Wednesday, August 5, 2020
Why Bitcoin is the not socialists’ ally – Yanis Varoufakis
Reply to Ben Arc
by Yanis Varoufakis
On 15th July, Ben Arc published in Bitcoin Magazine an open letter addressed to me in a bid to convince me that I should re-assess my rejection of Bitcoin as a force for good; as a bulwark for democratising capitalism and paving the ground for socialism. Here is my reply:
Dear Ben Arc,
by Yanis Varoufakis
On 15th July, Ben Arc published in Bitcoin Magazine an open letter addressed to me in a bid to convince me that I should re-assess my rejection of Bitcoin as a force for good; as a bulwark for democratising capitalism and paving the ground for socialism. Here is my reply:
Dear Ben Arc,
Thank you for your open letter and your efforts to bring a socialist perspective to bear upon my assessment of Bitcoin.
In my reply below, I shall address you as a fellow socialist, rather than put together a reply meant to address all sorts of different perspectives (e.g. Keynesian, Hayekian, neoclassical)
In my reply below, I shall address you as a fellow socialist, rather than put together a reply meant to address all sorts of different perspectives (e.g. Keynesian, Hayekian, neoclassical)
As you know, I am one of those who, back in 2011, were genuinely intrigued, fascinated even, by the remarkable blockchain algorithm. The prospect of a decentralised ledger controlled by its community of users was mesmerising.
As you also know, I was unimpressed by Bitcoin as an alternative to fiat money that is either likely, or indeed desirable, under our current capitalist predicament.
As you also know, I was unimpressed by Bitcoin as an alternative to fiat money that is either likely, or indeed desirable, under our current capitalist predicament.
Having read your open letter, I remain as enthusiastic on blockchain’s capacities and as unimpressed by Bitcoin’s ability to help us either civilise or (as any socialist dreams of) transcend capitalism.
Two propositions support this view. In the hypothetical case where Bitcoin were, under presently-existing capitalism, to replace fiat money: (1) It would lack the mechanism necessary to stop capitalist crises from yielding depressions that benefit only the ultra-right; and, (2) Its community-based, democratic protocols would do little to democratise economic life.
I shall explain my two propositions briefly below. But, before you despair (at my continued negative take on Bitcoin), let me foreshadow the concluding sentence in the Epilogue below: Once (and, of course, if) socialism dawns, money will have to be founded on a distributed-ledger, monetary commons enabling tehnology.
In other words, I shall argue that Bitcoin is not fit for purpose under capitalism, or as a vehicle toward transcending capitalism, but something like Bitcoin will characterise monetary systems in a future world free of private banks and share markets.
OK, let me now support my two propositions:
Proposition 1: Bitcoin lacks the shock absorbers necessary to prevent capitalist crises from doing untold damage to the working class
Consider the Crash of 2008 or the more recent 2020 Covid-19-induced crisis. Suppose that Central Banks did not have the capacity instantly to create trillions of dollars, euros, pounds and yen – and instead had to rely on a spontaneous majority of Bitcoin’s users to agree to a massive increase in the supply of money. The result would be a 1929-like collapse of banks and corporations.
While socialists would shed no tears for the tragedy of the oligarchy, socialists should beware that a 1929-like systemic collapse is bound to strengthen the forces of the ultra-right – not of the socialist left (that has been, since at least 1991, languishing in the doldrums of political paralysis).
Technically, there is of course nothing that would prevent the Bitcoin community from agreeing instantly to even a doubling of the money base. However, the Tragedy of the Commons guarantees that Bitcoin owners will be subject to the usual prisoner’s dilemma dynamic that prevents the boost in the money supply necessary to avert the liquidation of potentially viable businesses and jobs. Moreover, this free-rider problem is made far, far worse by the fact that Bitcoin ownership is very unequally distributed, thus giving the Bitcoin-rich powerful incentives to restrain the growth of the money supply (since such restrictions would boost their private rents at the expense of the public interest).
In short, the free-rider problem that guarantees the maximal reinforcement of any capitalist crisis (in any economy relying on Bitcoin as its main currency) will be turbocharged by the unequal ownership of Bitcoin – which is unavoidable in any monetary system overlaid upon contemporary capitalism.
Proposition 2: Under capitalism, Bitcoin’s dominance will not democratise economic life – or give socialism a chance
Suppose, again, that some magic wand is waved and Bitcoin replaces fiat money under contemporary capitalist conditions. In other words, as Bitcoin replaced dollars, pounds, euros and yen, property rights over land, resources and machines remain as they are while private equity firms and pension funds continue to own the bulk of shares trading in Wall Street, the City etc. All that will have changed is that Central Banks will vanish and the community of Bitcoin users will determine the global money supply (subject to the free-rider problems mentioned above).
Suppose, again, that some magic wand is waved and Bitcoin replaces fiat money under contemporary capitalist conditions. In other words, as Bitcoin replaced dollars, pounds, euros and yen, property rights over land, resources and machines remain as they are while private equity firms and pension funds continue to own the bulk of shares trading in Wall Street, the City etc. All that will have changed is that Central Banks will vanish and the community of Bitcoin users will determine the global money supply (subject to the free-rider problems mentioned above).
At the firm level, nothing will have changed. Jeff Bezos will still control a massive monopsony-cum-monopoly, Facebook will still own the whole marketplace within its platform, Exxon-Mobil will continue to lean on weaker developing country governments to drill for oil and gas that should be left in the Earth’s guts etc.
And what of private banks? They would, make no mistake here, find ways of creating complex derivatives based on Bitcoin – derivatives that will soon (just like Lehman Brothers’ CDOs prior to 2008) function as stores of value and means of exchange; i.e. as private money. Massive bubbles denominated in Bitcoin will build up and they will burst just as they did in the 19th century under the Gold Standard. And then?
In the absence of Central Banks and with the Bitcoin community in the clasps of the aforementioned free-rider problem, depression will follow – as it did before the Fed was instituted in the US. Thus, the tragedy mentioned in Proposition 1 above kicks in.
In short, not only will the democratisation of money via Bitcoin fail to democratise capitalism but it will also give an almighty boost to the forces of regression.
Epilogue
Bitcoin’s great appeal is that it breaks the cronyist chain linking central banks and private bankers. However, it does not undermine the cronyism of the network of bosses, politicians and private bankers.
Lest we forget, 19th Century bimetallic America also lacked a central bank. Under the gold and silver standards, the public money supply was fixed – and could not be easily manipulated by the state (either the government or the, then non-existent, Fed). But that did not stop private bankers from leveraging public money out of thin air to create huge quantities of private money with which to fund the Robber Barons, i.e. the Jeff Bezoses, of the era.
In this sense, replacing fiat money with Bitcoin would take us back to a postmodern version of 19th Century America - not exactly a prospect socialists should go to the barricades for.
In summary, the monetary system is like the dog’s tail. It cannot wag the capitalist dog, in the sense that democratising money by means of a monetary commons will not democratise economic life but, rather, make capitalism uglier, nastier and more dangerous for humanity.
In summary, the monetary system is like the dog’s tail. It cannot wag the capitalist dog, in the sense that democratising money by means of a monetary commons will not democratise economic life but, rather, make capitalism uglier, nastier and more dangerous for humanity.
Having said all this, a monetary commons (that may very well rely on something like the blockchain underpinning Bitcoin) will, I have no doubt, be an essential aspect of a democratised economy; of socialism.
For a nationwide general strike to halt the drive to reopen schools!
https://www.wsws.org/en/articles/2020/08/05/pers-a05.html
5 August 2020
A growing movement is now under way of teachers, students and parents against the effort to reopen schools amidst the expanding coronavirus pandemic.
Over the past month, more than 300,000 educators and parents have joined Facebook groups opposed to the back-to-school campaign. There have been protests and demonstrations in Mississippi, Arizona, Florida, Iowa, Alabama and many other states. On Monday, protests were held in dozens of cities throughout the country.
For this movement to succeed, it must be developed into a nationwide struggle, uniting educators with all sections of the working class in a general strike movement against the homicidal policy of the ruling elites.
The drive to reopen schools, supported by both the Republicans and Democrats, is a linchpin in the broader back-to-work campaign. The demand that workers return to work, put into effect in May, is already responsible for 50,000 deaths in June and July. But the ruling class cannot get workers back to work if their children are not in school.
This is the same logic that is driving the effort to curtail or eliminate federal unemployment benefits, forcing workers to return to work or face impoverishment, homelessness and destitution.
The science is clear: Children are equally susceptible to catching COVID-19, have viral loads equal to or greater than adults, are more likely to be asymptomatic carriers, and transmit the virus at the highest rates of any age group. At least four schools that reopened last week have already had students test positive for COVID-19. Any school that reopens will quickly become a major vector for the spread of the virus throughout that community.
The effort to reopen schools, in other words, means that students will get sick and die, teachers will get sick and die, and parents will get sick and die.
In raising the call for a nationwide general strike, the Socialist Equality Party (SEP) urges educators and all workers to raise and discuss the following demands in their schools, workplaces and neighborhoods:
* Keep all schools closed until the virus is eradicated! With the virus spiraling out of control across the US, in-person instruction cannot be done safely.
* Full funding for public education and online instruction! High speed Internet access, food distribution, mental health care, special education supports, and all other resources needed to provide the best quality remote learning must be guaranteed to every student and educator.
* Halt all nonessential production! Until the pandemic is contained, only key industries such as food production, medical care and logistics should remain open. Workers in those industries must be provided with the most advanced safety measures to prevent infection. All nonessential workers and laid off workers must be provided with full unemployment benefits and access to free health care.
* For a massive expansion of testing and contact tracing! In order to contain the virus, universal testing must be provided for all, and hundreds of thousands of contact tracers hired to track any cases that emerge, and test and isolate those potentially infected.
The past seven months have demonstrated that the fight against the pandemic depends upon the independent intervention of the working class. The death toll keeps rising and the pandemic is spiraling out of control because the ruling class will not tolerate any measures that cut across its interests.
If that means that the pandemic must rage on, so be it. The indifference of the ruling class to this massive loss of life was expressed most nakedly by Trump in an interview with Axios over the weekend. Asked to respond to the fact that 1,000 people are dying every day, Trump replied, “They are dying, that's true. And it is what it is.”
One could not have a clearer statement of class policy. On Monday evening, Trump declared his determination to press forward with his campaign to prematurely reopen schools, demanding on Twitter, “OPEN THE SCHOOLS!!!”
Trump does not just speak for himself. In an editorial Monday, “School-Opening Extortion,” the Wall Street Journal, gives vent to the social interests driving this policy.
The Journal denounces protesting teachers for exercising “political extortion” by resisting the effort to reopen schools. “Children, who would have to endure more lost instruction, are their hostages.” Teachers, the Journal states, are attempting “to coerce parents and taxpayers to dance to their agenda if they want their children to learn.”
What contemptible hypocrisy! The ruling class, for whom the Journal speaks, has systematically degraded public education for decades through the gutting of state funding and the promotion of charter schools, standardized testing and “school choice” schemes to divert funding to private and parochial schools.
The Journal has the gall to accuse teachers of using the pandemic to extract concessions. In reality, it is the financial oligarchy that used the pandemic to demand trillions of dollars in bailout money, sanctioned by the CARES Act passed in late March, with near unanimous bipartisan support. Having looted the state treasury, the ruling class now demands that workers get back to the job of producing profits to pay for it.
The editorial concludes by stating, “No political force should have veto power over the education of America’s children.” In class terms, the Journal is demanding that educators, parents, students and the working class should have no say in whether schools reopen or remain closed.
While the Trump administration is spearheading the campaign to reopen schools, it has bipartisan support. In New York City yesterday, teachers, parents and students staged a protest against plans by Democratic Party Mayor Bill de Blasio to reopen schools in the city.
Both Republican and Democratic governors, moreover, have removed restrictions on nonessential production as the pandemic spread, sending workers back on the job to risk their health and lives to produce profits for the corporations.
Teachers are not fighting alone. There is growing anger and opposition in the entire working class. Their allies are students and parents in K-12 schools, as well as students in colleges and universities that are also moving to reopen.
Meatpackers, health care workers, farm laborers, logistics workers at Amazon, UPS, and USPS, transit workers, service workers and the entire working class confront the same enemy. Autoworkers in Michigan and Ohio have already begun forming independent rank-and-file safety committees to organize opposition.
The end of federal unemployment benefits this week threatens millions of jobless with poverty and eviction. Behind closed doors, the Democrats and Republicans are negotiating over how much these benefits will be cut and how quickly, in order to create the best conditions to blackmail workers to get them back to work.
The opposition of teachers in the United States, moreover, is part of an international movement. Facebook groups opposed to reopening schools have formed in the UK, South Africa, and other countries where the ruling class is enforcing the same policy.
To fight back, teachers must form independent rank-and-file organizations. The protests organized by the teachers unions are entirely inadequate. The American Federation of Teachers (AFT) and National Education Association (NEA), subservient to the Democrats and the ruling class, are highly conscious of the radicalization taking place among educators and seek to preempt and control this movement. In 2018 and 2019, the unions orchestrated the shutdown and betrayal of a series of teachers’ strikes, beginning in West Virginia.
The Socialist Equality Party urges workers in every industry and sector to develop an interconnected network of rank-and-file committees to prepare for a general strike against the opening of schools and the entire policy of the ruling class.
The measures demanded by teachers correspond with what scientists and epidemiologists insist is necessary to stop the spread of the pandemic. Two absolutely opposed social interests are involved. Teachers are fighting for life. The ruling class is fighting for profits and death.
The trillions that have been handed over to Wall Street and the financial oligarchy must be redirected to provide full unemployment benefits to all workers, and universal access to health care and public education.
The development of a nationwide general strike would create a powerful impulse and would galvanize support internationally among workers who face the same life-and-death decisions. The logic of such a struggle would place the American working class in a direct confrontation with the Trump administration, which seeks to maintain its rule through increasingly authoritarian measures, and the entire ruling class.
All the rights of the working class, even the right to life, depend upon the expropriation of the ruling class and the reorganization of economic life on the basis of social need, not private profit.
The only way to halt the reopening of schools, stop the spread of the pandemic, and prevent millions more infections and deaths is through the mass mobilization of the working class in a revolutionary struggle against the source of all suffering wrought by the pandemic, the capitalist system.
The Socialist Equality Party and its youth movement, the International Youth and Students for Social Equality, are spearheading this fight. We urge teachers to contact us for assistance in organizing your struggle. We call on students and youth to support this struggle and join the IYSSE. Sign up for the World Socialist Web Site Educators Newsletter for updates on this fight.
Statement of the Socialist Equality Party
Fiat Chrysler bribed UAW with tens of millions, new GM court filing alleges
https://www.wsws.org/en/articles/2020/08/05/auto-a05.html
By Tom Hall
5 August 2020
Fiat Chrysler gave United Auto Workers officials tens of millions of dollars in previously unreported bribes, funneled through offshore bank accounts, to secure the union’s involvement in a bid to force a merger with General Motors, according to court filings submitted by lawyers for GM on Monday. The new accusations are part of GM’s bid to reopen its lawsuit against FCA alleging that its Italian-based rival used bribes to convert the union into an “FCA-controlled enterprise.” The lawsuit was dismissed by a federal judge last month, who noted “the direct victims of defendants’ alleged bribery scheme are FCA’s workers,” not GM.
The new court filings contain by far the largest-scale accusations against the UAW, either in GM’s civil suit or in the parallel criminal probe by the FBI, which has already brought down 14 FCA management and UAW officials. The “hush money,” according to GM, ran into the tens of millions, “exponentially higher” than what had been revealed so far in criminal charges against union officials and FCA executives.
While in its original complaint GM was at pains to insist that it was targeting only FCA and not the UAW, the new filing takes a far more aggressive stance against the auto union. Former UAW President Dennis Williams is now officially named as a defendant in the case. GM lawyers claim that Williams maneuvered former UAW Vice President Joe Ashton, who has already pleaded guilty to separate money laundering and wire fraud charges, onto GM’s Board of Directors in order to function as a “mole” for FCA.
The filing also contains the first public allegations against Ron Gettelfinger, UAW president from 2002 to 2010, who led the UAW during the restructuring of the auto industry under President Obama. It was under the terms of this deal, which slashed wages for new hires in half and destroyed tens of thousands of jobs, that the UAW gained billions of dollars in GM stock and a seat on the company’s board. According to the filing, Gettelfinger maintained overseas accounts in Switzerland and Panama, given to him by FCA, under a family member’s name.
The allegations mean that four of the five most recent presidents of the United Auto Workers have now been implicated in the massive corruption scandal. Gary Jones, who was president from 2018 until forced to step down late last year, has already pleaded guilty to charges that he had conspired with other top officials to embezzle over $1 million in workers’ dues money. Jones’ predecessor Williams is an unnamed co-conspirator in the Jones indictment, and his successor Rory Gamble, who replaced him on an interim basis, is reportedly himself the target of federal investigators.
The elaborate and wide-ranging scheme, dubbed “Kickback City,” involved offshore bank accounts in Italy, Switzerland, Panama, Singapore, Lichtenstein and the Cayman Islands. It was authorized by the late FCA chief executive Sergio Marchionne and other top executives, according to the filing. In addition to Williams and Ashton it also involved UAW Vice President for Fiat Chrysler General Holiefield, who only escaped prosecution because of his death in 2015. The aim of the scheme, GM’s lawyers allege, was to provide FCA with “confidential details about GM’s labor strategy,” aimed at imposing labor costs onto General Motors less favorable than those at Fiat Chrysler and to pressure the GM into a merger.
According to GM, former FCA executive Alphons Iacobelli, who pleaded guilty in 2018 to his role in bribing top UAW officials to obtain concessions in the 2009 and 2015 contracts, “curtailed his criminal plea to ensure that the true scope of the conspiracy was not revealed.” Iacobelli continued to cover up for other FCA executives and UAW officials even after his guilty plea, GM alleges.
While there is no reason to doubt the factual basis of the filing, it has the character of a desperate move by GM, one which suggests an increasingly fractious and embittered climate within corporate boardrooms as companies battle for survival in an economic situation fraught with dire perils.
While automakers had already been preparing for a long downturn even before the coronavirus pandemic, all three Detroit automakers posted huge losses in the second quarter due to a collapse in sales and a two-month cessation of production that was forced by a series of wildcat strikes. GM burned through nearly $8 billion in cash and posted a $806 million loss as sales dropped by roughly one-third. At Ford, where shareholders have long been demanding deeper cuts, CEO Jim Hackett announced his retirement only days after the company posted a $1.9 billion loss.
Prior to Monday’s filing, there were growing signs that the government was preparing to wind down the exposures of UAW corruption out of fear that continuing to air the union’s dirty laundry would serve to further encourage rebellion by autoworkers. But GM’s new filing, which was based on extensive work by private investigators conducted after the original suit was dismissed last month, threatens to utterly discredit the UAW and put paid to any claims the union can be reformed.
Paul Borman, the federal judge in the GM-FCA lawsuit, issued an extraordinary and nervous order in June demanding the two companies meet to settle their dispute out of court. “If this case goes forward, there will be years of contentious litigation,” Borman said, while the coronavirus pandemic “requires our attention here and now!” When lawyers for GM balked, Judge Borman dismissed the lawsuit on July 8.
At the same time, federal prosecutors began a series of meetings with UAW President Gamble to hammer out an agreement that would close the federal probe and keep the union out of federal receivership.
It is not clear whether the court will accept GM’s arguments and if the suit will be reopened. However, if there is any truth to the company’s allegations, it should serve as the final nail in the coffin for any lingering doubts as to whether the UAW remains, in spite of rampant and universal corruption, a “workers’ organization.” The filing’s description of a murky underworld of offshore bank accounts and corporate espionage depict an organization which is completely integrated within the orbit of the financial elite, and correctly seen by the auto companies themselves not as an adversary but as a tool of corporate policymaking. It is the outcome of decades of betrayals by the UAW, which have destroyed hundreds of thousands of jobs while the incomes of top union officials have soared along with the rising stock market.
For autoworkers, had the alleged FCA-UAW scheme to force a merger with GM succeeded, it would have produced even greater disasters than that which have already been inflicted through union-brokered concessions. The ultimate purpose of such a merger would have been to close down countless facilities and lay off tens of thousands of workers as “redundant,” a goal that the late Marchionne frequently declared in public. But for the UAW, the tens of millions in bribes would have been only a down payment for the billions in stock and other financial incentives that it could have expected to reap as a reward for brokering such a deal.
Such filthy dealings demonstrate the urgency of the call by the World Socialist Web Site and the Socialist Equality Party for the building of new organizations by workers, entirely independent of the UAW gangsters. Absolutely nothing associated with this organization can be trusted.
The latest revelations show, once again, that autoworkers must break with the UAW and take the initiative into their own hands. The World Socialist Web Site Autoworker Newsletter is helping workers accomplish this by forming rank-and-file safety committees at workplaces throughout the country. For help forming a committee at your plant, contact us at autoworkers@wsws.org.
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