if antitrust cases brought on by the government are overtly political, then it would seem that Google could have problems. First, as I already have pointed out, Republicans — who hold both the White House and a majority of both houses in Congress — are not particularly fond of Google.

Second, despite the millions of dollars that the company's leaders and employees have raised for the Democrats, it is doubtful that many Democrats would be willing to stand up for a firm that is accused of being a "monopolist." After all, Bill Gates is rumored to be a Democrat and Microsoft is located in the Seattle area, which is a Democratic stronghold. Even though that was the case, no Democrat having real political influence was willing to speak out against the Clinton Administration's jihad against Microsoft and Gates.

Further evidence of Democratic cowardice in protecting business figures accused of wrongdoing was the lack of support by politicians for Martha Stewart. While Stewart has been a stalwart contributor to the Democrats, no one from that party stood up for her when the Bush Department of Justice tried and convicted her in federal court on very flimsy charges. (Hillary Clinton even sent back a $1,000 contribution that Stewart had sent her during her 2000 U.S. Senate campaign.)

On the Republican side, no one with influence has stood up for Kenneth Lay, who was indicted last year on charges of "securities fraud," despite the lack of real criminal evidence. Republicans might have sought Enron money when it was a hot company, but it seems that everyone headed for the exits when the firm financially unraveled.

  Big is not bad: $10
Yet, while Lay and Enron might be considered politically radioactive, one must remember that it was politics, not law that drove the indictments and prosecution of Lay and others with Enron. That is why I am concerned about Google. Should the government decide to go after Google for antitrust "violations," it will do so for purely political reasons.

At the same time, however, Google will find that any political capital it has tried to establish with the Democrats will come to naught, as no self-respecting Democrat is going to stand up for a "monopoly." (Remember that Enron also made large contributions to the Democratic Party during the years of the Clinton Administration, but when the company fell from grace, it suddenly was described as a "Republican" firm.)

Such is the world of antitrust law. Because the law can be applied only on a political basis, all government prosecutions of firms accused of violating antitrust statutes are political by definition. While I hope this is not the case, I do know that there exists almost no political downside for an administration that pursues civil and criminal cases against firms and business owners. Although the Bush Administration is unpopular with large segments of the population (mostly for the failure of war in Iraq), any action it takes against Google will win praise from all sides — and the Bushies could use some political popularity at the current time.


William Anderson, an adjunct scholar of the Mises Institute, teaches economics at Frostburg State University. Send him MAIL. See his Mises.org Articles Archive. Comment on the blog.

[1] Former U.S. Supreme Court Justice Potter Stewart, in writing an opinion about an obscenity case, said that while he could not define obscenity, he would know it when he saw it. Things like "restraint of trade" and "monopolizing markets" are even more vague than obscenity in Potterland.


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