New Economy, Mid East

James Heartfield Jim at
Sun Oct 15 03:51:27 PDT 2000

The Week ending 15 October 2000

Living on Hot Air

New technology market Nasdaq nose-dived 27 per cent over the month, before making a mild recovery on Friday, raising fears that the new economy bubble had finally burst. There are two very different internets. The first is the technological internet - actually a metaphor for a great number of telephone calls, re-routed through visual displays. The economic potential of this internet is considerable but largely under-utilised. New technologies could create huge savings in turnover time, freeing up capital for new investments. Instead the internet has been developed as a mail-order catalogue.

While the technological internet remains underdeveloped there is another internet altogether. This is the fantasy internet. It exists as a metaphor for investors' desire to liberate themselves from the earthly realm of production into an ethereal world of unlimited wealth creation. This is the post-human techie religion in which mere corporeal existence is left behind as we all upload our consciousnesses into the net. Investors who would know better than to sign up for a psychological test at the Dianetic shop nonetheless are investing in the fantasy internet. In the lea of the financial districts of Tokyo, New York and London, uninvested capital slops over to create ersatz Silicon Valleys called respectively Bit Valley, Silicon Alley and the City Fringe.

British government advisor Charlie Leadbeater promoted the idea of a 'knowledge economy' in his book Living on Thin Air, because, apparently, we are all in 'the thin air business these days'. Leadbeater imagines that he can measure the knowledge component of wealth creation. The difference between the value of a companies' assets (called its 'book assets') and its value on the stock market is its 'market-to-book ratio'. This extra, says Leadbeater is the knowledge component of wealth. If that were true we would be left with the conclusion that for the last month, American companies have become 27 per cent more stupid than they were a month ago. What investors really pay extra for is a future claim on the unpaid labour of employees - which is to say the company's profits. In the case of internet companies, though, the absurdly over-inflated share prices do not reflect real growth. On the contrary, speculators forced up the price of these shares.

Surplus capital that is not being invested in the real economy creates bubbles around a variety of different crazes, from East Asia and East Europe stocks to the internet. In each case investment has had little relationship to real growth, leading instead to overheating and collapse. At the end of the nineteenth century speculative investment created the railroads as a by-product to fleecing the public. We will be lucky if the internet bubble leaves us with a similar legacy.

For a full report on the state of the world economy, go to http://www.he

This is the peace process

'The alternative to the peace process is no longer hypothetical. It is unfolding today before our eyes', said President Clinton. But the fighting in Jerusalem, Gaza and the West Bank is not a departure from the Peace Process, it is its obvious conclusion. The Peace Process was made possible by the moral exhaustion of the PLO, having fought for thirty years to free Palestine. Without Soviet support, the PLO accepted America's offer of a negotiated solution that would recognize the sovereign claims of both Israel and the Palestinians.

Far from ending the conflict, the peace process has only succeeded in institutionalizing it. Under the so-called peace process Palestinians suffered as much violence if not more than they did under the direct Israeli rule. To ensure their claim to land in the negotiations, Israelis increased the building of settlements and new buildings around Jerusalem. Israeli Defence Force attacks on Palestinian civilians increased during the Peace Process. The most recent round of violence was provoked by President Clinton's own intervention in opening the discussion on the status of Jerusalem, leading to Ariel Sharon's disruption at the Al Aqsa mosque. So far one hundred Palestinians have been slaughtered by in the IDF offensive, that culminated in a helicopter gun-ship attack on Yasser Arafat's office in Gaza.

America's mistake is to imagine that it has negotiated a peace when the condition of that negotiation is a massive breach between the PLO and ordinary Palestinians. Clinton might have negotiated a peace with Arafat, but it is a deal that has offered nothing to Palestinians, who are unmoved by appeals for calm.

President Clinton is stunned that the ungrateful Arabs have spat in his face. So far seventeen US marines have been killed in a suicide attack on a ship harbored in Yemen, two Israelis were killed when caught spying on a Palestinian funeral and a bomb devastated the British Embassy in Yemen. These Arab successes look spectacular but are actually a sign of desperation. Throughout the Middle East, the moral defeat of Arab nationalism has led to a dislocation between the elites and their own populations. On the Western media's scale of values, the crisis only becomes a crisis when non-Arabs get killed. But the reaction of Palestinians to repression was wholly predictable. It is not the end of the Peace Process. For Palestinians, violence is what the Peace Process always was.

-- James Heartfield

More information about the lbo-talk mailing list