Letter from The Cape
Episode 17

October 27, 2023

Hello, and here is another episode in my Letter from The Cape series where I talk about Modern Monetary Theory or MMT as it applies to the real world challenges and problems.

By now we are familiar with the horror of the long-standing and illegal Israeli occupation of Palestinian lands and the retaliations that that oppression has wrought.

I don't support any form of terrorism but for the Australian defence minister to assert that the brutal attacks by Hamas on Israeli citizens were, in his words, unprovoked, disqualifies him, in my view from being considered a credible commentator on the disaster.

The US is the most martial nation in history and regularly prosecutes conflicts around the world - sometimes with justification but mostly illegally.

Its involvement in the Middle East is, in my view, of the latter variety.

As the Israelis destroy the infrastructure of Gaza and murder thousands of innocent citizens including babies and young children with their weapons, the US Department of Defence is scurrying around to find more so-called precision weapons and artillery shells to supply to Israeli to feed their relentless attacks on the Palestinians.

Imagine the sheer quantity of resources that are being used in the assault.

One Department official was quoted in the media with reference to the Ukraine situation, as saying: "The scale is phenomenal when you look at the consumption of 155 rounds ... We have not seen anything like that, and the scale is incredibly daunting, especially when you’re in those meetings and you talk about what we need to do to increase our artillery production."

Already the US Defence Department was stretched in supplying Ukraine with weapons.

Last week, not long after the Israeli assault on Gaza began in earnest, I read that the IDF had already expended 8,000 precision munitions.

Precision munitions or precision-guided munitions include all sorts of smart bombs, guided missiles and the like.

There is a huge list of weapons that the US supplies the IDF and most are massive chunks of metal and other components that are being projected through the sky at withering frequency.

And, of course, the destruction of resources and lives that results is also beyond our normal scope for imagination.

While many of us look on in horror and disdain, the US corporate sector is having a picnic.

One corporate boss in the US was quoted as saying: "We need to figure out how to put the defense industry on a wartime footing even if U.S. troops aren’t at war."

Others are claiming that there needs to be an urgent increase in fiscal support for the US defence industry and are using the "China might now attack us while we are short of weapons" justification to support their desire for more corporate support from the US government, or should I say, corporate welfare.

The US Defence Department is aiming to scale up production of 155mm artillery shells from the present 14,000 per month to 100,000 per month by 2025.

And if the IDF really try to enter Gaza and flush Hamas soldiers out then history tells us that it will be a long drawn out process requiring massive fiscal support for an extended period.

Back home in the US, around 12 per cent of Americans live in poverty - that is, 38 million people.

The poverty rate in the US has hovered around that rate since the 1970s.

In the 1960s, the so-called War on Poverty saw the poverty rate tumble and by the end of the decade it had reached the level seen today.

No further progress has been made in 50 odd years, despite the War on Poverty demonstrating, categorically that with appropriate fiscal support, government agencies can significantly reduce poverty, and, if the effort is sustained for long enough, eliminate it.

The main reason that the poverty rate has remained at those elevated levels for so long in the US is because there is no effective welfare safety net in place.

There is a long literature that has recorded the corporate hostiliy towards government welfare and social policies.

During the Great Depression, there was a "businessmen's crusade against the New Deal". 

Later, the Koch Brothers, the mega rich industrialists, funded conservative platforms to pressure the government into abandoning welfare supports for the most downtrodden Americans.

What we know is that the image these conservatives give out of being wealth makers who are robustly independent of the state is fictional.

Capitalism has become necrotically dependent on the fiscal capacity of the state.

The realisation of private profit requires continual and expanding fiscal support through procurement contracts, handouts and suppression of the disadvantaged to ensure there is always a cheap pool of labour available.

Without that massive fiscal support, Capitalism in its current form would not survive.

It is not just the so-called Military-Industrial Complex that is propped up by government support.

Corporate welfare permeates the US system as it does in every nation.

Social welfare needs, though, struggle to maintain funding and the result is that millions live in poverty around the world in the age of the iPhone.

When asked the other day whether the US government could afford to finance two war efforts, the Treasury Secretary, Janet Yellen said that: "America can certainly afford to stand with Israel and to support Israel’s military needs and we also can and must support Ukraine in its struggle against Russia".

So no shortage of funds, which is obvious given that the US government is the sole issuer of the US dollar.

They have an infinite supply capacity to fund any program given resource availability.

The fact that the US government chooses to fund the murder of thousands innocent citizens in Gaza and the destruction of their communities, while millions are living in poverty within their own borders is a depravity of modern life that is beyond belief.

I am sorry to end on that note.

Until next time, see ya later.