Monday, April 23, 2012

The Role of Finance Capital in Detroit and Its Implications for the Right to Self-Determination

The Role of Finance Capital in Detroit and Its Implications for the Right to Self-Determination

Draconian cuts are designed to enrich the banks and further oppress the people

By Abayomi Azikiwe
Editor, Pan-African News Wire

Note: The following talk was delivered at a public meeting on April 21, 2012. The event featured numerous presentations by activists on the current economic crisis and its impact on the City of Detroit. Just two days after this meeting, the City administration, now under a bank-imposed “Financial Stability Agreement” signed on April 4, is proposing the elimination of 3,500 municipal jobs and massive cuts in various departments including the total elimination of the health and human services divisions of municipal government.

Over the last two weeks the ruling class interests through the banks, corporations and business media have been gloating over what appears to them to be a significant victory trampling the popular will of the people of Detroit. The signing of the “Financial Stability Agreement” (FSA) which, in actuality, has no basis in existing bourgeois law and does not make any real commitment to re-build municipal services, re-hire or maintain the city’s workforce, ensure healthcare benefits and guarantee pension obligations to civil servants, will result inevitably in the worsening of social conditions in Detroit and the disempowerment of its people.

As a result of this situation we must work to build a coalition of forces to challenge the FSA and defeat it politically. We are not in the same, or even similar, predicament as New York City during the mid-1970s. The situation in Detroit comes at a time of a global financial crisis that threatens the entire world capitalist and imperialist system.

The banks ensnared not only private industry and the housing sector in unsustainable and unmanageable debt, but have also deeply penetrated and endangered municipal governments across the country. Detroit may be the most severe case but we are by no means alone.

The Role of the Municipal Bond Market and CDSs

There are tremendous financial resources involved in the crisis of the cities in the United States. It is reported that the municipal bond market in the country is purportedly valued at $3.7 trillion.

These municipal bonds are becoming more risky because a growing percentage of them are based on Credit Default Swaps (CDSs). These are the same instruments that have caused such havoc in the mortgage and insurance industries.

Bloomberg Brief Municipal Market on April 9 in a headline entitled “CDS Trading Increases After Change in Format,” reports that “California Treasurer Bill Lockyer says municipal credit-default may endanger taxpayers. Yet trading is climbing after Wall Street banks made the contracts easier to buy.”

This article goes on to point out that “Transactions in a swap index representing the credit of state and local governments totaled $684 million April 3 and $154 million April 4, the first sessions using a new format intended to lower transaction costs by standardizing terms of deals. That compares with a recent monthly average of $100 million according to Markit Group Ltd, which compiles data on the instruments.”

The article continues revealing that “The new rules, which banks such as Citigroup Inc. and Morgan Stanley signed onto, may draw investors looking to hedge municipal holdings or bet on the $3.7 trillion market as fiscal strains lingering from the recession that ended in 2009 have increased the pace of defaults.” Otis Casey III of Markit says “That’s why we’re going to see interest in muni-credit swaps grow.”

Municipal Market goes on saying “U.S. municipal debt defaulted in 2010 and 2011 at twice the rate of the previous 39 years, Moody’s said last month in a study of bonds it rates. Defaults rose to 5.5 per year in 2010 and 2011, from 2.7 in the earlier stretch. More failures the past two years were by smaller cities struggling to sustain services and obligations, including pensions and salaries.”

The crisis in Detroit is caused by the financial institutions. With the decline in the labor market and the consequent drop in tax revenue, successive city administrations were forced to borrow money for operating expenses on less and less favorable terms.

Also the failure of corporations to pay adequate taxes has placed a larger burden on working people. The lowering of the credit-rating by the bond-rating agencies has increased the cost of borrowing.

In Detroit the impact of predatory lending has been devastating. When people lose their homes, jobs and even rental properties, it means that tax revenues for the city, county and state decline.

The banks put even more pressure on the city through usurious interests (debt-service) for repayment of these existing outstanding loans. With the escalation in the utilization of CDSs the potential for further disaster increases exponentially.

Detroit is not alone in this crisis. All over the state of Michigan and throughout the U.S. and the world, the banks are destroying public life by imposing cuts, fostering massive lay-offs and precipitating political instability. From Detroit, Stockton, California, Harrisburg, Pennsylvania, Jefferson County, Alabama, Providence, Rhode Island to Cairo, Egypt, Khartoum, Sudan, Blantyre, Malawi, Harare, Zimbabwe, Johannesburg, South Africa, Mogadishu, Somalia, Madrid, Spain, Lisbon, Portugal, Rome, Italy, Paris, France, and London England, the masses are being strangled by the banks.

Therefore, we must continue to focus attention on the underlying cause of the economic crisis. Through our public meetings, newspaper articles, leaflets, political propaganda and mass demonstrations we must compel people to organize for the overthrow of finance capital. Our lives and the future of the entire world is at stake.

Implications for Self-Determination in Detroit

What do municipal bond markets and credit default swaps have to do with the current Financial Stability Agreement imposed on Detroit? Why does the situations from Rhode Island, California, Alabama and Pennsylvania relate to the housing crisis, mass unemployment and the threat of pension seizures in Detroit and Michigan?

The answer is everything. As internationalists we recognize the global class struggle as the engine for societal and historical development in the present period. With specific reference to Detroit, as Leninists, we inherently recognize the struggle here encompasses serious challenges for both class and national oppression.

As Lenin wrote during the months leading up to the Russian Revolution: “The socialist revolution is not a single act, it is not one battle on one front, but a whole epoch of acute class conflicts, a long series of battles on all fronts; i.e, on all questions of economics and politics, battles that can only end in the expropriation of the bourgeoisie.”

Lenin continues stressing “It would be no less a mistake to remove one of the points of the democratic program for example, the point on the self-determination of nations, on the grounds of it being “impracticable” or “illusory” under imperialism. The contention that the right of nations to self-determination is impracticable within the bounds of capitalism can be understood either in the absolute, economic sense, or in the conditional, political sense.”

The history of the post-World War II period has revealed that the African American struggle for democracy and self-determination has made a monumental contribution to the working class movement in the U.S. and around the world. It is this fact that the bourgeoisie seeks to ignore and therefore obliterate.

Consequently our program must uphold the economic demands of the proletariat alongside the right of self-determination for the nationally oppressed. One cannot be won without the other.

The extent to which democracy exists in the U.S. is clearly related to the national liberation struggles of the oppressed both inside and outside the empire. As a result the total emancipation of humanity must link the movements of all workers and subjugated peoples around the globe.

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