Today Detroit – Tomorrow, Every City in America

May 5, 2011 by · Leave a Comment 

By Rania Khalek

If Milton Friedman, father of the free market, were alive today, I imagine he would be jumping with joy at the prospect of the abandonment of public education for private, for-profit charter schools.

Back in 2005, following the devastation of hurricane Katrina, Friedman wrote an article in the Wall Street Journal where he said “This is a tragedy. It is also an opportunity to radically reform the educational system.” Soon after, Friedmonites rushed into New Orleans for the chance to implement what Friedman had long envisioned. With the help of the Bush administration, they dissolved the public school system and in its place built a network of publicly funded charters run, not by educators, but by private entities that made their own rules.
At the time, New Orleans residents alerted the rest of the country, that what was happening to their city was only the beginning and it wouldn’t be long before it spread to our neighborhoods. In 2006, Bill Quigley, a local lawyer and activist warned:

We know that what is happening in New Orleans is just a more concentrated, more graphic version of what is going on all over our country. Every city in our country has some serious similarities to New Orleans. Every city has some abandoned neighborhoods. Every city in our country has abandoned some public education, public housing, public healthcare, and criminal justice. Those who do not support public education, healthcare, and housing will continue to turn all of our country into the Lower Ninth Ward unless we stop them. Why do we allow this?

If only we had listened. Soon after New Orleans came the drastic transformation of the Chicago school system by Obama’s Labor Secretary Arne Duncan, New York City schools by Mayor Bloomberg, and Washington DC schools by Michelle Rhee. Which brings us to Detroit.

Following the passage of Michigan Republican Gov. Rick Snyder’s “Financial Martial Law,” Emergency Financial Manager (EFM) of Detroit Public Schools (DPS) Robert Bobb is closing 8 schools and selling 45 to charter companies. DPS is currently preparing a charter school board through training sessions provided by the National Charter Schools Institute, which had more than 70 charter operators and entrepreneurs in attendance just this month. In addition, DPS has hired the National Association of Charter School Authorizers (NACSA) to review applications. NACSA’s president, Greg Richmond, worked with charter schools set up in New Orleans after Hurricane Katrina, and claims “The system opened up to the people of New Orleans in a way it hadn’t before…Now there are dozens of opportunities to get involved.”

In sharp contrast to the lingering unemployment that plagues Detroit, the auctioning off of Detroit’s schools is taking place with breathtaking speed. Gov. Snyder is on a mission to reinvent public education. He is calling for more measurements of student and teacher performance, while at the same time proposing deregulation and more teacher autonomy. He says “We have to put much more emphasis on proficiency, on growth, on measurements and results than we have had in the past” and “Michigan’s public schools need to more rigorously measure students’ academic growth, but with fewer state rules to make that happen.”

Detroit residents have already started protesting. Just last week, eight students, along with their children and some faculty members of the Catherine Ferguson Academy of Detroit, began a sit-in at the end of the school day in protest of EFM Robert Bobb’s announcement to close the school. About a dozen or so were arrested by Detroit police for refusing to leave. The school is specifically designed for pregnant and teen parents and their children, and has a 90% graduation rate and 100% college and higher education acceptance upon graduation.

Gov. Snyder recently said his focus is a holistic approach to education from pre-natal to life-long learning. He says early childhood education is important and should involve “a public and private partnership.” If shutting down an award-winning school and arresting, rather than listening to the students he claims to care so much about, is his idea of a holistic approach, then Detroit is in for a treat.

Shanta Driver, National Chairperson of By Any Means Necessary (BAMN), in an interview with Voice of Detroit at the sit-in, said it best:

The massive school closures that have been carried out in DPS since 2004 have led to the depopulation of Detroit and to the deepening financial crisis of the district. Public schools are being closed to make way for charters and are part of the national attack on public education. Today Detroit – tomorrow, every city in America. The parents and students of Catherine Ferguson are fighting to maintain the right of every student in our nation to a free, quality public education. Every supporter of public education should do everything possible to support their fight and make sure they succeed.

Driver is warning us, as did the people of New Orleans in 2006. This corporately funded education reform movement that praises standardised tests, non-union teachers, and private management as the solution to the budget woes of Detroit’s education system is a threat to us all.

Rania Khalek is a young, progressive activist with a passionate dedication to social justice. Check out her blog Missing Pieces or follow her on twitter @Rania_ak. You can contact her at raniakhalek@gmail.com.

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Pres. Obama’s Economic Policies

February 4, 2010 by · Leave a Comment 

By Michael Hudson

Reality had to raise its ugly head. Barack Obama was elected with overwhelming approval to inaugurate an era of change. And at his November 25 press conference, he said that his decisive victory gave him a mandate to change the direction in which America is moving. But his recent economic and foreign policy appointments make it clear that when he chose “change” as his campaign slogan, he was NOT referring to the financial, insurance and real estate (FIRE) sectors, nor to foreign policy. These are where the vested interests concentrate their wealth and power. And change already has been accelerating here. Unfortunately, its direction has been for the top 1% of America’s population to raise their share of in the returns to wealth from 37% ten years ago to 57% five years ago and an estimated nearly 70% today.

The change that Mr. Obama is talking about is largely marginal to this wealth, not touching its economic substance – or its direction. No doubt he will bring about a welcome change in race relations, environmental regulations, and a more civil rule of law. And he probably will give wage earners an income-tax break (thereby enabling them to keep on paying their bank debts, incidentally). As for the rich, they prefer not to earn income in the first place. Taxes need to be paid on income, so they take their returns in the form of capital gains. And simply avoiding losses is the order of the day in the present meltdown.

Where losses cannot be avoided, the government will bail out the rich on their financial investments, but not wage earners on their debts. On that Friday night last October when Mr. Obama and Mr. McCain held their final debate, Mr. Obama was fully on board with the bailouts. And this week’s appointment of the “Yeltsin” team who sponsored Russia’s privatization giveaways in the mid-1990s Larry Summers and his protégés from the Clinton’s notorious Robert Rubin regime shows that he knows his place when it comes to the proper relationship between a political candidate and his major backers. It is to protect the vested interests first of all, while focusing voters’ attention on policies whose main appeal is their ability to distract attention from the fact that no real change is being made at the economic core and its power relationships.

This is not what most people hoped for. But their hopes were so strong that it was easier to indulge in happy dreams and put one’s faith in a prince than to look at the systemic problems that need to be restructured in order for real change to occur. Individuals do not determine who owes what to whom, who is employed by whom or what laws govern their work and investment. Institutional economic and political structures are the key. And somehow the focus has been on the politics of personalities, not on the economic forces at work.

This is as true abroad as it is in the United States. Two weeks ago I was at an economic meeting on “financialization” in Germany. Most of the attendees with whom I spoke expressed the hope – indeed, almost a smug conviction – that Obama would be like Gorbachev in Russia: a man who saw the need for deep structural change but chose to bide his time, seeming to “play the game” with the protective coloration of going along, but then introducing a revolutionary reform program once in office.

Instead, after resembling President Carter by running a brilliant presidential primary campaign to win the nomination (will a similarly disappointing administration be about to come?), Obama is looking more like Boris Yeltsin – a political umbrella for the kleptocrats to whom the public domain and decades of public wealth were given with no quid pro quo.

Obama’s ties with the Yeltsin administration are as direct as could be. He has appointed as his economic advisors the same anti-labor, pro-financial team that brought the kleptocrats to power in Russia in the mid-1990s. His advisor Robert Rubin has managed to put his protégés in key Obama administration posts: Larry Summers, who as head of the World Bank forced privatization at give-away prices to kleptocrats; Geithner of the New York Fed; and a monetarist economist from Berkeley, as right-wing a university as Chicago. These are the protective guard-dogs of America’s vested interests.

If you are a billionaire, your first concern is simply to preserve your wealth, to avoid having to take a loss in the value of your financial claims on the economy – claims for repayment of loans and investment, as well as interest and dividends, and enough capital gains to compensate for the price inflation that erodes the spending power of more lowly income-earners.

This year has changed the typical fate of financial wealth in the face of bursting financial bubbles. Traditionally, business booms culminate in a wave of bankruptcies that wipe out bad debts–and the savings that have been invested on the ‘asset’ side of the balance sheet. This year has changed all that. The bad debts are being kept on the books–but transferred from the banks to the federal government, mainly the Federal Reserve and Treasury. The bank bailouts have aimed not so much to protect the banks themselves, but to enable them to pay off on the bad bets they made vis-à-vis the nation’s hedge funds and other institutional investors in the derivatives market.

To participate in a hedge fund, one needs to prove that one can afford to lose their money and not be much the worse off for it in terms of actual living conditions. So the $306 billion in federal guarantees of the junk mortgage packages sold by Citibank, and the $135 billion bailout of the insurance contracts written by A.I.G. to protect swap contracts from loss, could have been avoided without much impact on the “real” economy.

In fact, writing down these financial claims ON the economy would have paved the way for writing down its debt burden. If the subprime and other mortgage debts had been permitted to decline to the neighborhood of 22 cents on a dollar they were trading for, this would have made it possible to write down debts to match the price at which mortgage holders had bought these loans for. But the financial overhead of American wealth “saved” in the form of creditor claims on indebted homeowners, industrial companies and junk-insurance companies such as A.I.G. has been protected against erosion by this year’s federal bailout program.

Bloomberg has added up these programs and finds that they $7.7 trillion dollars – nearly half an entire year’s GDP. By acting to support the market for bad-mortgage loans (but not for real estate itself), the seemingly endless series of Paulson bailouts seeks to be to keep today’s debt overhead intact rather than writing it down. Service charges on this indebtedness will divert peoples’ income from consumption to paying creditors. It will help financial investors, not labor or industry. It will keep the cost of living and doing business high, preventing the U.S. economy from working its way out of debt by becoming competitive once again.

With all these trillions of dollars of bailing out the wealthy, one might easily forget to ask what is being left out. For one thing, the government’s Pension Benefit Guarantee Corp, whose $25 billion deficit is not bailed out. This year, underfunded corporate pension plans are supposed to “catch up” to full funding so as to protect the PBGC, in accordance with a law passed by Congress two years ago. If underfunded plans don’t meet the scheduled 92% coverage for this year, they have to bring their set-asides fully up to the 100% funding level. The stock market plunge has dashed their hopes to do this. The result will be to force many industrial companies into a financial bind.

On the auto front, the Bush Administration has brought pressure to force the big three Detroit companies into bankruptcy as a way to annul their defined-benefit pension plans – with no plans at all bail out money owed to labor by restoring the PBGC to solvency. State and local pension plans are almost entirely unfunded, and are at even more risk as their tax revenues plunge and property tax payments are stopped on housing and commercial buildings that have foreclosed.

And speaking of state and local finances, what role is local government to play in Mr. Obama’s promise to rebuild infrastructure, headed by transportation? Given their strapped position, one is hearing a surge of Wall Street plans to spend enormous sums. Whereas Obama’s economic team made fortunes for Russian kleptocrats by giving them public-sector assets already in place, their American counterparts are going to have to get rich by actually building new projects. In such cases the benefits are as large as the total amount of money being spent – but not in the way that most people understand at first glance. Construction contracts for new public transport systems, bridges and roads and urban or rural modernization may be entirely honest and provided at a fair cost. But it is a byproduct of such investment that it creates an amount that is of equal or often even greater magnitude in the form of rent-of-location – that is, vast windfall gains for well-located real estate.

This is where Mr. Obama’s Chicago political experience comes in so handy. It is in fact a game tailor-made for his team. Hundreds of millions of dollars were made in gentrifying Chicago’s notorious but conveniently centrally located public housing for low-income families. The developments sponsored by Mr. Obama’s mentors, the Pritzker family, the University of Chicago and assorted real estate reverends opened up vast new land sites, with public support to boot. (The house where I grew up in Hyde Park-Kenwood, a block or so from Mr. Obama’s house, was torn down along with the rest of the entire block as part of Mayor Daley’s urban renewal program in the late 1950s – after the University’s block busters had run down the neighborhood, then panicked the whites into selling to the blacks at extortionate price markups and mortgage rate premiums, then tearing down the houses into which the blacks had moved. It’s an old real estate game that one learns quickly in Chicago politics.) As Thorstein Veblen noted, any American city’s politics is best understood by viewing it as a real estate development.

The gains from providing better transport infrastructure typically are so large that transportation investment could be self-financing by taxing these property gains recapturing the added rental value in the form of property windfall taxes. London’s tube extension to Canary Wharf, for example, cost the city £8 billion but increased real estate values along the route by some £13 billion. The city could have financed the entire project by issuing bonds that would have been repaid out of taxes levied on the windfall gains created by this public expenditure.

Likewise in New York City, the transport authority has just announced that subway and bus fares will be jacked up (adding no less than $10 to the monthly commute card) and services cut back sharply. Mayor Bloomberg has just stopped work on the 2nd Avenue subway, its completion will add at least as much to upper East Side property values as the subway costs itself. The city thus could finance its construction not by issuing bonds to be paid off by city and state taxpayers in combination with user fees paid as fares. Taxpayers wouldn’t have to pay, and riders could enjoy subsidized fares simply by taxing the real estate owners.

But I see no prospect of this being done. Real estate is still the name of the game, because it remains the largest asset category in every economy today just as much as under feudalism. The difference from feudalism is that whereas landlords received the rental value of their lands in centuries past, today’s property owners acquire ownership not by military conquest (the Norman invasion of 1066 in England’s case) but by borrowing from the banks. To a mortgage banker, a commercial developer or real estate company is a prime customer, the bulwark of bank balance sheets. It is hard to imagine a new American infrastructure program not turning into a new well of real estate gains for the FIRE sector. Real estate owners on favorably situated sites will sell out to buyers-on-credit, creating a vast new and profitable loan market for banks. The debt spiral will continue upward.

The fact that state and local budgets are too burdened to afford infrastructure spending themselves will lead to it being privatized from the outset. Probably London’s notorious public-private partnerships (a Labour Party refinement more Thatcherite than even Margaret Thatcher herself could have got away with) probably will become the basic model. Users will pay higher fees rather than enjoying the subsidized or free access typical in public infrastructure spending during the Progressive Era. The main purpose of public enterprise back then was to keep prices down for basic services, thus lowering the cost of living and doing business in America. But today, infrastructure spending will be just one more item adding to America’s debt overhead to make its economy even less competitive with foreign ones than it is.

The moral is, next time a candidate promises change, ask him to say just what changes he has in mind. During the Presidential debates, only Dennis Kucinich came out and said each specific law that he had put before Congress to implement each change he promised. But most of the public didn’t want to know the details – they simply liked hearing the word “change.”

Here are some purely fiscal and financial changes that a future presidential candidate might propose – changes that I don’t expect to be hearing any more about during the next four years. Just to get the discussion going, why shouldn’t these merely marginal changes within the existing system be implemented right now by a presidential candidate who is still bragging about his “mandate for change”:

    * Regarding fiscal policy, re-introduce the estate tax, along with (at the very least) the Clinton era’s progressive-tax schedule.

    * Tax capital gains at the same rate as wages and profits, rather than at half the rate; and make these taxes be paid at the point of sale of real estate or other assets, not deferred ad infinitum if the gains simply are invested in yet more wealth.

    * Require a cost-benefit analysis of any publicly backed infrastructure spending so as to recapture all “external economies” (such as windfall real estate price gains) as the first line of financing such investment.

    * Tax corporate borrowing that is used merely to pay stock dividends or buy back one’s own stock at least at 50%.

    * Close the practice of offshore tax avoidance, and bring criminal cases against accounting firms abetting this practice.

    * Only let a building be depreciated once, not repeatedly as a tax writeoff.

    * Refocus state and local taxation on the property tax, remembering that whatever the tax collector relinquishes is simply “freed” to be paid to the banks as interest.

    * In the sphere of bad-debt banking, when a government agency takes over a bank or company that has negative net worth, the stockholders must be wiped out as their stock has lost all market value. Bondholders must stand in line behind the government in case of insolvency.

    * Write down mortgage debts to the ability of property owners to pay and/or the present market value. Banks that have made loans to these borrowers must take responsibility for their decision that the owners could afford to pay. Even better, apply New York State’s existing Fraudulent Conveyance law, and simply annul loans that are beyond the ability of debtors to pay.

None of this involves real structural change. It is simply more economically efficient under existing laws and practices – something like actually enforcing environmental law, anti-fraud and anti-crime laws, and the original intent of our tax legislation. It is a small step back toward the Progressive Era a century ago – the era that set America on the path of prosperity that made the 20th century the American century.

Michael Hudson is a former Wall Street economist. A Distinguished Research Professor at University of Missouri, Kansas City (UMKC), he is the author of many books, including Super Imperialism: The Economic Strategy of American Empire (new ed., Pluto Press, 2002) He can be reached via his website, mh@michael-hudson.com

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Community News (V11-I28)

July 2, 2009 by · Leave a Comment 

Top scientist receives grant to develop fast test to detect porcine fat

peggy hsieh TALLAHASSEE, June 29, 2009– Y-H. Peggy Hsieh, of Florida State University,  recently received a grant from Tanaka Kikinzoku Kogyo K. of Japan to develop a rapid method for the detection of porcine fat. The two-year grant provides $216,000 in research funds plus $40,000 in consulting fees.

Pork tissue is strictly prohibited in  Halal diets for religious reasons. Reliable methods for the detection of any porcine tissue, including muscle and fat, are of paramount importance to the practicing Muslim and Jewish populations. Hsieh has previously developed a rapid pork immunoassay which can sensitively detect any pork muscle in food and feed mixtures regardless of their processing conditions. This pork-specific assay was commercialized in 2000 and has been widely used internationally. However, detection of pork fat remains challenging due to the physiochemical nature of the fat. Currently available methods such as DNA based Polymerase Chain Reaction (PCR) techniques, gas and liquid chromatography, and near-infrared spectroscopy, all require sophisticated instruments coupled with complex data analysis procedures for interpreting results. Rapid field tests of pork or any other fat are non-existent.

Hsieh will search for a porcine-specific and thermal-stable biomarker in the porcine fat tissue and develop a rapid method for the detection of the biomarker in raw and processed pork fat. It is anticipated that after two years, she will deliver the very first field assay which can identify even small amounts of pork fat in a wide range of raw and processed materials without using expensive instrumentation. This type of assay will greatly benefit billions of people who try to avoid pork in their diet. Tanaka has signed an optional licensing agreement with FSU in the hopes of commercializing Hsieh’s end product upon completion of this project.

The Tanaka Kikinzoku Group is Japan’s leading precious metals company with a history of over one hundred and twenty years. Although best known internationally for its high specification industrial products, the group is also producer and trader of a variety of bullion and platinum group metals, coins and bars. The group is also active environmentally, and is one of the world’s largest recyclers of platinum group metals. Their newly established Medical Group, which is funding Hsieh’s research, is focused on developing various products through the use of precious metals to improve human health.

Protestors at mosque presented with roses

BOSTON, MA–The mosque complex of the Islamic Society of Boston Cultural Center officially opened last Friday with more than 1800 worshippers in attendance. Mayor Thomas M. Menino, city councilors, and state lawmakers also attended the ceremony.

The mosque had faced a plethora of problems including financial woes and allegations that some of the speakers there had indulged in extreme rhetoric.

A handful of protestors stood across the street from the mosque holding placards led by a leading critic Charles Mosque. Local Muslims gave them white flowers as a gesture of peace. A few arguments ensued but the overall atmosphere was peaceful.

The Muslim leaders of the area hoped that the mosque will become a hub of interfaith programs.

Mayor Bloomberg says schools won’t close for Eid

NEW YORK,NY–Mayor Michael Bloomberg says New York City’s schools can’t close for Muslim holidays.

The City Council is considering a nonbinding resolution on Tuesday asking the Education Department to observe Eid al-Fitr and Eid al-Adha.

The city has the nation’s largest school system. A 2008 study by Columbia University’s Teachers College estimates at least 10 percent of its 1.1 million students are Muslim.

The resolution asks the Bloomberg administration to observe the holidays in schools and for the state to require it by amending education law.

The mayor says the city is so diverse schools can’t observe every holiday.

LAPD appoints first Muslim chaplain

LOS ANGELES, CA–In a bid to improve relations with Muslims, the Los Angeles Police Department has appointed its first Muslim chaplain.

Pakistan-born Sheik Qazi Asad, 47, will become a reserve chaplain at the North Hollywood station, the Los Angeles Times reported Monday.

“We need to establish very good communication … where both parties are talking to each other,” Asad told the Times. “This is just opening up the door.”

Asad, a U.S. citizen, has spent a decade working to improve relations between police and Muslims  in Los Angeles County.

The LAPD hopes he’ll strengthen relations that have suffered since the department tried to map the city’s Muslim population in 2007, the newspaper said. The department abandoned the plan after critics called it religious profiling.

Asad has served as a member of the sheriff’s Executive Clergy Council, on which he worked to build trust between Muslims and police.

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