Capitalism: Not to be misunderstood

21 December 2011, Financial Express
29 December 2011, Dhaka Courier, Bangladesh

Fundamentals of Inductive logic tell us that (a) nothing comes out of nothing. Every event/occurrence is a result of multiple causes, immediate or distant. For example, if a bomb explodes then it needs to be noted carefully that it does not explode only for the immediate reason of its switching on but also for the reasons of its planting in that very mode and direction and, above all, the human brain behind all the plans and technicalities must be taken into account and (b) nature behaves in the same way under the similar circumstances, which implies that if there is a rain today, there shall be rain tomorrow provided the same weather takes place again. That’s why, instead of going for any kind of SOS services to meet with the crises in the fold of capitalism, let the leaders of G-20 and EU face the challenging question emanating from the reality is that ‘Has capitalism as a model really failed? Or ‘Has it been strangulated by the political leaderships of ‘Oligarchy’ in the name of so-called multi-party ‘Democracy’ allowing unchecked monopolistic corporate Dinosaurs to grab the very concept and purposes of welfare state paving further, to our utter surprise, the way for consolidating and cementing the standing and march of corporationist state?

Definitely, capitalism as an ideological content and model of politics has been made subservient to those forces that are matured, clever and cunning enough to turn it into their self-targeted ideological content and model of sweet-heaven squeezing ambits of the powers and functions of state. Hence, the concept of ‘less interference by the state means more development’ is another ill-motivated weapon being made and used by them and their think-tanks, researchers, propagandists and advertisements in a very planned, concerted and convincing manners, modes and fashions.

Capitalism, in fact, does speak of a welfare state based on multi-party democracy, human rights and economic development with due respects to culture and religion of various folds and beliefs. All these ingredients assert, affirm, confirm and conform a society and state where there must have a balance, befitting, qualified or unqualified, so that the range and extent of inequalities, opportunities and privileges in almost all sectors cannot under any circumstances emerge and continue as threats to each other and one another; where resources are not to be concentrated in the hands of few; where powers are not to be vested in the hands of opportunists and demagogues; where science and technology shall be used for the benefits and development of the people, not for the satisfaction of a few and ,above all, where due care must be ensured so that the stages of the development of capitalism with a responsible and responsive role of ‘national bourgeois (as opposed to the rise and expansion of modern monopolistic corporate Dinosaurs) might not be disturbed or foiled. And to tie and integrate all these, state shall play and continue her role as a friend, philosopher and guide ensuring territorial integrity, security and sovereignty internally and externally to the best of its capabilities, capacities and strengths. Therefore, the very question of her (state) becoming a ‘post-office or a mere ‘director of orchestra’ is just a negation to the very basis and aims of the birth of state since a welfare state cannot sit and remain idle leaving all the keys of welfare vulnerable to others considering the area as ‘discretionary zone’ of those who can afford and like to do so. Sovereignty lies inherently in the hand of state and it should be there undeniably based on monism. But while applying such power a state must have to be careful enough so that question or chance of misuse may not jeopardize or frustrate its sanctity and purpose(s). Pluralistic approach to sovereignty is very soothing to hear but in reality it weakens or makes inoperative of the sovereignty of state as a whole.

But as ill luck would have it, the world of today’s capitalism is just a U-turn from the very vision and mission of capitalism proper and that’s why it’s truly a misnomer to entitle the ‘perversion’ as ‘proper’. Had there been proper treatments and preventive measures of causes of the ‘Great Depression of 1930’ and ‘Black Tuesday’ there possibly took place no further ‘Crisis’ that has recently started plaguing the domain of capitalist world. Communist Manifesto of 1848 followed by Das Kapital of 1867, translated into Capital: Critique of Political Economy, came into being not because of the momentary outbursts of the emotions and protests of Karl Marx and Friedrich Engels rather it was also a clear message to the welders of politics of capitalism of those days as to what ought to be done in the face of new challenges. Adam Smith’s ‘Wealth of Nations’ does not contain a single sentence in favor of exploitation by a few over the majority. Economists, researchers, think-tanks, media etc supporting the negative escalation of capitalism in line with the expansion of corporationist state either failed to realize what they are exactly doing or they have taken the course deliberately to suit their vested purposes.

In this regard two examples, inter alia, may largely be illustrative. One is the repealing part of Glass-Steagall Act of 1933 and enactment of Gramm–Leach–Bliley Act (GLB), also known as the Financial Services Modernization Act of 1999, USA and the other is genesis of off-shore banks.

Today it is well-understood that in the name of de-regulation, repealing part of the Glass-Steagall Act of 1933 and passage of the Gramm–Leach–Bliley Act (GLB), also known as the Financial Services Modernization Act of 1999, during Clinton administration (1993-2001) removing barriers in the market among banking companies, securities companies and insurance companies that prohibited any one institution from acting as any combination of an investment bank a commercial bank, and an insurance company caused a havoc in the financial and banking sectors in USA with its blasts in UK because of Blaire’s following the same pursuits in line with the thoughts of his mentor Professor Anthony Giddens. With the passage of the Gramm–Leach–Bliley Act, commercial banks, investment banks, securities firms, and insurance companies were allowed to consolidate.

Many believe that the Act directly helped cause the 2007 subprime mortgage financial crisis. President Barack Obama has stated that GLB led to deregulation that, among other things, allowed for the creation of giant financial supermarkets that could own investment banks, commercial banks and insurance firms, something banned since the Great Depression. Its passage, critics also say, cleared the way for companies that were too big and intertwined to fail. Economists Robert Ekelund and Mark Thornton have also criticized the Act as contributing to the crisis. They state that "in a world regulated by a gold standard, 100% reserve banking, and no FDIC deposit insurance" the Financial Services Modernization Act would have made "perfect sense" as a legitimate act of deregulation, but under the present fiat monetary system it "amounts to corporate welfare for financial institutions and a moral hazard that will make taxpayers pay dearly. Joseph Stiglitz, 2001 Nobel laureate for economics and former World Bank Chief Economist also argued that the Act helped to create the crisis (Gramm-Leach-Bliley Act, Wikipedia, the free encyclopedia).

The process began in the very face of the continuation of Glass-Steagall Act of 1933 even a year before the new law was passed. Citicorp, a commercial bank holding company, merged with the insurance company Travelers Group in 1998 to form the conglomerate Citigroup, a corporation combining banking, securities and insurance services under a house of brands that included Citibank, Smith Barney, Primerica, and Travelers. Because this merger was a violation of the Glass–Steagall Act and the Bank Holding Company Act of 1956, the Federal Reserve gave Citigroup a temporary waiver in September 1998. Less than a year later, GLB was passed to legalize these types of mergers on a permanent basis. Yes, be sure, it happened due to indomitable rise and walk of monopolistic corporate empire in the fold of capitalism.

Creation of Off-Shore banks (while the term originates from the Channel Islands being "offshore" from the United Kingdom, and most offshore banks are located in island nations to this day, the term is used figuratively to refer to such banks regardless of location, including Swiss banks and those of other landlocked nations such as Luxembourg and Andorra ) within the fold of capitalist empire is another landmark addition to the protection of the deposits of those who earn a lot through various sources, legal or illegal, open or underground, crime or plunder, taking resorts to tax evasion, money laundering, or non-declaration of the income by the tax-payer to the authorities concerned in the nation-states and jurisdictions. Interestingly enough, such protections include greater privacy in the name of bank secrecy, a principle born with the 1934 Swiss Banking Act, low or no taxation called tax heavens, easy access to deposits at least in terms of regulation and protection against local political or financial instability.

Feedbacks and impacts of such off-shore banking on the nation-states are well understood today. In their efforts to stamp down on cross border interest payments EU governments agreed to the introduction of the Savings Tax Directive in the form of the European Union withholding tax in July 2005. A complex measure, it forced EU resident savers depositing money in any country other than the one they are resident in to choose between forfeiting tax at the point of payment, or allowing notification by the offshore banks to tax authorities in their country of residence. This tax affects any cross border interest payment to an individual resident in the EU. Following September 11, 2001, offshore banks and tax havens, along with clearing houses, have been accused of helping various organized crime gangs, terrorist groups, and other state or non-state actors. Since then there have been many calls for more regulation on international finance, in particular concerning offshore banks, tax havens, and clearing houses such as Clearstream, based in Luxembourg, being possible crossroads for major illegal money flows. However, offshore banking is a legitimate financial exercise undertaken by many expatriate and international workers.

In the 21st century, regulation of offshore banking is allegedly increasing, although critics maintain it remains largely insufficient. The quality of the regulation is monitored by supra-national bodies such as the International Monetary Fund (IMF). Banks are generally required to maintain capital adequacy in accordance with international standards. They must report at least quarterly to the regulator on the current state of the business.

Since the late 1990s, especially following September 11, 2001, there have been a number of initiatives to increase the transparency of offshore banking, although critics such as the Association for the Taxation of Financial Transactions for the Aid of Citizens (ATTAC), non-governmental organization (NGO) maintain that they have been insufficient. A few examples of these are:

*The tightening of anti-money laundering regulations in many countries including most popular offshore banking locations means that bankers are required, by good faith, to report suspicion of money laundering to the local police authority, regardless of banking secrecy rules. There is more international co-operation between police authorities.

*In the US the Internal Revenue Service (IRS) introduced Qualifying Intermediary requirements, which mean that the names of the recipients of US-source investment income are passed to the IRS.

*Following 9/11 the US introduced the USA PATRIOT Act, which authorizes the US authorities to seize the assets of a bank, where it is believed that the bank holds assets for a suspected criminal. Similar measures have been introduced in some other countries.

*The European Union has introduced sharing of information between certain jurisdictions, and enforced this in respect of certain controlled centers, such as the UK Offshore Islands, so that tax information is able to be shared in respect of interest (Off-shore bank, Wikipedia, the free encyclopedia).

Therefore, the question is, how long shall this very unethical standing of Off-shore bank continue? Is it not a curse for capitalism proper and civilization? Voicing of the same is much more reflected truly in a prose-poetry mode as follows:

O United Nations----------------------------------

Behold, behold, behold

In the name of privacy, secrecy and safety of

Money, bonds and securities going on what a

Wonderful legally protected guarantee under the canopy of

Off-shore and Swiss banks

Certainly, certainly within the wrinkle of

Capitalism!!!

Bearing on the other side of coin c as a

Corollary to all such capitalistic boundaries a

Merciless, crude and brute hidden truth

Full of suspense, sensation and thrills leading, leading to

Tragic culmination while so-called invulnerable diamond-fenced

Privacy, secrecy and safety wither away in moments

As soon as whistling starts followed by

Ringing of the bells of fall of such account-holder(s);

Dazzling recent examples are---

Former Egyptian President Hosni Mubarak

Tunisian President Zine al-Abidine

Pilipino Dictator Marcos and so on.

Therefore, O United Nations, tax heavens are not safe

Not safe even for the Dinosaur account-holder(s) in time of

Distress and necessity

So the logical asking crops up-----------------

Are not forts remaining unsafe finally?

Is not it a shame for mankind and civilization?

How long, O United Nations, how long such tax havens

Even in refined, redirected form shall continue to be justifiable?

Cannot, cannot we get rid of it

Paving, paving a right way out?

(Page 36 in the Author’s book O United Nations at www.sinha-onitednations.com)

Therefore, there needs a great overhauling in capitalism with clear focuses on wherefrom it started, wherefrom it got derailed and how such derailments can be compensated, stitched, tailored and tuned to move with time, space and dimension. Let all perceptions and senses of frustrations centering in and around capitalism as a viable contents of politics be revisited, recast and refueled. Let us not utter nostalgically and conclusively that ‘the ‘days of capitalism are over’ rather let us sound on a high volume that ‘Let the days of corporationist state foisted as a heavy weight upon the natural course of development of capitalism be over’.

Similarly, there should be no hide and seek in affirming that socialism as a content of politics has not failed rather it was mishandled by the managerial management after the spirit of the dictatorship of the proletariat. Almost all the condition precedents were ignored or set aside. Neither Marks nor Engels nor any book on socialism including the Communist Manifesto ever made a pen-picture of a socialist state, which emerged and continued under the leadership of pre-disintegrated USSR, then a leader of bi-polar world.

Further, between the two systems basic differences mostly come from that capitalism sticks to a multi-party democracy with propensity towards both state(where essential or unavoidable) and private ownerships while socialism believes in single party democracy and state ownership with less or no interest in religion even as a faith. To be noted here is that capitalism is more dynamic, accommodative while socialism is more stereotyped and non-accommodative. Capitalism has every avenues, lane and by-lane to continue with state ownership and private ownership, which for socialism implies deviation from the root. From this point of view, the concept of mixed economy is very much inherent to capitalism or rather says that mixed economy is a phase or variety of capitalism. When China adopts and continues with ‘two economy’ it indicates the worthiness and sustainability of capitalism and limitations of socialism. So, capitalism can never wither away or die since it is organically tied to the fundamentals of human race, spirit and development.

Therefore, when it is heard that neither capitalism nor socialism is in a position to meet with the needs of time, in both cases the outright reply is, although comparatively capitalism is viable, accommodative, an sustainable truth is that neither capitalism nor socialism was allowed to flower, develop and, accordingly, stand by the people because of poverty of leaderships with firmness, determination, courage, honesty and commitments predominantly. We must not forget even for a second that any content of politics may meet with failure or extinction also because of those who for a particular period of time take the helms to lead, guide and direct. Hence, more focuses should be made on the men behind the machines such as Stalin, Brezhnev, Gorbachev, Regan, Bush, Clinton and Obama and so forth.