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by michael roberts
At the Kansas City Fed Jackson Hole symposium, the annual jamboree ‘think-tank’ for international central bankers, US Federal Reserve Chair Jay Powell announced the end of monetary policy as a tool to control inflation. His speech of just a few minutes completely dropped the monetarist theory of inflation as proposed by Chicago free market economist Milton Friedman and pursued by his disciple and former Fed chief, Ben Bernanke. Powell also made it obvious that the Keynesian argument for inflation, namely as trade-off for full employment and rising wages, as graphically presented in the so-called Phillips curve, was also dead.
Powell noted that “over the years, forecasts from FOMC participants and private-sector analysts routinely showed a return to 2 percent inflation, but these forecasts were never realized on a sustained basis.”
And more recently, despite falling and record low unemployment (before the pandemic), the inflation rate continued to fall. “The muted responsiveness of inflation to labor market tightness, which we refer to as the flattening of the Phillips curve, also contributed to low inflation outcomes….. the historically strong labor market did not trigger a significant rise in inflation.”
Why does it matter if inflation is falling and is below the Fed’s 2% a year target? Powell explained: “Many find it counterintuitive that the Fed would want to push up inflation. After all, low and stable inflation is essential for a well-functioning economy. However, inflation that is persistently too low can pose serious risks to the economy. Inflation that runs below its desired level can lead to an unwelcome fall in longer-term inflation expectations, which, in turn, can pull actual inflation even lower, resulting in an adverse cycle of ever-lower inflation and inflation expectations.”
What’s wrong with that? After all, working people would be very happy if there was no inflation to cut into the purchasing power of their wages. But the objective of the Fed is not to stop inflation hitting wages. The objective is to have some inflation, because without it “we would have less scope to cut interest rates to boost employment during an economic downturn, further diminishing our capacity to stabilize the economy through cutting interest rates.” So low inflation means low interest rates and no room for monetary policy to cut rates further to “boost employment” or “stabilise the economy”. In other words, monetary policy (changing the Fed policy rate and/or injecting quantities of money into banks) would no longer work.
Indeed, the reality of the last ten years since the Great Recession is that cutting interest rates to zero and applying quantitative easing (which has taken the Fed balance sheet to record highs) has done little or nothing to boost economic growth or the productivity of labour. As Powell said in his Jackson Hole speech: “assessments of the potential, or longer-run, growth rate of the economy have declined. For example, since January 2012, the median estimate of potential growth from FOMC participants has fallen from 2.5 percent to 1.8 percent”. So monetary policy has failed the productive part of the economy. The prices of financial assets and property have rocketed, on the other hand.
So what has Powell decided to do to justify his job? “Our new statement indicates that we will seek to achieve inflation that averages 2 percent over time. Therefore, following periods when inflation has been running below 2 percent, appropriate monetary policy will likely aim to achieve inflation moderately above 2 percent for some time.” The target of 2% a year has been abandoned in favour of some vague ‘average rate over time’. In other words, the Fed will sit on its hands and do nothing.
The stock market loved this because the rich-investing public (hedge funds, banks, insurance companies and pension funds) can now expect the cost of borrowing to speculate to be near zero for the foreseeable future. But the Fed and mainstream economics provide no explanation of why inflation has slowed and so there is no guarantee that it won’t return in the future.
What are the mainstream explanations of low inflation in the last 30-40 years? Powell commented that “some slowing in growth relative to earlier decades was to be expected, reflecting slowing population growth and the aging of the population. More troubling has been the decline in productivity growth, which is the primary driver of improving living standards over time.” It seems that inflation is not “purely a monetary phenomenon” (Friedman), but instead is “driven by fundamental factors in the economy, including demographics and productivity growth— the same factors that drive potential economic growth.”
At the symposium, some mainstream economists attempted to offer an explanation for why US productivity growth has been so weak, thus keeping real GDP growth low and, with it, inflation. One Chicago University economist (the home of Friedman and free market economics) argued that productivity growth was low because of “slowing business dynamism”. Businesses were not innovating but had become lazy and just taking the money. Why? Because of the decline in ‘free competition” and the rise of monopolies. Market concentration had risen and average profit markups increased. The productivity gap between frontier and laggard firms had widened and the share of young ‘innovative’ firms had declined.
This is the argument of ‘market power’, popular among left economists as well, it seems, as among right-wing free market economists. It is ironic that usually the argument is that inflation is caused by monopolies using ‘pricing power’. Now the argument is reversed: monopolies slow productivity growth and so inflation slows. So low productivity and stagnation is the fault of monopoly power. The free market policy is to break up monopolies and return to (the myth) of ‘free competition’. The leftist policy is pretty much the same, or sometimes more radically, to call for the public ownership of these monopolies.
But is the problem of low growth in productivity down to ‘market power’? I have presented several arguments against this explanation in previous posts.
The other explanation offered for low growth in real GDP, productivity and inflation is falling population. Jay Powell referred to an ageing population that spends less, thus keeping prices low. And one economist at the Jackson Hole symposium argued that old people are less likely to want to use innovation, so businesses will invent less.
Source: Pugsley, Karahan and Sahin (2018): Demographic Origins of the Start-Up Deficit
Does not sound very convincing does it?
A much better explanation can be found using Marx’s value theory. In a previous post, I have spelt out a theory based on value creation. If new value created by labour power (divided into profits and wages) accelerates, purchasing power will accelerate and so will inflation of goods and services over time – and if new value growth slows, so will inflation.
Source: Federal Reserve, author’s calculations
The growth in the productivity of labour will slow if the growth in investment in productive assets slows. And investment growth ultimately depends on the profitability of capital. The movement in productive investment is driven by underlying profitability, not by the extraction of rents by a few market leaders.
The very latest corporate profit figures for the US economy provide strong support for the view that slowing productivity and inflation is driven by slowing profits and thus falling profitability of capital. The US rate of profit peaked in the late 1990s and has not recovered from a 30-year low in the Great Recession. And now the rate of profit in 2020 could end up at levels not seen since the deep slump of the early 1980s (and perhaps even lower).
Source: Penn World Tables, AMECO
US non-financial sector corporate profits have been falling since 2014, and now in the pandemic lockdown, have dropped another 20%-plus, to reach levels not seen since the depths of the Great Recession.
Source: BEA NIPA
No wonder monetary policy has failed to restore economic growth, even to rates achieved before the Great Recession, let alone back to the years of the Golden Age of the 1960s. Low inflation may be a product of ‘slowing business dynamism’, but that in turn is a product of slowing investment in productive assets because of low and falling profitability.
Press.com
By Maureen Clare Murphy, Electronic Intifada.
Israel’s bombing of the besieged Gaza Strip must be met with an “urgent and comprehensive military embargo,” the Palestinian Boycott, Divestment and Sanctions National Committee stated on Sunday.
Israel has bombed Gaza every night for the past 12 days in response, or so it claims, to incendiary balloons flown from the territory. Those balloons have caused fires on agricultural land in southern Israel.
Two-thirds of Gaza’s population of 2.1 million are refugees, some of them from the lands just on the other side of the Gaza boundary fence. Israel denies them their right to return, enshrined in international law, while encouraging Jews worldwide to emigrate to Israel.
Gaza has been under a devastating blockade enforced by Israel and Egypt for the past 13 years.
Israel has faced and has paid little consequence aside from Palestinian resistance in the form of mass protests, rocket fire and incendiary balloons.
Palestinians living in the Gaza Strip are deprived of basic human rights under the siege.
Coupled with repeated Israeli military offensives, the siege has eroded the functioning of the health system while Gaza’s authorities cope with the first confirmed cases of COVID-19 outside of quarantine centers in the territory.
Health authorities on Monday confirmed four cases in the same family in Maghazi refugee camp in Gaza’s central region.
Authorities declared an immediate 48-hour lockdown in hopes of thwarting community transmission.
The infection was brought to Gaza by a member of the affected family who had recently visited a hospital in occupied East Jerusalem, the health ministry said.
The health ministry said it would hold Israel responsible for any escalated military aggression during the current state of emergency in Gaza.
Israel’s siege has also sharply increased poverty and aid dependency in the territory has grown ten-fold.
The bleak environment in Gaza has driven many of its young people to despair.
Nearly half of Gaza’s population are children under the age of 15. Most households are moderately to severely food insecure with unemployment rates in the territory among the highest in the world.
Gaza’s children have already lived through multiple Israeli military campaigns.
Escalation Looms
A Qatari envoy is reportedly planning to visit Gaza this week to prevent another escalated confrontation.
A senior Hamas official told the Tel Aviv daily Haaretz that the incendiary balloons won’t stop unless Israel significantly eases the siege.
“I belong to the ranks of senior academics in Gaza and this weekend I couldn’t bring food for my children, so you can understand what happens to the weaker population,” the unnamed official said.
Gaza’s sole power station stopped generating electricity last week after Israel halted fuel supplies in an act of collective punishment over the incendiary balloons launched from the Strip.
Collective punishment is a violation of the Fourth Geneva Convention – a war crime.
Currently, households in Gaza have three to four hours of electricity per day on average.
Impunity Reigns
The Palestinian Boycott, Divestment and Sanctions National Committee noted in its statement on Sunday that the “new wave of Israeli bombings of Gaza coincides with the sixth anniversary of Israel’s 2014 massacre.”
More than 2,250 Palestinians, including 550 children, were killed during that 51-day offensive.
An independent commission of inquiry formed by the United Nations investigated Israel’s conduct in Gaza in 2014 and stated its concern that “impunity prevails across the board” when it comes to rights violations committed by Israeli forces.
The commission added that the “persistent lack of implementation of recommendations” by previous investigators and various UN bodies towards accountability “lies at the heart of the systematic recurrence of violations.”
Instead, Israel has only been rewarded with normalized relations with “despotic Arab regimes,” as the boycott national committee put it. Those regimes include the UAE, which recently formalized relations with Israel.
That development was applauded by UN Secretary-General António Guterres:
The UAE-Israel agreement was also welcomed by Nickolay Mladenov, the secretary-general’s Middle East peace envoy:
With those plaudits came statements of hope for re-engagement in “meaningful negotiations” towards a two-state solution.
Though without having to pay any price, it is hard to see why Israel would see any reason to stop proceeding as usual.
That means meeting any Palestinian resistance to decades of oppression with lethal force.
It means continuing with de facto annexation of West Bank land through confiscation and settlement construction.
It means making life so miserable for Palestinians that many who can leave do just that – even if it costs them their lives.
And it means profiting from the situation by marketing weaponry as “field-tested” on Palestinians to the very countries that instead of sanctioning Israel, purchase its war and surveillance technologies.
As the Palestinian Boycott, Divestment and Sanctions National Committee said, the complicity of Western government such as the US, UK and the European Union allows Israel’s “crimes against a captive civilian population” in Gaza to proceed with impunity.
The group is calling for popular pressure on governments to impose military embargoes on Israel. It is also encouraging intensified academic and cultural boycott campaigns, as well as campaigns targeting corporations that enable and profit from Israel’s crimes.
For the long-suffering Palestinians in Gaza, a return to the status quo – as UN and Qatari officials seem keen to secure – is not an option.
https://popularresistance.org/lebanon-inconvenient-truths-about-syria-iran-hezbollah-and-the-shia-street/
By Danny Sjursen, AntiWar.com.August 27, 2020
| EDUCATE!
This is the fourth segment in the author’s backstory series – “Lebanon: Bellwether, Battleground, and Bastard Child” – in the wake of the August 4, 2020 Beirut port explosion. Check out parts one, two, and three, plus stay tuned for upcoming segments at Antiwar.com.
There’s been a lot of nonsense passing as truth in post-blast Lebanon reporting. Most centers around alarmism about Hezbollah’s nefarious influence, the West’s “opportunity” to destroy it, and the supposed struggle with Russia, China, and Iran for paternalist-preeminence in a country that isn’t ours (or theirs) to preside over in the first place. Consider some embarrassing examples:
Forbes, August 19:
Headline: “Presence Of Hezbollah In Lebanon Renders National Unity Government Ineffective, Hinders IMF Aid.”
Highlights: “‘France fails to understand the extent of the stranglehold on power held by Hezbollah,’ [Carlos Abadi, Managing Director at financial advisory firm DecisionBoundaries] said;” and “How Lebanon’s creditors fare will not just depend on the continued influence of Hezbollah in blocking the necessary IMF reforms relating to customs…”
National Review (authored by an editorial intern and student in data science and economics at Harvard), 22 August:
Headline: “Now Is the Time to Force Hezbollah out of Lebanon.”
Highlights: “Without a lasting, consistent effort from the U.S. or some kind of global coalition and a blessing from all the Lebanese – including the Shiites – Hezbollah could stick around for quite some time;” and “the US seemingly has a window to encourage a free and democratic Lebanon while taking a critical step in the maximum-pressure strategy against Iran.”
The National (this, instructively, a UAE-based publication), 23 August.
Headline:“The world’s great powers will soon face off in Lebanon.”
Highlights: “The US is locked in a struggle with China and Russia over Iran, and the playing field is now moving to Beirut;” and “There is little incentive for Russia and China to deter Iran’s prospective takeover of Lebanon’s political structure.”
Strange, isn’t it, that there’s little discussion in most mainstream reporting on the minor matter of why Hezbollah gained influence in the first place – you know: like, where it came from, why it formed, and how it took hold in Lebanon of all places. Well, here’s a cursory cut:
Shia Muslims are difficult to provoke and almost impossible to suppress once aroused. Long led by a more “quietist” strand of conservative, apolitical, clerics, these massive Mideast minorities – all 100 million of them – have, since Iran’s Islamic Revolution in 1979, emerged as the most effective regional resistors to Israeli expansionism and Western neo-imperialism.
They’ve met with meaningful and unexpected success – where nearly all Sunnis states and subgroups have mainly failed – combating Israel, America, and both’s assorted Arab clients for more than 40 years. Indeed, while hardly immaculate, the Shia resistance record is rather impressive and worth a brief credentialed tour:
Iran: survived the existential threat of Iraq’s U.S.-backed invasion (1980-88) as well as the unending onslaught of the American superpower’s implacable ire (1979-present).
Lebanon: Israel then the U.S.-led Multinational Force (MNF) ejected from Beirut (1982-84); Israel caught in quagmire of insurgency, then forced to unilaterally withdraw from the country’s south (1982-2000); the Israeli Defense Force (IDF) fought to a standstill in a region-reverberating moral victory (2006); extinguished – in conjunction with the cross-confessional national army – the Syrian civil-spillover of ISIS’s mini-caliphate and cross-border terror campaign.
Iraq: Respectably resisted the US military occupation yet simultaneously and successfully seized political power after America’s invasion (2003-11); rebounded from its national army’s near-collapse with a mass urgent uprising that halted, then vanquished, the seemingly unstoppable Baghdad-bound ISIS wave (2014-17).
Syria (though it’s Alawi minority-led regime is only vaguely Shia): Withstood and recovered from repeated, crippling Israeli – and occasionally American – attacks to maintain a grip on Lebanon through an extended military occupation (1976-2005), then indirect influence (2005-present); rallied, with mostly coreligionist regional, and Russian, support, to repulse rebel – largely Islamist and/or outright ISIS – advances that were backed by powerful US, Turkish, and Gulf State sponsors, emerging all-but victorious (2011-present).
Yemen (Here I speak of the Zaydi Shia-sub-sect Houthis): waged war, on and off, to gain autonomy from the Gulf- and U.S.-backed central government (2004-14); ultimately seized the capital and large swathes of the country’s north and west (2014-15); then held firm despite Washington’s complicity in a withering Saudi-led terror-bombing and blockade (2015-present).
It was in one of those theaters that the potential power of Shia solidarity and rage first struck me – specifically, an intense East Baghdad marketplace march of self-flagellation in 2007, amidst Iraq’s civil war. This unfolded during the sect’s always-intense annual Ashura commemoration of the martyrdom of the prophet’s grandson, Hussein, by the ascendant Sunni army of Caliph Yazid. Thousands of street-urchin Shia men – underprivileged urban-displaced detritus of Sunni (though secular) Saddam Hussein’s repressive rule – beat their backs with barbed chains until blood profusely streamed.
This macabre masquerade mirrored the community’s 1300-year-old cult of martyrdom, reflecting an equally earned and even older victim culture incarnate. I took a troubling and instructive snapshot that’s haunted me for more than a decade: a young child, in his father’s arms, and carrying a toy replica of the barbed whips which would someday sear his own flesh. It was all so disturbing, guiltily captivating, and frightening.
My reflexive reaction to that first Ashura?: My God, what if the mass of these devotees ever really rose and against me, my men, my country’s military? They hadn’t and haven’t, in Iraq, despite the significant casualties Shia militias even then caused – two dead and two wounded in our 19-man scout platoon alone – and which have now been laid, a bit too confidently, at Tehran’s doorstep.
Whilst some 600 dead US soldiers sniped and blasted to death by militias is nothing to sneeze at, any staid survey showed that – though punctuated by occasional uprisings – Iraqi Shia resistance remained restrained, calculated, and also balanced. The latter being reflected in the realization that America’s invasion had presented an historic opportunity for their community’s “legit” political prospects. Thus, a mass uprising wasn’t necessary – the threat of it, enough to discipline an ostensible American master already mired in a intractable Sunni rebellion.
Still, on that East Baghdad byway in 2007, I discerned what the IDF should’ve learned in the 1980s, my generals should’ve studied, and the omens their civilian masters should’ve heeded. That Iraq’s, and the region’s, Shia stored significant energy – a long injured, often endearing people neither to be dismissed nor trifled with.
That said, the Shia Crescent narrative, as I discussed in a previous column, is more alarmism than actuality. It posits a coherency, capacity, and central-direction (from Tehran, naturally) to a conspiracy that isn’t. Yet widespread Shia uprisings are real, misunderstandings aside. And it’s precisely what the Iran-hawk, Shia-monolith provocateurs misread and omit that matters – and is most menacing. To wit, that it’s mainly Israel, by-with-and-through Washington, that woke the sleeping Shia giant – birthing an unnecessary enemy beast it didn’t need and can’t beat. Nowhere was this more or earlier evident than in the modern Shia intifada’s first post-Persian-propulsion theater: Little Lebanon.
It was there that long roots of collective grievance and communal capacity took on truly transnational – yet spontaneous and domestic – dimensions. It was there that successful Shia states and subgroups – Syria, Iran, and Hezbollah – haltingly, but ultimately deftly, discovered a defiance formula that worked. Yet it was also there, on the Mediterranean’s shores, that the entire profound phenomenon was – and remains – most misunderstood. Consider a first such crucial, if uncomfortable, truth – one turbulent as ever, and live from Lebanon:
The Shia Factor: Awakening Martyrdom’s Sleeping Giant (#1)
Lebanon’s Shia uprising was authentic, organic, local, and persistent.
The Shia, as a rule, perceive themselves as a perennially put-upon people. While the intra-Islamic schism is hardly the permanent cosmic battle of simplistic Western fantasy – historically, Sunni and Shia have coexisted in relative peace, more often than not – the power imbalance was typically real. And Lebanese Shia suffered worse than most, particularly over the last century. They’ve always been the poorest, most rural, least educated and most politically-underrepresented community in the synthetic-state of French post-colonial creation. Long-preyed-upon by their own feudal landlords, neglected by the Beirut government, and sometimes exploited by Palestinian refugee fighters streaming into their sectors, Shia were fated to suffer more from Israel’s aggression than any other Lebanese community.
The Shia’s two traditional heartlands were wedged between the Christian coastal cities and Syria (the Bekaa Valley) and betwixt Israel and the Palestinian resistance fighters in their midst (Southern Lebanon). When Israel chose limited (1978), then outright (1982-2000), invasion and occupation of its northern neighbor, the Shia fled en masse from their destroyed villages and swelled the squatter-suburb of South Beirut – the aptly-branded “belt of misery.” This great displacement-migration tracked – but was even more conflict-induced than – earlier influxes of their Iraqi brethren into Baghdad’s Sadr City. Both Shia slums proved predictable hotbeds of radicalism and militia mobilization: Hezbollah and Ayatollah Musa Sadr’s Amal Movement in South Beirut, and later, his distant cousin Moqtada al-Sadr’s Mahdi Army in East Baghdad.
Unnecessary Enemies
In the Lebanese scenario, the southern Shia of Lebanon’s Jebel Amil region should’ve been natural allies – or at least no threat – to the Israelis just over the border. Most local Shia were initially lukewarm towards the Palestinian fighters in their midst. Others openly opposed their presence. Indeed, when the IDF first invaded in 1978’s Operation Litani, and even during its more extensive 1982 Operation Peace in Galilee, some local Amal leaders essentially collaborated with them.
In the latter case, it was only after eight months, amidst widespread popular pressure catalyzed by Israeli brutality, that Amal took to outright resistance. In fact, their leader – currently the speaker of Lebanon’s parliament – Nabih Berri’s decision to sign on to the multi-sectarian committee negotiating P.L.O. withdrawal forever tainted Amal in many Shia eyes, and contributed to the rise of radical alternatives like Hezbollah.
The IDF’s viciousness and disproportionality sabotaged their Shia opportunity. Though they hadn’t been either operation’s original target, no Lebanese community suffered more. Shia accounted for the majority of some 20,000 killed in Israel’s war on the PLO, and it was mainly their villages – almost 80 percent of them, in fact – the invasions destroyed. As sophomore cadets at West Point studying Just War theory, we devoted ample time to the legal and ethical mandates of discrimination – attacking only legitimate targets – and proportionality – tempering the extent of violence to minimize destruction and casualties. By even the most permissive measures, IDF actions grotesquely violated both principles in Shia South Lebanon. Consider just a few obscene examples:
July 17, 1981: After PLO rocket attacks on northern Israel killed three civilians, the IDF retaliated with airstrikes across Southern Lebanon, and on West Beirut neighborhood housing the PLO’s headquarters – during the height of Friday rush hour – killing 120-150 and wounding 550, mainly civilians (the majority of them Lebanese).
Casualty ratio: ~40-to-1.
April 21, 1982: When a landmine killed an army officer in South Lebanon (the IDF offered no explanation for his pre-invasion presence there), retaliatory Israeli air strikes killed 23 in the coastal town of Damour.
Casualty ratio: 23-to-1.
June 3-5, 1982: The attempted assassination of Israel’s ambassador in Britain – though perpetrated by the PLO’s rival Abu Nidal organization – prompts IDF bombings inside Lebanon and a tit-for-tat rocket-retaliation cycle with the PLO Four Israelis, plus 190-230 Palestinians and Lebanese are killed.
Casualty ratio: ~50-to-1.
These incidents all occurred before the IDF invasion that eventually caused exponentially greater – mostly Shia – Lebanese fatalities. A wider aperture reveals a far more obscene picture: during the IDF invasion and its subsequent occupation from July 1982-2000, Hezbollah’s cross-border shelling killed nine Israeli civilians. By contrast, approximately 22,000 Lebanese civilians, the majority of them Shia, were killed in IDF operations – that’s a cool 2,400-to-1 casualty ratio-disparity.
Israel’s Vietnam: Stirring Up The Shia
Even so, early Shia resistance to the Israeli incursion was mostly nonviolent, and when attacks began they were initially small-scale and sporadic. Resistance was spontaneous, and locally led and directed – an organic uprising bred by IDF-brutality. The tragedy of what the Israeli historian Martin Van Crevald called Tel Aviv’s “greatest folly,” was how unnecessary and remarkably counterproductive this Shia provocation truly was.
If the Lebanese Shia had until then been – so far as Israel was concerned – a quiescent non-threatening lot, even minimally culture-aware strategists and military leaders ought have known this wasn’t a community to trifle with. The local clerics of Jebel Amil were exceedingly close to their flock of copious, disenchanted, and conservative farm boys. More than most, these men – whom Musa Sadr had dubbed the “dispossessed” – manifested that unique Shia cultural capacity for discipline, humility, and martyrdom. Furthermore, Israel unknowingly waded into a perfect storm of sorts, since Lebanese Shia had only recently been politically awakened by Sadr’s mobilization movement and seven years of catalyzing civil war.
It was, without exaggeration, a society ripe for production of the Islamic World’s earliest suicide bombers. One of the very first was a teenager named Ahmad Qassir, who’d lost several family members during Israel’s Litani operation – four years before driving an explosives-packed car into IDF headquarters in Tyre on November 11, 1982, killing 141. Even now, when the West commemorates its World War I dead on Armistice-cum-Veterans’ Day, Lebanese Shia supporters of Hezbollah celebrate “Martyrs’ Day.”
Perhaps then, IDF soldiers could hardly have committed a worse blunder than – as they did in October 1983 – mistakenly driving into a tens of thousands-strong throng of Ashura worshippers at their peak lamentation-ecstasy. When some of these rudely interrupted surged towards the lone lost Israeli lieutenant’s convoy, tipping and torching a jeep, the troops fired rifles and grenades into the crowd: killing one and wounding several. Though far from the IDF’s most lethal affair, it was a transformational one: plunging the entire Shia South into open rebellion. Amal’s, and increasingly Hezbollah’s, attacks nearly quadrupled – to 90 per month – within a year.
This set off a tit-for-tat retaliation cycle – in which IDF troops blew up suspected “terrorist” houses, cut down orchards, and imprisoned 15,000 Shia in the veritable insurgent-university that was its Ansar concentration camp. By 1985, the IDF had suffered, proportionally, more casualties than the US military did in the Vietnam War. More than half had been killed – not by their stated PLO adversaries – but a new grassroots Shia enemy they didn’t know they had, and certainly didn’t need. Little did the occupiers then know that the costly war in South Lebanon would rage for 15 more years.
Frightened and frustrated Israelis essentially created the uprising they’d been sent to stifle, in a community they scantly understood. So it goes, and so familiar it doth sound to these post-9/11 American military ears. IDF troopers behaved badly, smashed up Lebanese homes and – in particular no-nos for a religiously motivated enemy – entered mosques with dogs, plus urinated and trampled on Korans. The more Israeli soldiers were killed, the more the Shia themselves became the enemy – the dehumanization usually preceding war crimes best articulated by the IDF’s regional commander, General Ori Orr, who described their foes as “vermin, snakes, and scorpions.”
The IDF stayed locked in a Lebanese quagmire of their own creation for a decade and half before unilaterally withdrawing – or driven out, depending on one’s point of view – in 2000. Shia success – where Sunni Pan-Arab nation-states and Palestinian guerrillas had repeatedly failed – bred community confidence and pride. Already, in 1985, a doctor and Amal village militia leader boasted “We have destroyed the myth that Israel is the world’s fourth military power. We have done it ourselves, without being paid like Palestinians…In all the Arab world no one has resisted like us.” He wasn’t wrong, as his coreligionist – and sometime competing – Hezbollah fighters would prove once again in their region-reverberating moral victory and respectable-showing during Israel’s 2006 encore invasion.
Such Shia success, and the communal rising that produced it, was a fundamentally local affair. Any Iranian interventions, or Syrian facilitation, was secondary – no matter how significant. Sequence matters. Israeli aggression and occupation, more than anything else, birthed the newly woke – if already restive – Shia community that wields such power in today’s Lebanon. No matter what Washington says: the path to Shia resistance and ascendance ran through Tel Aviv, not Tehran. In a very real sense, it still does.
All For Nothing
In June 1985, the IDF decided against a full withdrawal and retained a so-called southern “security zone,” or “strip.” They did so, according to the “coordinator” of Israeli activities in Lebanon, because they feared that they would “wake up one day with a mini-Iran on their doorstep.” Ironically, due to their continued military occupation – these, historically, breed local resistance – that’s precisely what the Israelis got.
By staying put in Southern Lebanon, the IDF furnished Amal and more-so, Hezbollah – which couldn’t have sustained itself on purely religious grounds – with a (quite legitimate) nationalist justification for continuing the jihad. Israel’s future prime minister, Yitzhak Rabin, described continuing the occupation as a fundamental error that fueled Hezbollah – “We let the Shia genie out of the bottle.”
Ironically, Prime Minister Menachem Begin – himself a former civilian-killing Zionist underground terrorist leader – had justified the initial 1982 invasion as a means to ensure “No more rockets [fall] on Kiryat Shmona”. Yet just four days after the initial IDF pullback to the security strip in 1985, the first Katyushas landed in northern Israel. Only these were launched by Hezbollah rather than the PLO
Israel’s invasion had merely substituted Lebanese for Palestinian rockets. The screech of inbound Katyushas was the visceral proof: all that killing and dying in Israel’s “Vietnam” had been for nothing…
By Lisa Newcomb, Commondreams.
The Committee To Protect Journalists Speaks Up For Members Of The Press Who Were Arrested While Covering Black Lives Matter Protests Across The US.
The Committee to Protect Journalists on Monday called for authorities to drop charges against members of the news media who were arrested while covering Black Lives Matter protests across the United States.
“It is absurd that law enforcement officials around the country continue to pursue charges against journalists who were doing their jobs at the time they were arrested,” Carlos Martinez de la Serna, CPJ program director, said in a statement. “It’s high time for authorities to drop this pursuit, which is frivolous and wasteful.”
More than 600 attacks against the press during the protests, ongoing since the end of May, have been reported to the U.S. Press Freedom Tracker, and many detained journalists were released without charges, according to CPJ.
As of Monday, at least six journalists still faced charges after covering the protests, the tracker showed. The charges against them — lodged by local authorities in Nevada, Minnesota, New York, and Iowa — are misdemeanors with fines up to $1,000, according to the watchdog group.
The call from CPJ comes just weeks after Amnesty International released a report detailing human rights violations by police in the United States against protestors and journalists, and following reports that the Department of Homeland Security compiled “intelligence reports” on American journalists covering BLM protests in Portland, Oregon.
Andrea Sahouri, a reporter for the Des Moines Register who has pleaded not guilty to charges of failure to disperse and interference with official acts, demanded that the freedom of the press be protected in a tweet about CPJ’s latest call for authorities to drop charges.
“Freedom of the press must be protected, as well as freedom to peacefully protest,” Sahouri wrote. “I stand in solidarity with my fellow journalists still facing charges and protestors who have been unlawfully arrested.”
By Michael Klare, Tom Dispatch.
Robot Generals
Will They Make Better Decisions Than Humans — Or Worse?
With Covid-19 incapacitating startling numbers of U.S. service members and modern weapons proving increasingly lethal, the American military is relying ever more frequently on intelligent robots to conduct hazardous combat operations. Such devices, known in the military as “autonomous weapons systems,” include robotic sentries, battlefield-surveillance drones, and autonomous submarines. So far, in other words, robotic devices are merely replacing standard weaponry on conventional battlefields. Now, however, in a giant leap of faith, the Pentagon is seeking to take this process to an entirely new level — by replacing not just ordinary soldiers and their weapons, but potentially admirals and generals with robotic systems.
Admittedly, those systems are still in the development stage, but the Pentagon is now rushing their future deployment as a matter of national urgency. Every component of a modern general staff — including battle planning, intelligence-gathering, logistics, communications, and decision-making — is, according to the Pentagon’s latest plans, to be turned over to complex arrangements of sensors, computers, and software. All these will then be integrated into a “system of systems,” now dubbed the Joint All-Domain Command-and-Control, or JADC2 (since acronyms remain the essence of military life). Eventually, that amalgam of systems may indeed assume most of the functions currently performed by American generals and their senior staff officers.
The notion of using machines to make command-level decisions is not, of course, an entirely new one. It has, in truth, been a long time coming. During the Cold War, following the introduction of intercontinental ballistic missiles (ICBMs) with extremely short flight times, both military strategists and science-fiction writers began to imagine mechanical systems that would control such nuclear weaponry in the event of human incapacity.
In Stanley Kubrick’s satiric 1964 movie Dr. Strangelove, for example, the fictional Russian leader Dimitri Kissov reveals that the Soviet Union has installed a “doomsday machine” capable of obliterating all human life that would detonate automatically should the country come under attack by American nuclear forces. Efforts by crazed anti-Soviet U.S. Air Force officers to provoke a war with Moscow then succeed in triggering that machine and so bring about human annihilation. In reality, fearing that they might experience a surprise attack of just this sort, the Soviets later did install a semi-automatic retaliatory system they dubbed “Perimeter,” designed to launch Soviet ICBMs in the event that sensors detected nuclear explosions and all communications from Moscow had been silenced. Some analysts believe that an upgraded version of Perimeter is still in operation, leaving us in an all-too-real version of a Strangelovian world.
In yet another sci-fi version of such automated command systems, the 1983 film WarGames, starring Matthew Broderick as a teenage hacker, portrayed a supercomputer called the War Operations Plan Response, or WOPR (pronounced “whopper”) installed at the North American Aerospace Command (NORAD) headquarters in Colorado. When the Broderick character hacks into it and starts playing what he believes is a game called “World War III,” the computer concludes an actual Soviet attack is underway and launches a nuclear retaliatory response. Although fictitious, the movie accurately depicts many aspects of the U.S. nuclear command-control-and-communications (NC3) system, which was then and still remains highly automated.
Such devices, both real and imagined, were relatively primitive by today’s standards, being capable solely of determining that a nuclear attack was under way and ordering a catastrophic response. Now, as a result of vast improvements in artificial intelligence (AI) and machine learning, machines can collect and assess massive amounts of sensor data, swiftly detect key trends and patterns, and potentially issue orders to combat units as to where to attack and when.
Time Compression And Human Fallibility
The substitution of intelligent machines for humans at senior command levels is becoming essential, U.S. strategists argue, because an exponential growth in sensor information combined with the increasing speed of warfare is making it nearly impossible for humans to keep track of crucial battlefield developments. If future scenarios prove accurate, battles that once unfolded over days or weeks could transpire in the space of hours, or even minutes, while battlefield information will be pouring in as multitudinous data points, overwhelming staff officers. Only advanced computers, it is claimed, could process so much information and make informed combat decisions within the necessary timeframe.
Such time compression and the expansion of sensor data may apply to any form of combat, but especially to the most terrifying of them all, nuclear war. When ICBMs were the principal means of such combat, decisionmakers had up to 30 minutes between the time a missile was launched and the moment of detonation in which to determine whether a potential attack was real or merely a false satellite reading (as did sometimes occur during the Cold War). Now, that may not sound like much time, but with the recent introduction of hypersonic missiles, such assessment times could shrink to as little as five minutes. Under such circumstances, it’s a lot to expect even the most alert decision-makers to reach an informed judgment on the nature of a potential attack. Hence the appeal (to some) of automated decision-making systems.
“Attack-time compression has placed America’s senior leadership in a situation where the existing NC3 system may not act rapidly enough,” military analysts Adam Lowther and Curtis McGiffin argued at War on the Rocks, a security-oriented website. “Thus, it may be necessary to develop a system based on artificial intelligence, with predetermined response decisions, that detects, decides, and directs strategic forces with such speed that the attack-time compression challenge does not place the United States in an impossible position.”
This notion, that an artificial intelligence-powered device — in essence, a more intelligent version of the doomsday machine or the WOPR — should be empowered to assess enemy behavior and then, on the basis of “predetermined response options,” decide humanity’s fate, has naturally produced some unease in the community of military analysts (as it should for the rest of us as well). Nevertheless, American strategists continue to argue that battlefield assessment and decision-making — for both conventional and nuclear warfare — should increasingly be delegated to machines.
“AI-powered intelligence systems may provide the ability to integrate and sort through large troves of data from different sources and geographic locations to identify patterns and highlight useful information,” the Congressional Research Service noted in a November 2019 summary of Pentagon thinking. “As the complexity of AI systems matures,” it added, “AI algorithms may also be capable of providing commanders with a menu of viable courses of action based on real-time analysis of the battlespace, in turn enabling faster adaptation to complex events.”
The key wording there is “a menu of viable courses of action based on real-time analysis of the battlespace.” This might leave the impression that human generals and admirals (not to speak of their commander-in-chief) will still be making the ultimate life-and-death decisions for both their own forces and the planet. Given such anticipated attack-time compression in future high-intensity combat with China and/or Russia, however, humans may no longer have the time or ability to analyze the battlespace themselves and so will come to rely on AI algorithms for such assessments. As a result, human commanders may simply find themselves endorsing decisions made by machines — and so, in the end, become superfluous.
Creating Robot Generals
Despite whatever misgivings they may have about their future job security, America’s top generals are moving swiftly to develop and deploy that JADC2 automated command mechanism. Overseen by the Air Force, it’s proving to be a computer-driven amalgam of devices for collecting real-time intelligence on enemy forces from vast numbers of sensor devices (satellites, ground radars, electronic listening posts, and so on), processing that data into actionable combat information, and providing precise attack instructions to every combat unit and weapons system engaged in a conflict — whether belonging to the Army, Navy, Air Force, Marine Corps, or the newly formed Space Force and Cyber Command.
What, exactly, the JADC2 will consist of is not widely known, partly because many of its component systems are still shrouded in secrecy and partly because much of the essential technology is still in the development stage. Delegated with responsibility for overseeing the project, the Air Force is working with Lockheed Martin and other large defense contractors to design and develop key elements of the system.
One such building block is its Advanced Battle Management System (ABMS), a data-collection and distribution system intended to provide fighter pilots with up-to-the-minute data on enemy positions and help guide their combat moves. Another key component is the Army’s Integrated Air and Missile Defense Battle Command System (IBCS), designed to connect radar systems to anti-aircraft and missile-defense launchers and provide them with precise firing instructions. Over time, the Air Force and its multiple contractors will seek to integrate ABMS and IBCS into a giant network of systems connecting every sensor, shooter, and commander in the country’s armed forces — a military “internet of things,” as some have put it.
To test this concept and provide an example of how it might operate in the future, the Army conducted a live-fire artillery exercise this August in Germany using components (or facsimiles) of the future JADC2 system. In the first stage of the test, satellite images of (presumed) Russian troop positions were sent to an Army ground terminal, where an AI software program called Prometheus combed through the data to select enemy targets. Next, another AI program called SHOT computed the optimal match of available Army weaponry to those intended targets and sent this information, along with precise firing coordinates, to the Army’s Advanced Field Artillery Tactical Data System (AFATDS) for immediate action, where human commanders could choose to implement it or not. In the exercise, those human commanders had the mental space to give the matter a moment’s thought; in a shooting war, they might just leave everything to the machines, as the system’s designers clearly intend them to do.
In the future, the Army is planning even more ambitious tests of this evolving technology under an initiative called Project Convergence. From what’s been said publicly about it, Convergence will undertake ever more complex exercises involving satellites, Air Force fighters equipped with the ABMS system, Army helicopters, drones, artillery pieces, and tactical vehicles. Eventually, all of this will form the underlying “architecture” of the JADC2, linking every military sensor system to every combat unit and weapons system — leaving the generals with little to do but sit by and watch.
Why Robot Generals Could Get It Wrong
Given the complexity of modern warfare and the challenge of time compression in future combat, the urge of American strategists to replace human commanders with robotic ones is certainly understandable. Robot generals and admirals might theoretically be able to process staggering amounts of information in brief periods of time, while keeping track of both friendly and enemy forces and devising optimal ways to counter enemy moves on a future battlefield. But there are many good reasons to doubt the reliability of robot decision-makers and the wisdom of using them in place of human officers.
To begin with, many of these technologies are still in their infancy, and almost all are prone to malfunctions that can neither be easily anticipated nor understood. And don’t forget that even advanced algorithms can be fooled, or “spoofed,” by skilled professionals.
In addition, unlike humans, AI-enabled decision-making systems will lack an ability to assess intent or context. Does a sudden enemy troop deployment, for example, indicate an imminent attack, a bluff, or just a normal rotation of forces? Human analysts can use their understanding of the current political moment and the actors involved to help guide their assessment of the situation. Machines lack that ability and may assume the worst, initiating military action that could have been avoided.
Such a problem will only be compounded by the “training” such decision-making algorithms will undergo as they are adapted to military situations. Just as facial recognition software has proved to be tainted by an over-reliance on images of white males in the training process — making them less adept at recognizing, say, African-American women — military decision-making algorithms are likely to be distorted by an over-reliance on the combat-oriented scenarios selected by American military professionals for training purposes. “Worst-case thinking” is a natural inclination of such officers — after all, who wants to be caught unprepared for a possible enemy surprise attack? — and such biases will undoubtedly become part of the “menus of viable courses of action” provided by decision-making robots.
Once integrated into decision-making algorithms, such biases could, in turn, prove exceedingly dangerous in any future encounters between U.S. and Russian troops in Europe or American and Chinese forces in Asia. A clash of this sort might, after all, arise at any time, thanks to some misunderstanding or local incident that rapidly gains momentum — a sudden clash between U.S. and Chinese warships off Taiwan, for example, or between American and Russian patrols in one of the Baltic states. Neither side may have intended to ignite a full-scale conflict and leaders on both sides might normally move to negotiate a cease-fire. But remember, these will no longer simply be human conflicts. In the wake of such an incident, the JADC2 could detect some enemy move that it determines poses an imminent risk to allied forces and so immediately launch an all-out attack by American planes, missiles, and artillery, escalating the conflict and foreclosing any chance of an early negotiated settlement.
Such prospects become truly frightening when what’s at stake is the onset of nuclear war. It’s hard to imagine any conflict among the major powers starting out as a nuclear war, but it’s far easier to envision a scenario in which the great powers — after having become embroiled in a conventional conflict — reach a point where one side or the other considers the use of atomic arms to stave off defeat. American military doctrine, in fact, has always held out the possibility of using so-called tactical nuclear weapons in response to a massive Soviet (now Russian) assault in Europe. Russian military doctrine, it is widely assumed, incorporates similar options. Under such circumstances, a future JADC2 could misinterpret enemy moves as signaling preparation for a nuclear launch and order a pre-emptive strike by U.S. nuclear forces, thereby igniting World War III.
War is a nasty, brutal activity and, given almost two decades of failed conflicts that have gone under the label of “the war on terror,” causing thousands of American casualties (both physical and mental), it’s easy to understand why robot enthusiasts are so eager to see another kind of mentality take over American war-making. As a start, they contend, especially in a pandemic world, that it’s only humane to replace human soldiers on the battlefield with robots and so diminish human casualties (at least among combatants). This claim does not, of course, address the argument that robot soldiers and drone aircraft lack the ability to distinguish between combatants and non-combatants on the battlefield and so cannot be trusted to comply with the laws of war or international humanitarian law — which, at least theoretically, protect civilians from unnecessary harm — and so should be banned.
Fraught as all of that may be on future battlefields, replacing generals and admirals with robots is another matter altogether. Not only do legal and moral arguments arise with a vengeance, as the survival of major civilian populations could be put at risk by computer-derived combat decisions, but there’s no guarantee that American GIs would suffer fewer casualties in the battles that ensued. Maybe it’s time, then, for Congress to ask some tough questions about the advisability of automating combat decision-making before this country pours billions of additional taxpayer dollars into an enterprise that could, in fact, lead to the end of the world as we know it. Maybe it’s time as well for the leaders of China, Russia, and this country to limit or ban the deployment of hypersonic missiles and other weaponry that will compress life-and-death decisions for humanity into just a few minutes, thereby justifying the automation of such fateful judgments.
By Marty Johnson, The Hill.August 27, 2020
https://popularresistance.org/milwaukee-bucks-skip-playoff-game-to-protest-shooting/
Above photo: Women’s basketball team, the Mystics, wore shirts that spelled out Jacob Blake’s name and that had seven black spots on the back to symbolize where he was shot seven times. Twitter.
The Milwaukee Bucks boycotted their playoff game against the Orlando Magic on Wednesday afternoon to protest the shooting of Jacob Blake in Kenosha, Wis., on Sunday.
The game was scheduled to begin at 4 p.m. EDT, but minutes before tipoff, the Bucks still had not taken the court.
“Some things are bigger than basketball,” Alex Lasry, senior vice president of the Bucks, tweeted Wednesday afternoon.
“The stand taken today by the players and org shows that we’re fed up. Enough is enough. Change needs to happen. I’m incredibly proud of our guys and we stand 100% behind our players ready to assist and bring about real change,” he added.
Hours after the game was called off, players for Milwaukee called on the Wisconsin legislature to reconvene to address racial injustice.
“We are calling for justice for Jacob Blake and demand the officers be held accountable,” Bucks guard George Hill said in a statement to reporters as several of his teammates stood behind him. “For this to occur, it is imperative for the Wisconsin legislature to reconvene after months of inaction and take meaningful measures to address police accountability, brutality and criminal justice reform.”
ESPN NBA insider Adrian Wojnarowski had reported on Twitter that the decision to boycott what was supposed to be Game 5 of the Bucks’ first-round playoff game against the Magic was made by the players.
“We’re tired of the killings and the injustice,” Bucks guard George Hill said, according to ESPN.
The NBA and National Basketball Players Association later announced that “in light of” the team’s decision, two other playoff games scheduled for Wednesday would be postponed: one between the Houston Rockets and Oklahoma City Thunder and another between the Los Angeles Lakers and Portland Trail Blazers.
Lakers star LeBron James tweeted Wednesday afternoon in part, “WE DEMAND CHANGE. SICK OF IT.”
Blake, 29, was critically wounded Sunday afternoon after being shot multiple times in the back at close range by Kenosha police after officers responded to a reported domestic incident.
Graphic cellphone footage showed Blake walking away from a pair of police officers toward his car. As he attempted to get in his car — where his three children were — an unidentified officer could be seen pulling Blake back by his shirt before firing off several rounds.
Witnesses have said that Blake was not a part of the incident but was trying to break it up when police arrived.
Civil rights attorney Benjamin Crump, who is representing Blake’s family, said Tuesday in a press conference that Blake was still in critical condition and paralyzed from the waist down. Blake’s family plans to launch a civil suit against the Kenosha Police Department.
Protests have rocked Kenosha since Blake was shot. Property damage has been reported at local businesses, prompting Wisconsin Gov. Tony Evers (D) to mobilize the state’s National Guard.
President Trump on Wednesday said that he would be sending federal officers to help with the unrest. Tuesday night, a white teenager from Illinois shot three people who were protesting, killing two of them. The teen has since been charged.
Kenosha is about 50 miles north of Chicago and just a 45-minute drive from Milwaukee, where the Bucks regularly play.
The Athletic reported that the Bucks were in their locker room on Wednesday trying to get in touch with Wisconsin Attorney General Josh Kaul (D) following the shooting in Kenosha.
Kaul on Monday vowed to “vigorously and fully investigate” what happened.
https://popularresistance.org/courts-worldwide-ruling-that-gig-economy-is-a-road-to-serfdom/August 27, 2020
| EDUCATE!
Companies Have Consistently Sought To Deny Their Workers Traditional Benefits Via Labour Law Loopholes That The Courts Are Rapidly Closing.
The tech industry buzzword “gig” has distracted society from important questions about the gig economy that are surprisingly traditional: whether a business has employees or contractors, and how it can avoid payroll taxes and legal liability. Countless Silicon Valley business models have been built under the guise of gigs, Uber and Lyft two of the best known cases, which is ironic considering that for all of their high-tech pretensions, at the core both are taxi and food delivery services. But with state governments like California facing increasing revenue shortfalls and an estimated 57 million gig workers in the United States noting a lack of employer protections and fair wages, the matter has shifted to the courts.
Uber and Lyft now find themselves at the centre of years-long legal disputes on this question. Court challenges, however, are now extending beyond these two companies.
Over the past 40 years, the rise of neoliberalism has enabled employers to tilt the terms of our capitalist economies heavily toward capital and away from labour, via the evisceration of unions, the deconstruction of the welfare state, and the privatization of public services. The growing use of the independent contractor classification represents the latest attempt to exploit and amplify this power imbalance. The exploitation of this labour loophole is symptomatic of the rise of what author Albena Azmanova has called “precarity capitalism” in her new book, Capitalism on Edge, a condition that Professor James Galbraith has described as “a minority ensconced in a diminishing set of safe career paths or sufficient wealth not to bother worrying about [economic insecurity], and a majority living in persistent anxiety over the costs of health, housing, education, the quality of public services and other formerly ordinary attributes of middle-class life.” What makes this trend particularly galling is that the main economic drivers of this transition to serfdom fancy themselves as enlightened, socially “woke” corporations, be they Uber, Lyft, DoorDash, or Amazon, but in fact all embrace employment practices more evocative of the 19th-century robber barons.
As the protections governing the traditional employer-employee relationship have been increasingly subverted, workers have responded by turning to the courts to rectify this loophole that has allowed their employment conditions to become a form of indentured servitude. And the courts are largely ruling in their favour. A California superior court judge has recently denied injunctive relief to both Uber and Lyft, which means that they will be forced to comply with earlier rulings, and a California state statute, that mandated them to reclassify their workers as employees (although the original August 20 deadline has now been extended until October so that the companies’ full appeal can be considered by the California Court of Appeals). The original California ruling confirms a similar ruling made by a New York federal judge in July.
These are also consistent with a growing number of decisions in other countries, such as the UK, where Uber is now appealing a lower court ruling that its drivers should be classified as employees “entitled to employment protections such as a minimum wage and holiday pay,” and in Canada, where the country’s Supreme Court has recently ruled that Uber drivers were entitled to sue for traditional benefits and vacation pay.
Equally striking is some of the sharp language deployed in these proceedings against the practices. In the judgments, the courts explicitly highlighted the massive imbalance in the so-called “contractor” relationship between the companies and their respective workforces, which invalidates any notion of the “contractors” being genuinely independent. In the Canadian case, Uber Technologies Inc. v. Heller, the Supreme Court specifically cited the inequality of bargaining power between the plaintiff and Uber, noting that driver David Heller was in fact powerless to negotiate any of its terms of his engagement with the company (which largely invalidated the notion that he was an independent contractor as Uber alleged). Likewise, in the UK Court of Appeals case, Uber BV v. Aslam, the judges noted that Uber’s “drivers do not market themselves to the world in general; rather, they are recruited by Uber to work as integral components of its organization.” In other words, Uber exercises full control over them as employees, but it attempts to escape its obligations by designating the drivers as independent contractors. Consequently, the UK Court of Appeal characterized Uber’s description of the work relationship “a sham.”
The success of these legal cases has encouraged further challenges: DoorDash, “the US market leader in food delivery,” is now being faced with a preliminary injunction by San Francisco’s district attorney to “force the company to reclassify its workers as employees,” reports the Financial Times.
Displaying Leona Helmsley-like contempt for the rulings, Uber and Lyft are both threatening to suspend their service if they have to reclassify their drivers as employees. This of course is as flimsy a threat as could be imagined: how many publicly traded Fortune 500 companies would dare to tell stockholders that they plan to cut themselves off from revenue as part of their business strategy, especially if the long-term goal is to use their “contractors” to establish a consumer base, while they work to perfect the robotic technology that ultimately enables the company to replace them with self-driving cars (a strategy that is hard to execute if the companies threaten to shut down their operations whenever they encounter a law they don’t like)? That is their only plausible path to profitability in the longer term, assuming, of course, that the self-driving cars fully develop the capacity to recognize a pedestrian, so that they don’t kill them.
In fact, both companies are haemorrhaging cash even as they operate with the existing legal loopholes. Meanwhile, their interim strategy is to make their exploitation legal for as long as possible: In addition to the shutdown threats, they are deploying considerable sums to have the California statute overturned via a ballot measure, Proposition 22. The state of California estimates that it is missing $7 billion a year in lost payroll taxes from the gig economy.
But the fact is that the companies’ business models have been unsustainable by any measure, even before their abusive labour practices were challenged in the courts. Since inception, both have survived by virtue of an ongoing high IPO bubble that has infused them with cash to staunch the red ink. It’s a form of “Ponzi finance,” a condition that economist Hyman Minsky defined as “the cash flows from operations… [being insufficient] to fulfil either the repayment of… [principal] or the interest due on outstanding debts by their cash flows from operations.”
As a letter writer to the Financial Times observed, the IPO bubbles that sustain these Ponzi schemes are predicated on “a cynical assumption that… [these companies] will be allowed to expand… [their] drove of cyber serfs.” Absent that assumption, the reality is dire. As the analyst Hubert Horan has highlighted: “Uber has now lost $23.2 billion in the past four and a half years.” Horan also notes that the company has higher operating costs than the taxi companies it is seeking to displace. In other words, without illegal exploitation models, the rate of financial losses would far exceed their ability to raise cash from the credulous finance and investment world.
Attempts to circumvent existing employment law protections simply constitute a form of social dumping, even as Uber’s CEO, Dara Khosrowshahi, decried the lack of flexibility in current labour law as denying workers the freedoms to choose the way they work and when they do it. Khosrowshahi asserted this in a recent New York Times op-ed, and went on to argue that pay versus benefits was a “false choice.”
Uber’s CEO is right, but not in the way he argues. In a genuinely independent contractor relationship, the quid pro quo is higher pay as an offset to the lack of paid benefits. But companies in the gig economy generally don’t operate this way: Uber and Lyft pay minimum wages that in many instances compel employees to work 70-80 hours per week to make a living. That considerably impinges on the contractor’s supposed work-time flexibility, as well as rendering it virtually impossible to afford decent benefits, such as adequate health insurance, let alone sick pay or vacation leave. In the words of a recent report of the National Labor Relations Board’s Office of the General Counsel (NLRB GC), “Uber drivers—who earn about $9–$10 an hour—can’t expand revenues because they can’t control prices or expand their customer base—the only thing they can do is drive more hours.”
The NLRB report also noted that any “boost” to the drivers’ earnings “is minimal and stalls out after about two years.” While they are called “independent contractors,” their independence is illusory because the so-called “entrepreneurs” in reality “do not even have basic control over how they deliver rides… [and] are ‘supervised’ by semi-automated and algorithmic systems that track their acceptance rates, time on trips, speed, customer ratings, and other factors, and drivers can be ‘deactivated’ based on these factors.” That’s not a co-equal work relationship between an employer and an independent contractor; it’s more a form of indentured servitude.
In other words, the courts’ legal clarification accords with the underlying reality.
This strengthens the case for a robust social welfare system, notably something like Medicare for All. A publicly funded single-payer system would not only alleviate a major source of economic insecurity for workers, but also ensure that employers don’t have to weigh the cost of providing health care to their employees as a condition of doing business in the United States (a factor that puts them at a disadvantage relative to global competitors).
That consideration aside, COVID-19 has created a situation in which many of the extolled benefits of the gig economy, such as working from home or choosing one’s hours of employment, are gradually being imported into a multiplicity of jobs, without subverting the protections and benefits afforded by traditional employment practices. To be sure, many of these jobs will ultimately revert to office environments, but a recent report from the Stanford Institute for Economic Policy Research persuasively argues that working from home and other such features of the gig economy are likely to be expanded in other businesses that are not reliant on a medieval labour model to sustain profitability.
Happily, our courts are finally beginning to draw a line to limit such egregious practices. The next steps must go beyond the efforts of individual states. The federal government ought to establish a national framework to wipe out these evasions once and for all and to rebuild the rights and protections that used to characterize our economy in more civilized times.
