The Sickness is the System: When Capitalism Fails to Save Us from Pandemics or Itself by Prof Wolff is a unique collection of over 50 essays, that argues "returning to normal" no longer responds adequately to the accumulated problems of US capitalism. What is necessary, instead, is transition toward a new economic system that works for all of us.
To our loyal audiences, we’d like to share with you, here, an excerpt of the introduction by Prof Wolff.
“One consequence of the neoliberalism that took over much of world capitalism after the 1970s was that privatization and deregulation became favored policies for dealing with capitalism’s continuous crashes. Authorities thus imposed “austerity measures” after the 2000 dot.com and 2008 subprime-mortgage crises. Public services – including measures to protect and advance public health – and regulations governing private healthcare industries were cut. Those cuts undermined preparations, private and public, for a possible viral pandemic. When COVID-19 hit, it thus triggered the capitalist crash that was already overdue since 2008-2009 (more than the usual four to seven years between crashes). Part I of this book thus argues that the cause of our current societal sickness was not chiefly the virus but rather an unsustainable and vulnerable economic system.
Part II explores capitalism’s accumulated vulnerabilities with particular emphasis on how they undermined the capacity to contain COVID-19’s spread across the US. The politics and ideology promoted and celebrated by US capitalism had been among its chief supports. In 2020 they became instead agents of glaring failures and decline.
Part III examines how the intertwined pandemic and capitalist crash reawakened millions to social problems capitalism had long been unable to solve. The system had repeatedly “kicked those problems down the road.” That is, it deferred seriously addressing what activists demanded in the way of ending racism, unemployment, sexism, poverty, inequality, political corruption, and so on. Pandemic capitalism forcefully returned those problems to the forefront of public awareness. It also intensified them and brought them together as a broad-based, multi-layered challenge to capitalism as a system.
Whenever capitalism has been challenged as a system – and especially when the challenge is as wide and deep as it has been since March 2020 – voices of reform arise. Proposals are made to soften capitalism’s harder edges, to reintroduce government regulations dismantled under neoliberalism, to give capitalism a social consciousness, to give the unemployed bigger compensation checks for a while, and so on. Reform proposals also serve as distracting covers for what the main government programs actually do: throw unprecedented amounts of money (via government deficits and central-bank money creation) at capitalists to help them through the crises. Part IV offers critical looks at reforms of capitalism in the past and what that history suggests about the pertinence of similar reforms here and now.
Reforms of capitalism have been achieved mostly in, and because of, its crises. If capitalism’s crises were short or shallow enough, capitalists evaded reforms. When reforms were won, they usually proved temporary, as capitalists and their supporters later rolled them back. The so-called COVID-19 crisis of capitalism has provoked proliferating reform proposals. But this time, given the history of past reforms and this latest crisis’s extreme severity, reforms may no longer suffice. There are signs that this time reform demands may get swept up into social movements for transition beyond capitalism itself. Such revolutionary movements will define their goals as making sure that the set of changes now arising will not only be achieved but will also endure. Part V considers today’s case for, and possibilities of, changing the system as a whole.
All economic systems are born, evolve, and die. As they decline, eventually alternative systems replace them. The catastrophic coincidence of viral pandemic and economic crash places extreme pressure on our institutions and ways of thinking. Over the last three centuries, those have mostly defined and supported the reproduction of capitalism. Yet there were always critical strains of thought and social movements that understood that we can and should do better than capitalism. I hope this book builds on those strains and movements to capture the feeling and thinking of those today who grasp this critical moment in capitalism’s history. Like them, it seeks basic economic change as a key part of the way forward.”
The Sickness is the System is published by Democracy at Work (d@w). Professor Wolff generously donated his time on this book (as he does with all of his work for us) so that all sales revenue could support d@w. Our nonprofit organization’s work analyzes capitalism critically as a systemic problem and champions democratizing workplaces as part of a systemic solution.
We hope this book is a useful tool for understanding, amidst the crises we face today, a better future can be envisioned. The book is available for purchase on Lulu.com You can learn more on our website.
In solidarity,
The 
Team
Wall Street demands still more Fed money
By Nick Beams
19 September 2020
When Wall Street receives a major boost from the US Federal Reserve it can always be relied upon to come back and demand more. This phenomenon, one could say a law of political economy, has been on display again this week.
On Wednesday, the central bank’s Federal Open Market Committee (FOMC) set out its new framework for monetary policy. It committed itself to maintaining interest rates at near zero levels, for as far as the eye can see. It would also maintain its purchases of financial assets, at least to the tune of $120 billion a month—nearly $1.5 trillion a year—and intervene even more aggressively should there be a return of financial turbulence.
Since the market freeze in mid-March, the Fed has pumped in more than $3 trillion, sending the stock indexes back to their record highs in August. But this month, the markets have been on a steady decline. In the past three weeks, the S&P 500 index has lost 5.4 percent, and the tech-heavy NASDAQ has dropped by 7.7 percent—its biggest decline since March.
Market indexes have dropped over the past three days, with the Dow, the S&P 500 and the NASAQ all down by around 1 percent yesterday.
With expectations of lower profits in the third quarter—analysts have forecast a 22 percent decline in earnings, compared to the same period last year—and the prospect of further government corporate stimulus packages being tied up in Congress, Wall Street was looking for more action from the Fed in order to push shares prices higher.
The FOMC’s decisions last Wednesday were in line with Wall Street’s demands for “strong and powerful forward guidance,” to use Fed chair Jerome Powell’s words. But they were deemed to be insufficient.
James Athey, senior investment manager at Aberdeen Standard Investments, told the Wall Street Journal, following the FOMC meeting: “The Fed said it would keep rates low for ages. But that’s not enough. Not taking away is no longer sufficient for this market. You need to do more, more, more.”
Another hedge fund manager told the Journal, “you need fiscal policy to come through.” This is a demand that Congress pass legislation to extend the more than $3 trillion provided in corporate bailouts under the CARES Act.
The director of equity trading at KBW, R. J. Grant, said the Fed had acted swiftly and decisively, but now “people are kind of pivoting to see if Congress can step up to the plate here and get something done.”
The concern of the financial markets is not over the economic devastation being inflicted on millions of workers. It is that, with the deep recession in the economy set to continue for the foreseeable future, corporations must have still more support.
Dissatisfaction with the Fed’s pronouncements extends across the board. The Financial Times (FT) reported that when the Fed massively intervened in financial markets in mid-March, “investors took comfort from knowing that the Fed and its chairman Jay (Jerome) Powell had their back. But this week they were frustrated by his reluctance to promise more specific actions.”
The main cause of dissatisfaction is that, apart from saying that the Fed would maintain its asset purchases, at least at their current level, there was no indication of how it would adapt its balance sheet.
“That was something the market was hoping to get clarity on and they failed to deliver it,” Michael Kushma, chief investment officer of global fixed income investment at Morgan Stanley, told the FT.
According to the newspaper, one cohort of investors wants the Fed to shift the focus of its asset purchases of long-dated Treasuries, in order to ensure that borrowing costs remain low, “while another subset thought a larger program was warranted.”
Krishna Guha, vice-chairman at Evercore ISI, told the FT the Fed’s current approach to bond-buying was “weak.” He said the Fed had to “deploy all its instruments.”
In other words, the Fed’s massive expansion of its balance sheet from $4 trillion in March, to more than $7 trillion by June, is deemed to be insufficient. Still more money must be pumped in.
That is because of complete uncertainty about the direction of the economy. In its economic outlook, the FOMC’s median prediction for contraction this year was 3.7 percent, compared to its forecast of a 6.5 percent contraction in June. Its median jobless rate for the end of the year is now 7.6 percent, compared to 9.3 percent in June.
A Wall Street Journal editorial scathingly commented that “even discounting for the uncertainties of COVID-19 these are large misses” over the space of 90 days. The large variations underscore the fact that none of the official bodies, including the Fed, has any clear idea about the economic future.
Under these conditions, the demand is being made that whatever the state of the underlying economy, the Fed must expand its intervention so that money can continue to be raked in.
This week, the FT published a report revealing how the increase in corporate debt, made possible by the Fed’s ultra-low interest rate regime, is being used.
Private equity groups were “taking advantage of blockbuster demand for corporate debt by loading companies they own with fresh loans and using the cash to award themselves a bumper payday.”
So far this month, almost 24 percent of the money raised in the US loan market had been used to fund dividends paid to private equity owners. This was up from an average of less than 4 percent over the past two years.
The numbers involved are not small.
Wall Street demands still more Fed money
By Nick Beams
19 September 2020
When Wall Street receives a major boost from the US Federal Reserve it can always be relied upon to come back and demand more. This phenomenon, one could say a law of political economy, has been on display again this week.
On Wednesday, the central bank’s Federal Open Market Committee (FOMC) set out its new framework for monetary policy. It committed itself to maintaining interest rates at near zero levels, for as far as the eye can see. It would also maintain its purchases of financial assets, at least to the tune of $120 billion a month—nearly $1.5 trillion a year—and intervene even more aggressively should there be a return of financial turbulence.
Since the market freeze in mid-March, the Fed has pumped in more than $3 trillion, sending the stock indexes back to their record highs in August. But this month, the markets have been on a steady decline. In the past three weeks, the S&P 500 index has lost 5.4 percent, and the tech-heavy NASDAQ has dropped by 7.7 percent—its biggest decline since March.
Market indexes have dropped over the past three days, with the Dow, the S&P 500 and the NASAQ all down by around 1 percent yesterday.
With expectations of lower profits in the third quarter—analysts have forecast a 22 percent decline in earnings, compared to the same period last year—and the prospect of further government corporate stimulus packages being tied up in Congress, Wall Street was looking for more action from the Fed in order to push shares prices higher.
The FOMC’s decisions last Wednesday were in line with Wall Street’s demands for “strong and powerful forward guidance,” to use Fed chair Jerome Powell’s words. But they were deemed to be insufficient.
James Athey, senior investment manager at Aberdeen Standard Investments, told the Wall Street Journal, following the FOMC meeting: “The Fed said it would keep rates low for ages. But that’s not enough. Not taking away is no longer sufficient for this market. You need to do more, more, more.”
Another hedge fund manager told the Journal, “you need fiscal policy to come through.” This is a demand that Congress pass legislation to extend the more than $3 trillion provided in corporate bailouts under the CARES Act.
The director of equity trading at KBW, R. J. Grant, said the Fed had acted swiftly and decisively, but now “people are kind of pivoting to see if Congress can step up to the plate here and get something done.”
The concern of the financial markets is not over the economic devastation being inflicted on millions of workers. It is that, with the deep recession in the economy set to continue for the foreseeable future, corporations must have still more support.
Dissatisfaction with the Fed’s pronouncements extends across the board. The Financial Times (FT) reported that when the Fed massively intervened in financial markets in mid-March, “investors took comfort from knowing that the Fed and its chairman Jay (Jerome) Powell had their back. But this week they were frustrated by his reluctance to promise more specific actions.”
The main cause of dissatisfaction is that, apart from saying that the Fed would maintain its asset purchases, at least at their current level, there was no indication of how it would adapt its balance sheet.
“That was something the market was hoping to get clarity on and they failed to deliver it,” Michael Kushma, chief investment officer of global fixed income investment at Morgan Stanley, told the FT.
According to the newspaper, one cohort of investors wants the Fed to shift the focus of its asset purchases of long-dated Treasuries, in order to ensure that borrowing costs remain low, “while another subset thought a larger program was warranted.”
Krishna Guha, vice-chairman at Evercore ISI, told the FT the Fed’s current approach to bond-buying was “weak.” He said the Fed had to “deploy all its instruments.”
In other words, the Fed’s massive expansion of its balance sheet from $4 trillion in March, to more than $7 trillion by June, is deemed to be insufficient. Still more money must be pumped in.
That is because of complete uncertainty about the direction of the economy. In its economic outlook, the FOMC’s median prediction for contraction this year was 3.7 percent, compared to its forecast of a 6.5 percent contraction in June. Its median jobless rate for the end of the year is now 7.6 percent, compared to 9.3 percent in June.
A Wall Street Journal editorial scathingly commented that “even discounting for the uncertainties of COVID-19 these are large misses” over the space of 90 days. The large variations underscore the fact that none of the official bodies, including the Fed, has any clear idea about the economic future.
Under these conditions, the demand is being made that whatever the state of the underlying economy, the Fed must expand its intervention so that money can continue to be raked in.
This week, the FT published a report revealing how the increase in corporate debt, made possible by the Fed’s ultra-low interest rate regime, is being used.
Private equity groups were “taking advantage of blockbuster demand for corporate debt by loading companies they own with fresh loans and using the cash to award themselves a bumper payday.”
So far this month, almost 24 percent of the money raised in the US loan market had been used to fund dividends paid to private equity owners. This was up from an average of less than 4 percent over the past two years.
The numbers involved are not small. The article reported that just over $4 billion of the $15 billion borrowed in the loan market so far this month would be paid out in dividends, with a further $2 billion to come in the next two weeks.
BOEING IS ONLY ONE MORE EXAMPLE OF HOW UTTERLY CORRUPT OUR STINKING GOVERNMENT IS! THERE IS PROBABLY NOT ONE MEMBER OF CONGRESS THAT HAS NOT SUCKED OFF BRIBES HANDED OUT BY BOEING!
It is worth noting that the $60 billion figure equals what Boeing requested from the government last week. In a statement, the firm said it “supports a minimum of $60 billion… for the aerospace manufacturing industry.” Boeing would receive the lion’s share of any such bailout.
House report on Boeing 737 Max crashes: Corporate criminality, FAA complicity, but no accountability
17 September 2020
On Wednesday, the Democratic majority on the House Transportation and Infrastructure Committee released the results of its 18-month investigation into the two crashes of Boeing 737 Max airplanes that killed a combined total of 346 passengers and crew.
The 238-page report provides damning evidence that Boeing knowingly risked the lives of countless thousands of people by rushing into service an aircraft it knew to have potentially fatal design flaws. It systematically concealed the dangers from government regulators, airline customers, pilots and the general public.
The Federal Aviation Administration (FAA), even when it became of aware of the safety risks of the new plane, certified the 737 Max and failed to alert either airline workers or passengers of the dangers.
The result was the horrific crash of Lion Air flight 610 some 13 minutes after takeoff from Jakarta on October 29, 2018, killing all 189 people on board. Even after this disaster, in which a malfunction repeatedly forced down the nose of the plane until it crashed into the Java Sea, Boeing and the FAA kept the 737 Max in the air and failed to address the automated flight control defect that caused the crash.
This led less than five months later to the crash of Ethiopian Airlines flight 302, on March 10, 2019. That disaster followed the same pattern and ended with the plane plowing into the ground and killing all 157 men, women and children on board.
It was only after this second crash that Boeing and the FAA agreed to ground the 737 Max, and that was only after every other major government in the world had rejected their claims that the plane was safe and banned it from their airspace.
The report by the House Democrats cites the testimony of Ed Pierson, a senior plant supervisor at the Renton, Washington 737 Max production facility and retired Navy squadron commander, before the committee last December. Pierson related how in 2018 he told 737 General Manager Scott Campbell of multiple safety problems and defects at the Renton plant.
“For the first time in my life, I’m sorry to say that I’m hesitant about putting my family on a Boeing airplane,” he told Campbell, and added that the military would suspend production to address the safety issues. Campbell replied, “The military is not a profit-making organization.”
The report, which the Republican committee members refused to endorse, makes clear that 346 lives were destroyed and countless more threatened because the aircraft maker and defense contracting giant made calculated decisions to sacrifice safety in order to maximize market share and corporate profits.
But despite the incriminating evidence in its own report, the Democratic majority proposes no actions to hold either Boeing or FAA officials accountable. There are no calls for criminal prosecution, nor are any financial penalties proposed.
This is under conditions where the bipartisan CARES Act passed last March effectively earmarked $17 billion in taxpayer money to prop up the company, and the Federal Reserve has backed up a $25 billion bond sale by the firm as part of the government's multi-trillion-dollar pandemic-triggered bailout of the US corporate elite.
Dennis Muilenburg, the Boeing CEO throughout the period of 737 Max development, resigned under fire last December, and received a severance package worth $80.7 million.
Even as the House releases its damning report, moreover, the FAA is signaling that it will soon allow the 737 Max to resume commercial flights.
The report cites five different areas of negligence and cover-up. Under “Production Pressures,” it notes, “There was tremendous financial pressure on Boeing and the 737 Max program to compete with Airbus' new A320neo aircraft.”
In other words, Boeing, which accounted for a huge portion of the rise on Wall Street following the election of Donald Trump, was under the gun from major shareholders and banks to speed up production of its new plane and cut costs in order to win the race with its European-based rival for market share, particularly in expanding markets such as China.
That market share, profit and stock price eclipsed safety for Boeing was clear from the very origins of the 737 Max. Rather than design a new generation of medium-range carriers, Boeing decided to save time and money by revamping its five-decade-old 737 model. The main innovation was a larger engine that had to be placed higher up on the wing. However, the company soon discovered that the new configuration resulted in a tendency for the plane to stall.
In order to compensate for this design flaw, Boeing installed a new automated flight control system called Maneuvering Characteristics Augmentation System, or MCAS. The House report lists “Faulty Design and Performance Assumptions” in connection with MCAS as the second major factor in the crashes.
Boeing concealed the existence of MCAS from its airline customers and their pilots in order to avoid having to retrain pilots on flight simulators for the new aircraft, a costly and time-consuming process.
Moreover, it designed MCAS to be triggered by only one of the plane's two external angle-of-attack (A-O-A) sensors, rather than by both, as is the accepted practice for functions that are critical to the safety of an aircraft. Moreover, it failed to inform airlines and pilots, as well as the FAA, that a warning alert listed as a feature of the plane, which told the cockpit that the two sensors disagreed and therefore one was malfunctioning, was inoperable on 80 percent of its active 737 Maxes.
As a result, when MCAS was set off on the two doomed flights as a result of incorrect information from a faulty A-O-A sensor, the pilots were unable to determine the cause of the repeated downward plunges and incapable of stabilizing the planes.
That Boeing was acutely aware of the problems with MCAS is shown by the fact that MCAS was referenced in half a million emails and other internal documents.
Under the heading “Culture of Concealment”, the report provides a multitude of examples of Boeing withholding critical information from the FAA, its customers and Max pilots. This includes internal test data from 2016 revealing that it took a Boeing test pilot more than 10 seconds to diagnose and respond to un-commanded MCAS activation in a flight simulation. The pilot described the situation as “catastrophic.” Federal guidelines assume that pilots will respond to this condition within four seconds.
The fourth area cited in the report is titled “Conflicted Representation.” This is a euphemism for the FAA's total subordination to Boeing and the lack of any serious regulatory oversight. The report cites, in particular, the policy implemented under Democratic as well as Republican administrations of delegating FAA oversight to Boeing employees. These so-called “authorized representatives” routinely withheld from top FAA officials safety issues that arose in the design, production and certification of the 737 Max. In other cases, the FAA higher-ups sided with Boeing and dismissed reported safety concerns.
In the end, the FAA allowed Boeing to put the 737 Max into service without pilots having to undergo training on flight simulators. Instead, it authorized a total of two hours of “training” on an iPad.
In December 2018, some weeks after the crash of Lion Air flight 610, the FAA conducted a risk assessment and estimated that, without a fix to MCAS during the life of the 737 Max fleet, there could be 15 additional fatal crashes resulting in over 2,900 deaths. Nevertheless, the FAA allowed the 737 Max to continue flying while Boeing worked on a software patch for MCAS, setting the stage for the crash of Ethiopian Airlines flight 302 just weeks thereafter.
Finally, under the title “Boeing's Influence Over the FAA's Oversight Structure,” the report gives multiple examples of the FAA siding with Boeing and dismissing warnings from its own experts.
The chairman of the House committee, Peter DeFazio (Democrat from Oregon), said upon the release of the findings: “Our report lays out disturbing revelations about how Boeing—under pressure to compete with Airbus and deliver profits for Wall Street—escaped scrutiny from the FAA, withheld critical information from pilots, and ultimately put planes into service that killed 346 innocent people. What’s particularly infuriating is how Boeing and FAA both gambled with public safety in the critical time period between the two crashes.”
What he did not mention, however, is that he and his fellow Democrats supported passage of the FAA Reauthorization Act of 2018, which expanded the self-regulation of Boeing and other corporations in the airline industry. In fact, the deregulation of the airline industry was begun in 1978 under the Democratic administration of President Jimmy Carter, leading to the dismantling of the Civil Aeronautics Board and its replacement by the far weaker and more pliant FAA.
What neither the Democrats nor the media speak about is the root cause of the mass deaths caused by Boeing and its government accomplices—the capitalist profit system.
As the wrote titled “Boeing executives must be tried for murder:”
The elevation of profit above human life is the social essence of capitalism. The Max 8 disasters are not merely symptoms of corporate greed, but the end result of the capitalist system itself, which subordinates all social needs to private profit. There is a basic contradiction between the interests of society, including safe, efficient and inexpensive air travel, and the private ownership of essential industries, as well as the division of the world economy among rival nation-states. The same basic contradictions of capitalism are fueling the geopolitical and economic conflicts that threaten nuclear war and ecological disasters.
The only way to prevent further disasters is to take the profit motive out of commercial flight, end the dominance of Wall Street and replace the nightmare of the capitalist market with a rationally planned and internationally organized system of air transport. This requires the nationalization of the airline and aerospace companies and their transformation into publicly owned and democratically controlled utilities.
Boeing executives must be tried for murder
13 December 2019
Former Boeing senior manager Ed Pierson testified on Wednesday before the House Transportation and Infrastructure Commerce Committee that he warned senior company management twice in the summer of 2018 that “deteriorating factory conditions” at the Renton, Washington Boeing 737 production facility would inevitably produce faulty and potentially deadly aircraft.
The report by the ex-employee reveals another layer of the criminality and negligence of Boeing executives, abetted by the regulatory agencies, in their drive to generate multi-billion-dollar profits from the 737 Max 8 aircraft. It is more evidence, this time by someone on the shop floor, that the leadership of Boeing and the Federal Aviation Agency should be indicted for the murder of the 346 men, women and children killed in the two Max 8 crashes and for endangering the lives of hundreds of thousands more that flew on the deadly aircraft.
Pierson’s fears were realized four months after his second warning, when Lion Air Flight 610 plunged into the Java Sea after taking off from Jakarta, Indonesia, killing all 189 passengers and crew on board. This was followed by a second crash of a Max 8 jet just outside of Addis Ababa on Ethiopian Airlines Flight 302, which extinguished the lives of a further 157 human beings.
It was only after the second crash that Boeing decided to ground the deadly plane worldwide, and that only occurred after international outrage mounted when Boeing declared two days after the second crash that they had “full confidence in the safety of the 737 Max.” These comments were backed and echoed by the Federal Aviation Administration and US President Donald Trump.
The same House hearing also revealed that in the month after the first crash, an internal analysis by the FAA determined that, unless the plane was grounded, the Max 8 would average one fatal crash every two or three years, far more than Boeing or the agency indicated at the time. This report was suppressed by the agency for more than a year, even after the second crash in the span of less than six months.
In other words, the agency ostensibly responsible for ensuring the safety of airplanes knew that the Max 8 would inevitably kill more people, and did nothing to prevent the continued use of the plane.
The immediate reason for both crashes was a previously unknown piece of software known as the Maneuvering Characteristics Augmentation System (MCAS), which erroneously activated as a result of a faulty angle-of-attack sensor and forced both planes into an uncontrollable nosedive. The sensors, Pierson noted, were replacements for the originals that were also defective, something that should not have happened on airplanes only a few months old, pointing to serious problems in the production of the Max 8 itself.
In an email from June 2018 to Boeing Vice President Scott Campbell, the head of the Max 8 program, Pierson warned that “Frankly right now all my internal warning bells are going off.” He explicitly noted the lack of skilled mechanics, electricians and technicians, and an overtime rate that more than doubled and fatigued workers. He added that “for the first time in my life, I’m sorry to say that I’m hesitant about putting my family on a Boeing airplane.”
In his comments to the House, Pierson highlighted the “dogmatic focus on schedule” after the company demanded that the facility increase the number of planes it was making from 47 to 52 a month and the increased “product and worker-safety risks.”
As a result, Boeing’s internal quality tracking metrics found a 30 percent increase in engineering and wiring defects, which can all cause potentially fatal faults in an aircraft. This all could have impacted the broken MCAS sensors. In order to address these problems, Pierson recognized the need to shut the factory down “to allow our team time to regroup so we can safely finish the planes.”
Even as factory conditions worsened, Boeing executives continued to stonewall Pierson. During a meeting between Pierson and Campbell, in which the former reiterated his plea to shut down production to address documented safety concerns, the executive in charge of the 737 Max program told him, “We can’t do that. I can’t do that” because Boeing is “a profit-making organization.”
The naked greed embodied in this statement gives only a hint of the enormous sums of money Boeing has made thanks to the Max 8 program. While the grounding of the Max 8 and lawsuits by pilots and relatives of victims are expected to cost Boeing $8 billion, the company increased in value by nearly $200 billion from the time that the planes were announced in 2011 to when the entire fleet was grounded.
Boeing’s executives themselves also made immense personal fortunes. During the meteoric rise of the company’s stock in January and February of this year, Chief Financial Officer Gregory Smith, Executive Vice President John Keating, General Counsel Michael Luttig and Chief Executive Officer Dennis Muilenberg all sold shares worth $9.5 million, $10.1 million, $9.5 million and $6.5 million, respectively.
These figures belie any crocodile tears Boeing’s leadership have shed, especially when one realizes that the second Max 8 crash occurred just one month after these windfalls. It points to the likely fact that Boeing’s leadership was well aware of the dangers of the aircraft and, rather than warn their pilots and passengers, used the opportunity to cash in. The stock data should be used as an exhibit for their trial.
Neither can one accept the remarks made by the members of the House Transportation Committee. In response to the release of the internal FAA document, Democratic Representative Peter DeFazio from Oregon stated, “Despite its own calculations, the FAA rolled the dice of the safety of the traveling public and let the 737 Max continue to fly.” The chairman of the House Transportation Committee made no mention of the fact that he and his colleagues recently passed the FAA Reauthorization Act, which gives Boeing and other airplane manufacturers even more freedom from regulation and oversight.
Moreover, the US, state and local governments have underwritten Boeing’s operations. Since 1994, Boeing has received $74 billion in government subsidies and loans, $14 billion of which have come just from the state of Washington. This money has been funneled from the working class directly into the pockets of executives and large shareholders.
This makes clear the relationship between the US government and Boeing, the country’s second largest defense contractor and the largest exporter. They do not have an adversarial relationship, but rather represent the nexus between giant companies, the state, and the military.
Despite obvious and mounting evidence of 346 counts of murder on the part of Boeing executives and government officials, no criminal charges have been brought against the responsible parties. This is fully in keeping with recent precedent, in which even the most horrendous corporate malfeasance has resulted in no prosecutions. The purpose of the prosecution should be not only to put these corporate killers behind bars, but to expose to the public the magnitude of the criminal conspiracy to sacrifice lives for profit.
The elevation of profit above human life is the social essence of capitalism. The Max 8 disasters are not merely symptoms of corporate greed, but the end result of the capitalist system itself, which subordinates all social needs to private profit. There is a basic contradiction between the interests of society, including safe, efficient and inexpensive air travel, and the private ownership of essential industries, as well as the division of the world economy among rival nation-states. The same basic contradictions of capitalism are fueling the geopolitical and economic conflicts that threaten nuclear war and ecological disasters.
The only way to prevent further disasters is to take the profit motive out of commercial flight, end the dominance of Wall Street and replace the nightmare of the capitalist market with a rationally planned and internationally organized system of air transport. This requires the nationalization of the airline and aerospace companies and their transformation into publicly owned and democratically controlled utilities.
Bryan Dyne
Bipartisan corporate bailout gives $17 billion to Boeing
27 March 2020
The bipartisan corporate “rescue” package awaiting approval by the House of Representatives carves out of its more than $1 trillion in taxpayer handouts to large businesses some $17 billion for airplane manufacturer Boeing. The company’s cut is part of a $75 billion bailout of the airline industry as a whole.
Though Boeing is not explicitly named in the bill, the provision of $17 billion for commercial air companies that are “important to maintaining national security” is deliberately worded to apply to the nation’s biggest airplane manufacturer and second biggest defense contractor. In a recent press conference, Trump underscored the special treatment for Boeing, saying, “Yes, I think we have to protect Boeing. We have to absolutely help Boeing.”
The company may also have the opportunity to draw from the $500 billion set aside for corporate bailouts in general.
Boeing shares rose more than 25 percent on Wednesday on the heels of the unanimous Senate passage of the bailout bill in the early morning hours. They extended their gains by an additional 15 percent on Thursday, closing at $180. The company’s shares have risen four straight days in anticipation of adoption of the gargantuan fiscal measure. Its share price had fallen from a high of $440 in March of 2019 to a 52-week low of $89 this year.
The rescue of Boeing by the federal government comes one year after the grounding of Boeing’s flagship 737 Max 8 aircraft in the wake of two crashes—Lion Air Flight 610 outside of Jakarta, Indonesia and Ethiopian Airlines Flight 302 from Addis Ababa, Ethiopia. Both occurred shortly after takeoff as a result of a fatal design defect and the company’s rush to bring the new plane onto the market.
To date, no executive who oversaw production of the plane or regulatory official who approved it has been charged, much less prosecuted, for the development, manufacture and marketing of the deadly plane and the death of 346 passengers and crew on the two flights.
As has now been proven, the crashes were caused by a piece of software known as the Maneuvering Characteristics Augmentation System (MCAS). It was installed by Boeing to compensate for the Max 8’s tendency to stall, a byproduct of attaching a newer, larger engine onto the half-century-old Boeing 737 chassis.
The aerospace giant used an old airframe in order to save time and money in bringing to market a new model to compete with European-based Airbus for market share and profit, particularly in the expanding Chinese market. It sold the plane to airlines with the claim that 737 pilots required little additional training, such as flight simulator training, to fly the new model.
In the aftermath of the crashes and the grounding of the Max 8—which both Boeing and the Federal Aviation Administration (FAA) initially opposed—a myriad of reports from aviation safety agencies internationally and leaked internal emails from Boeing employees and officials have established that the company was well aware of the dangerous flaws in the aircraft, but carried out a cover-up in order to get the plane into the air.
The 737 Max 8 disaster has caused a sharp drop in Boeing’s income and share value over the past year. The company’s airplane sales plummeted from 893 in 2018 to just 54 in 2019, and it shuttered its production of the Max 8 aircraft in January. It has also been forced to borrow $13.8 billion to cover some of the estimated $20 billion lost in the wake of the grounding. At the same time, airlines have massively reduced the amount of new planes they are buying in response to the drastically reduced demand for air travel stemming from the pandemic.
Boeing officials claim that the cash infusion from the government “will be used for payments to suppliers to maintain the health of the supply chain.” However, its actions in the wake of the 2008 bailout of Wall Street indicate that the bulk of the money will go to push up Boeing stock and the wealth of executives, hedge funds and major shareholders, which is tied to the massive inflation of share values.
From 2014 to 2019, it spent just under $60 billion on stock buybacks and dividends, all of which went into the pockets of its wealthy investors and top shareholders. This includes ex-CEO DENNIS MUILENBERG who oversaw the introduction of the deadly Max 8 jet.
It is worth noting that the $60 billion figure equals what Boeing requested from the government last week. In a statement, the firm said it “supports a minimum of $60 billion… for the aerospace manufacturing industry.” Boeing would receive the lion’s share of any such bailout.
The massive sums being provided to Boeing sharply contrast with the pittance the corporate giant has provided for the 346 families that lost loved ones in the two crashes. Each received a mere $144,500 per crash victim from an account that is overseen by notorious Wall Street ‘fixer’ Kenneth Feinburg. He is acting to defend the airplane manufacturer’s profits and refurbish its public image.
The money to the crash victims also pales in comparison to the money made by the current suite of Boeing executives who sold off a great deal of stock just before the markets began to tank at the end of February and beginning of March. These include President and CEO of Boeing Defense Space & Security Leanne Caret, who sold $5.9 million worth of stock, Executive Vice President Ted Colbert ($2.4 million), Senior Vice President B. Marc Allen ($2.3 million) and President and CEO of Boeing Commercial Airplanes Stanley A. Deal ($2.5 million).
During this same period, these executives rewarded themselves with gifts of stock worth, at their 2019 height, $3.9 million, $2.3 million, $1.7 million and $4.0 million, respectively. At least nine other members of Boeing’s leadership received similar sums in the past month.
Boeing’s major investors also stand to make a killing off the company’s rising share prices. These include The Vanguard Group, Inc., which currently owns $11 billion in shares, Newport Trust Co., with $8.4 billion, and T. Rowe Price Associates, Inc., holding $8.2 billion. If Boeing’s stock returns to its previous values, these companies stand to more than double the value of what they currently own.
The fix is in: Kenneth Feinberg to oversee payouts to Boeing crash victims
26 February 2020
Boeing’s appointment last week of Kenneth Feinberg to administer the aerospace giant’s $50 million Community Investment Fund to compensate the communities affected by the two 737 Max 8 crashes and the resulting 346 deaths leaves little doubt that the account will be used to defend the airplane manufacturer’s multi-billion-dollar profits.
Feinberg played a similar role when he was selected in July 2019 to head the $50 million Boeing Financial Assistance Fund. In that role, he oversaw payments of a mere $144,500 to each family that lost a loved one on either the crash of Lion Air Flight 610 in October 2018 outside of Jakarta, Indonesia or Ethiopian Airlines Flight 302 in March 2019 near Addis Ababa, Ethiopia.
In total, Boeing has pledged only $100 million to compensate the crash victims’ families and neighborhoods for putting their friends and relatives on the deadly Max 8 jets. For comparison, the company reported revenues of $76.6 billion in 2019 and has pledged to pay airlines at least $5 billion for their lost profits resulting from the two crashes. To date, no executives at the company or regulators at the Federal Aviation Administration, which were all aware of the deadly flaws in the Max 8, have been prosecuted or even charged for the murder of the 346 men, women and children who were killed.
The selection of Feinberg to oversee both funds was approved by Boeing’s executives with good reason. As Wall Street’s preeminent corporate “fixer,” he has repeatedly been called upon to protect the interests of the country’s corporate and political elite. In recent times, he has chaired an escrow account to minimize compensation to victims of the September 11, 2001 terrorist attacks in the US. He was also chosen by the Obama administration as its “pay czar” to ensure that the heads of bailed-out Wall Street banks received multi-million-dollar bonuses in the wake of the 2008 financial crash.
Feinberg’s chief responsibility will be to ensure that whatever money Boeing does eventually pay out is vetted in such a way that the corporation will ultimately be absolved for manufacturing lethal airplanes. While Tim Keating, the Boeing executive who is overseeing the funds, has stated that Boeing is “empower[ing] the [crash victims’] families to decide how to allocate these funds,” a press release on the Community Investment Fund makes clear that “governments and other interested parties” will have the final say.
This is not the first time Feinberg’s services have been employed to minimize damage to major manufacturers in the wake of their criminal negligence. He was hired by General Motors in 2015 after it was exposed that the automaker hid an ignition switch fault in low-end GM vehicles that killed at least 169 people. Under rules set by the Obama administration, Feinberg rejected 90 percent of the claims submitted against GM for the company’s criminal negligence, saving GM several billion dollars in liability costs.
The fixer is playing a similar role for Boeing. The payouts that Boeing gave directly to its victims’ families amounted to less than what ex-CEO Dennis Muilenburg averaged in a month. The company is also using the fund, and Feinberg’s skills, in an attempt to stave off other lawsuits. So far only 50 families have come forward with additional claims, which Boeing has settled out of court for $1.2 million for each life lost. If Feinberg is able to convince the other 296 families that they should accept Boeing’s payout and not seek further damages, it will save Boeing an estimated $355.2 million.
Other cases in which Feinberg has saved giant corporations or the federal government hundreds of millions or billions of dollars include suits by Vietnam citizens and US soldiers against Dow and Monsanto for supplying Agent Orange to the American military, and ensuring that BP paid only a quarter of what it originally claimed it would pay to people devastated by the ecological catastrophe caused by the 2010 Deepwater Horizon explosion.
Feinberg, who emerged as a political figure as chief of staff for Senator Ted Kennedy in the late 1970s, was also appointed trustee of the victim compensation fund for the notoriously dangerous Dalkon Shield, a birth control device made by A.H. Robins. It was established that Robins knew of the dangers the device posed to women’s health, including causing death, and suppressed and destroyed such information where and whenever it could.
The Dalkon Shield ultimately caused life-threatening pelvic infections in more than 200,000 women, with side effects including complete hysterectomy, chronic pelvic pain and/or permanent infertility. Feinberg ensured that each woman injured would receive money from the fund only if she forfeited her right to sue outside of the settlement. Those who accepted the deal received an average of $725.
Boeing is eager to receive similar windfalls. Over the past year, Boeing’s total stock value has fallen more than $72 billion. It has been forced to pay nearly $19 billion as a result of the grounding of its 737 Max fleet, including compensation to airlines for canceled flights and maintenance costs.
Feinberg is being used to minimize the money going to the company’s victims and to silence criticism so the aerospace giant can get back to business as usual as soon as possible.
It is still unclear, however, when or even if the Max 8 will ever fly again. Since its grounding last March, a steady stream of internal leaks, news reports, interviews with former employees and congressional hearings have provided a mountain of evidence that the plane is fundamentally unsafe and should remain grounded indefinitely.
Just last week, in a report to the FAA, Boeing revealed that it found trash and debris in the fuel tanks of 35 of 50 inspected Max 8s that were being reviewed in preparation for the plane’s reintroduction into service. Objects that were discovered in the fuel tanks included tools, rags, shoe covers and other detritus, all of which can cause fires, block fuel lines and trigger other potentially catastrophic problems.
The planes that were reviewed are among the nearly 400 Max 8s that were made after the jets’ grounding, which are all now being inspected. According to company spokesman Bernard Choi, “It’s still undecided,” if Boeing will mandate the inspection of the other 385 jets that have been delivered to customers. He claimed, despite the past year’s evidence to the contrary, that, “Obviously, we’ll do what’s right for safety.”
Both Boeing and the FAA also missed a fault in the electrical wiring related to the aircraft’s horizontal wing, which can create a short and cause an unrecoverable, uncontrolled dive similar to the Lion Air and Ethiopian Airlines crashes. Boeing argues that because the same wiring configuration was authorized for use on the older 737 NG model, it shouldn’t need to inspect the wiring for the Max 8, basing itself on safety regulations from the early 1990s.
It is likely, however, that the FAA will force Boeing to resolve the fault, pushing back the relaunch of the Max 8 by months, in order to relieve pressure from other regulatory agencies, particularly the European Aviation Safety Agency (EASA). Even if the FAA approves the Max 8 to fly, it is now a given that other countries will not allow the Max 8 to fly unless also approved by the EASA, meaning that the Max 8 must satisfy two sets of regulators if Boeing is to have any hope of pushing its flagship aircraft into international aviation market
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