Dr. Jessica Rose has a BSc in Applied Mathematics and completed her MSc in Immunology at Memorial University of Newfoundland in Canada. She completed her PhD in Computational Biology at Bar Ilan University and then did her first Post Doctorate at the Hebrew University of Jerusalem in Molecular Biology.
Estimating the number of COVID vaccine deaths in America
by Jessica Rose, Mathew Crawford
Abstract: Analysis of the Vaccine Adverse Event Reporting System (VAERS) database can be used to estimate the number of excess deaths caused by the COVID vaccines. A simple analysis shows that it is likely that over 150,000 Americans have been killed by the current COVID vaccines as of Aug 28, 2021.
The Vaccine Adverse Event Reporting System (VAERS) database is the only pharmacovigilance database used by FDA and CDC that is accessible to the public. It is the only database to which the public can voluntarily report injuries or deaths following vaccinations. Medical professionals and pharmaceutical manufacturers are mandated to report serious injuries or deaths to VAERS following vaccinations when they are made aware of them. It is a “passive” system with uncertain reporting rates. VAERS is called the “early warning system” because it is intended to reveal early signals of problems, which can then be evaluated carefully by using an “active” surveillance system.
The VAERS database can be used to estimate the number of deaths caused by the COVID vaccines using the following method:
1. Determine the significant adverse event under-reporting multiplier by using a known significant adverse event rate
2. Determine the number of US deaths reported into VAERS
3. Determine the propensity to report significant adverse events this year
4. Estimate the number of excess deaths using these numbers
5. Validate the result using independent methods
Determining the VAERS under-reporting multiplier
One method to discover the VAERS underreporting analysis can be done using a specific serious adverse event that should always be reported, data from the CDC, and a study published in JAMA. Anaphylaxis after COVID-19 vaccination is rare and occurs in approximately 2 to 5 people per million vaccinated in the United States based on events reported to VAERS according to the CDC report on Selected Adverse Events Reported after COVID-19 Vaccination. Anaphylaxis is a well known side effect and doctors are required to report it. It occurs right after the shot. You can’t miss it. It should always be reported.
A study at Mass General Brigham (MGM) that assessed anaphylaxis in a clinical setting after the administration of COVID-19 vaccines published in JAMA on March 8, 2021, found “severe reactions consistent with anaphylaxis occurred at a rate of 2.47 per 10,000” people fully
vaccinated. This rate is based on reactions occurring within 2 hours of vaccination, the mean time was 17 minutes after vaccination. This study used “active” surveillance and tried not to miss any cases.
When asked about this, both the CDC and FDA sidestepped answering the question. Here’s the proof at the CDC (see page 1 which incorporates the CDC response to the original letter on pages 2 and 3).
As noted in the letter, this implies that VAERS is underreporting anaphylaxis by 50X to 123X. The CDC chose not to respond to the letter.
Is the anaphylaxis under reporting rate a good proxy for reporting fatalities? Since anaphylaxis is such an obvious association, one could argue that the rate would be a lower bound. Others would argue that deaths are more important and would be more reported than anaphylaxis.
We don’t know, but it doesn’t matter because this is just an approximation to get to a ballpark figure. In general, most of us think It is therefore entirely reasonable to assert that deaths are reported even less frequently than anaphylaxis since deaths are not as proxmate to the injection event.
The MGH study used practically identical criteria as CDC used in its study to define a case of anaphylaxis. We ran the numbers ourselves and confirmed this.Therefore, a conservative estimate (giving the government the greatest benefit of the doubt) would use 50X as the underreporting rate.
However, after the MGH study was published, one doctor pointed out that doctors were more careful to avoid anaphylaxis; there was more careful screening of people likely to have anaphylaxis, and they were advised to see their allergist and take more precautions prior to
vaccination. This sort of thing would overstate the numbers above.
So we ran the numbers BEFORE the JAMA study appeared and got a more conservative estimate.
Here’s the data from Google (which uses World In Data):
We’ve vaccinated 97.5M people from the start thru March 2021 and there were 583 reports in VAERS who had an anaphylaxis reaction on their first dose. This suggests that the underreporting rate is 41X.
Other estimates such as How Underreported Are Post-Vaccination Serious Injuries and Deaths in VAERS? suggests a 30X factor based on VAERS.
However, this used a serious adverse event rate from the Pfizer Phase 3 study which we believe under-reported these events for three reasons:
1) the patients were much healthier than average with a 10X lower rate of cardiac arrest than the general public (for example),
2) it was hard to report adverse events if you were in the trial (the evidence of this was unfortunately deleted when Facebook removed the vaccine side effect groups), and
3) there was known malfeasance in the reporting of adverse events in the 12-15 year old trial where the paralysis of 12-year-old Maddie de Garay was never included in the trial results and the FDA and CDC refused to investigate and the mainstream media would not report on it.
The point of this paper is not to find the exact number of deaths, but merely to find the most credible estimate for deaths. We think that anaphylaxis is an excellent proxy for a serious adverse event that, like a death, should always be reported so we think 41X is the most accurate number.
Our hypothesis is that this number will be applicable to deaths as well. In order to confirm our hypothesis, we must derive the death count in different ways and see if we come up with the same answer.
When used for less serious events, such as a headache, it’s likely that 41X is going to be low since such events are less likely to be reported. So our hypothesis is that 41X is a safe, conservative factor useful for both serious and less serious adverse events.
Determining the number of US deaths
As of August 27th, 2021, a search of the VAERS database shows that there are 7,149 domestic deaths in the VAERS database (US/Territories/Unknown).
Estimate the propensity to report for 2021
Healthcare providers have been required by law to report serious adverse events in VAERS with passage of the National Childhood Vaccine Injury Act (NCVIA) in 1986.
Therefore, nothing has changed this year vs. previous years:
1. no new legal requirements,
2. no noticeable promotion or incentives to report into VAERS.
Even when there are strong promotions to report adverse events as there was with H1N1 in 2009 where there were serious campaigns to raise the visibility of reporting, this didn’t impact the background fatality event reporting: it didn’t go up at all in 2009 and 2010 as can be seen from the graph below.
In short, it is extremely difficult to materially change the propensity to report serious adverse events into the VAERS system; it is remarkably consistent from year to year. This makes sense: old habits die hard… behaviors are hard to change. And there was nothing “new” this year to incentivize a massive change in behavior.
Look at the weekly data below. The massive increase in reporting pretty much happened almost instantaneously as soon as the vaccines started rolling out. And it was proportional to the rollout. That is not how behavioral change works… behavioral change would happen very lowly over time; especially if you are trying to get doctors to change their long term behaviors. The reporting basically followed the rollout of the vaccine. Doctors were more likely to report to VAERS this year because there were simply more events to report. We have verified that by talking directly to the doctors as the reason they are reporting more for these vaccines.
To double check our hypothesis that the propensity to report is unchanged this year, we ran VAERS queries using symptoms unrelated to those impacted by the vaccines. We ruled out any known comorbidities like diabetes and obesity since these would likely be elevated since there are more adverse events.
We found that the reporting rates for these unrelated events (listed in the table below) are no different this year than in previous years and for some of these events, the reporting rate is dramatically lower. Note that the number in the 2015-2019 column is the total for the 5 years, not an average annual amount. The Rate Increase is an X factor (i.e., A/B*5)
A third way to see that 2021 isn’t simply over-reporting normal background adverse events is to look at the “adverse event (AE) footprint” of the vaccine. You do that by listing adverse events on the X-axis and AE counts on the Y-axis. If there is over-reporting this year, the overall outline of the boxes will be exactly the same as previous years, and they will just be higher due to the higher propensity to report the same types of events. As you can see, that is not the case here.
This vaccine is definitely causing a completely different “shape” of severe adverse events. Here we show 2018, 2019, 2020, and 2021.
For a more detailed set of vaccine fingerprints (COVID vs. other vaccines), see these charts from Jessica Rose.
A fourth way to confirm there wasn’t over-reporting is through informal physician surveys.
In our informal physician surveys we saw a bias to under-report serious adverse events in order to make the vaccines look as safe as possible to the American public since most physicians believe they are hurting society if they do anything to create vaccine hesitancy.
Secondly, we’d estimate that at least 95% of physicians have completely bought into the “safe and effective” narrative and thus any event that they observe they deem as simply anecdotal and don’t bother to report it since it couldn’t have been caused by such a safe vaccine that appeared to do so well in the Phase 3 trials.
Determining the number of excess deaths caused by the COVID vaccines
There are three ways to estimate the number of excess deaths caused by the vaccine. Using these three methods we can estimate the low and high likely bounds for the number of excess deaths caused by the vaccine:
1. Subtract the average number of background deaths in previous years
2. Use 86% based on the analysis in the Mclachlan study
3. Use 40% based on the estimate of Dr. Peter Schirmacher one of the world’s top pathologists
Here is the result we get from the three methods:
In the first method, we used 500 background deaths as normal for a year since the propensity to report is the same this year as in previous years as shown earlier. However, we should assume that the age cohort is older this year than previous years. For example, here are the vaccination rates shown in a CDC report for influenza:
So a conservative estimate is to take the <500 deaths per year and increase it by 50% to more than account for a shift to higher ages so subtract 750 background deaths.
In the second method, McLachlan examined 250 VAERS reports in detail and concluded that up to 86% of the deaths were consistent with the vaccine being causal for the death. We use the higher number, because using a lower number makes no sense since it leads to a background death rate that would be excessive compared to previous years (.14*7149 = 1,000 which is already higher than the 500/yr background death rate).
The third method uses estimates made by Dr. Peter Schirmacher, one of the world’s top pathologists, for the % of deaths examined by autopsy within 2 weeks of the vaccine that were clearly caused by the vaccine.
The range was from 30% to 40% and we used the high end of the range since we believed that in making a potentially career-ending revelation such as this that Dr. Schirmacher was being extremely conservative and only estimating what he was 100% certain of proving.
40% is likely very conservative since Norway was under no such reputational pressure and in the the first 13 bodies they assessed, 100% of the deaths were found to be caused by the vaccine (see Norwegian Medicines Agency links 13 deaths to vaccine side effects). Therefore using a 60% number seems relatively conservative (less than the 65% average of 30 and 100).
Therefore we have a range of death estimates from 148,000 to 216,000 deaths which averages to 182,000 deaths.
Validation using other methods
In order to validate that our estimates are reasonable (or simply that the evidence was more likely consistent with the hypothesis that the vaccine does more harm than good), we looked at four different quantitative methods from very small to very large and summarized their estimates in the table:
There are additional qualitative methods that show a large number of deaths. The point of these method is to show that the FDA assumption that “the vaccines are safe and all of the reports in VAERS are background events” is not even close to being true.
Example 5: The pericarditis data below shows that the number of events for these vaccines are anything but safe: they generate myocarditis/pericarditis at 860 times the rate of the typical flu vaccine in a year.
A friend of ours got pericarditis right after getting the influenza vaccine when she was 30 years old. It took her two years to recover. The heart muscle never really regenerates like other organs unfortunately.
Example 6: A total of 23 deaths have been reported in connection with the corona vaccination to the Norwegian Medicines Agency. Of those, 13 deaths were linked to the vaccine’s side effects. The other 10 haven’t been evaluated yet. Thus, 100% of the reported deaths have been deemed to be caused by the vaccine. If the vaccine is perfectly safe and has killed no one, then this is statistically impossible. Someone is lying. The fact that there are no autopsies being done in the US in public view suggests that it is more likely that the CDC is lying than the Norwegian Medicines Agency.
Example #7: An analysis of excess deaths in Israel, especially among young people, that was done by Dr. Steven Ohana, clearly shows a huge rise in excess deaths that have no explanation other than the rollout of a mass vaccination program.
Example #8: A published analysis of VAERS data by Dr. Jessica Rose and a more recent analysis of VAERS data done by Christine Cotton show massive numbers of cardiovascular and neurological adverse events occurring within temporal proximity to the injection date.
Example #9: Causality of these adverse events is confirmed using Dose 1 and Dose 2 studies done by Dr. Jessica Rose.
Example #10: If the vaccine is perfectly safe, the number of deaths would be equally likely after the first dose vs. the second dose since both are effectively “non-events.”
Because there are 15% fewer people who get the second dose than the first dose, we should expect the blue bars to be uniformly 15% lower than the red bars. This is not the case here. If the vaccine kills 50% of the 1% most vulnerable people each time it is administered, this can explain the dramatic drop off in events.
Another explanation is that the vulnerable population experienced severe adverse events following Dose 1 and thus chose not to get a second Dose despite the societal pressure (vaccine mandates, peer pressure, etc) to do so.
It is likely a combination of both effects. Here is an example of this from a comment posted to TrialSiteNews on A New Low For the FDA:
Whatever the cause, evidence to support the arisal and reporting of multiple severe adverse events that are dose-related is a very strong safety signal that requires investigation.
Example #11: The same commentary as before applies for cardiac arrest; a safe vaccine should have blue bars on average 15% below the red bars.
Example 12: Absolute numbers of VAERS reports plotted according to “time to death” is very revealing. We don’t know what the exact distribution of timing looks like because this was never measured. But we speculate that maximum accumulation of spike protein is achieved around 24 hours or so after injection and then it plateaus after that point as the mRNA disintegrates. Therefore, we would expect to see a death peak more than 24 hours after injection, i.e., on Day 1 and not on Day 0 This is exactly what happens in practice:
If these were simply random background deaths, we would expect to see a peak on the first day since that has the highest propensity to report, and it would drop from there; it would never peak on Day 1. In the graph above, we plot 8 months of the COVID19 vaccine reports compared to all death reports from all influenza vaccines for the past 10 years combined. So the blue line at 0 is 20 years of death reports, it is not an annual average. In short, the killing power of this vaccine is at least 200X greater than the influenza vaccine and probably a lot more than that since background deaths are included in both red and blue bars.
Furthermore, the shape of the two curves is completely different. The combined flu deaths are relatively flat with a slight rise in the first few days. The COVID vaccine generally kills people very quickly, and then gradually over time from there.
Example 13: A visual way to show that excess deaths are likely caused by the vaccine is to plot vaccinations and deaths on the same axis using data from the COVID-19 data explorer. For Israel we get this chart which shows a correlation between vaccine booster doses given
(cumulative booster doses per 100 people) and average daily deaths per million: they track almost in lock step.
This is hard to explain any other way.
In summary, the qualitative and quantitative confirmation techniques we used were all independent of each other and of our main method, yet all were consistent with the hypothesis that the vaccines cause large numbers of serious adverse events and excess deaths and are inconsistent with the null hypothesis that the vaccines have no effect on mortality and have a safety profile comparable to that of other vaccines.
We were not able to find a single piece of evidence that supported the FDA and CDC position that all the excess deaths were simply over-reporting of natural cause deaths.
Serious adverse events elevated by the COVID vaccines
We made a table comparing the rate of adverse events this year relative to the annual VAERS incidence rate reported for all vaccines over the period from 2015-2019 for ages 20 to 60.
We limited the age range to show that these events are affecting young people and not just the elderly. Also, the signal to noise ratio is much stronger in this younger age group since they are less likely to suffer “background” adverse events. A value of 473 means the rate reported in VAERS for the COVID19 vaccines in 2021 was 473 times higher than what is typical for all vaccines combined in the typical average year.
Nearly all serious adverse events we looked at were strongly elevated compared to the expected normal baseline event rate. This table is useful when assessing whether the vaccine may have been involved in causing death in cases.
The symptoms listed here are consistent with the presumed mechanism of action for how these vaccines kill people (producing spike protein throughout the body that cause inflammation, scarring, and blood clots).
Surprisingly, only a few of these symptoms appear in the labeling of the recently approved Pfizer vaccine. Thus, this table is important and timely.
Child deaths are consistent with symptoms elevated by the COVID vaccines
Perhaps most troubling of all is child deaths.
The CDC VAERS review of the 12-17 year old data released on July 30, 2021 showed there were 345 cases of myocarditis and 14 deaths. Unlike old people, kids don’t spontaneously die every day at anywhere near the same rate.
Using the table above and investigating each death, all of these deaths where there was sufficient detail in the death report showed that it involved one or more of the symptoms listed in the elevated adverse event table.
14*41 = 574 deaths
There are fewer total child deaths for 17 and under (which is a much wider age range than above) in the entire pandemic.
Therefore, the cost benefit case for children isn’t there.
Lack of a stopping condition
In 1976, they halted the H1N1 vaccine after 500 GBS cases and 32 people died.
However, there is no stopping mortality condition for these vaccines. We are likely at 150,000 deaths and counting and nobody in the mainstream medical establishment, mainstream media, or Congress is raising any concerns.
No member of the medical community is calling for any stopping condition nor autopsies. We find this troubling.
Negative efficacy
This paper shows that the vaccines we received may well shortly become completely useless to protect us and, to make matters worse, might enhance the ability of future variants to infect us due to vaccine enhanced infectivity/replication, rather than “classical” ADE.
In short, even if the vaccine were perfectly safe and killed no one, it’s rapidly becoming a net negative based on efficacy alone.
We are starting to see evidence of this today. UK data destroys entire premise for vaccine push. August 21. 2021. “Again, 402 deaths out of 47,008 cases or 0.855% CFR in fully vaccinated, and; 253 deaths out of 151,054 cases or 0.17% CFR in unvaccinated. If you get Covid having been fully vaccinated, according to this UK data, you are five (5) times more likely to die than if you were not vaccinated!”
All-cause mortality is the single most important thing to focus on and it’s not there
Today, most people focus on the relative risk reduction of the vaccines against infection, hospitalization death from COVID. They pay less attention to the absolute risk reduction from COVID. And they pay no attention at all to the absolute all-cause mortality benefit.
The funny thing is that we should be paying attention to these in the opposite order that we listed them.
All-cause mortality is key. If there is no improvement in all-cause mortality, nothing else matters.
In short, say our vaccine reduces the risk of dying from COVID by 2X. But it came at a cost, e.g., increasing your risk of dying from a heart attack by 4X. And let’s say both events are equally likely (which they aren’t). Then you’ve made a bad decision… you’re more likely to die if
you took the vaccine.
Here are the results from the Pfizer 6-month study:
Discussion of these results is quite a bit more complex than we have space to go into here, but these are the basic stats. For more information, see the 10-page discussion of the Pfizer 6 month trial at Why so many Americans are refusing to get vaccinated.
All the all cause mortality numbers are negative from the 6 month Pfizer study. This is not a surprise: it is caused by the high rates of adverse events we’ve already discussed.
There is no evidence of statistically significant mortality improvement.
If there was the CDC, FDA, and NIH would certainly let us know. But just the opposite happened: when the Pfizer 6 month study came out, the mainstream media and mainstream medical scientists were silent on the lack of all-cause mortality evidence. It didn’t even make it into the abstract. The fact that 4 times as many people were killed by cardiac arrest wasn’t even mentioned.
When you combine (1) the negative efficacy of the vaccine with (2) the negative all-cause mortality benefit, it’s impossible to justify vaccination. Either alone is sufficient to kill the benefit; both of them together makes things even more difficult for recommending vaccination.
The bottom line is clear: If you got the vaccine you were simply more likely to die. The younger you are, the greater the disparity.
Early treatment using repurposed drugs has always been the safer and easier way to treat COVID infections
Early treatment protocols such as those used by Fareed and Tyson have been shown to provide more than a 99% relative risk reduction, work for all variants, and the drugs don’t maim or harm the recipients. It is baffling that we are ignoring these treatments and waiting for more evidence when we have a vaccine which appears to kill more people than it saves, soon will be completely useless against future variants, and is likely going to make things worse for the recipient by enhancing replication and/or infectivity.
There are also a variety of prophylaxis techniques that are simple, safe, and highly effective including. The precautionary principle suggests that if there is evidence from a credible source of the benefits of these treatments (which there are), that doctors.
Because early treatments using repurposed drugs don’t create a measurable risk of death, the all-cause mortality for early treatments is always positive.
Many people assume that vaccination is the only path forward. It isn’t. Allowing people to be infected and develop recovered immunity leads to immunity which is broader against variants and lasts longer. See “Recovered immunity is broader and longer lasting” in this document.
It is instructive to compare Israel with India.
Israel is one of the most vaccinated countries on Earth with 80 percent of citizens above the age of 12 fully inoculated. As of Aug 24, 2021, Israel reported 9,831 new diagnosed cases on Tuesday, a hairbreadth away from the worst daily figure ever recorded in the country—10,000—at the peak of the third wave.
At the same time, India recorded 354 deaths in a day, Israel was reporting 26 deaths and record high cases. Here’s how they stack up:
Obviously, India has 11.6X lower deaths per capita than Israel.
The conclusion is clear, vaccination is not the only solution nor the best solution.
Summary
Using the VAERS database and independent rates of anaphylaxis events from a Mass General study, we computed a 41X under-reporting factor for serious adverse events in VAERS, leading to an estimate of over 150,000 excess deaths caused by the vaccine.
The estimates were validated multiple independent ways.
There is no evidence that these vaccines save more lives than they cost. Pfizer’s own study showed that adverse events consistent with the vaccine were greater than the lives saved by the vaccine to yield a net negative benefit. Without an overall statistically significant all-cause mortality benefit, and evidence of an optional medical intervention that has likely killed over 150,000 Americans so far, vaccination mandates are not justifiable and should be opposed by all members of the medical community.
Early treatments using a cocktail of repurposed drugs with proven safety profiles are a safer, more effective alternative which always improves all-cause mortality in the event of infection and there are also safe, simple, and effective protocols for prophylaxis.
CYCLES OF CAPITALIST ACCUMULATION
A recession is defined in economics as two or more quarters of negative growth. A depression, on the other hand, comprises a sharp and deep downturn, usually as a result of bursting asset-price bubbles, a weak recovery, and a subsequent prolonged period of sub-optimal growth. This is about where we are at the present time.
Mr Mullan’s book – which I would recommend although my own views don’t always coincide with the author’s – is well-argued, researched and well worth reading.
The title itself is an obvious allusion to the theories put forward by the great Austrian economist, Joseph Alois Schumpeter (1883-1950) although Schumpeter was never part of the Austrian school of Von Mises and Von Hayek.
Capitalism is nothing if not cyclical, but the cycles themselves vary greatly from mild recessions to full-blown semi-collapses and Kondratiev waves. These episodes are necessary to the system; they are the cleansing method whereby all the bad investment decisions, false values and misallocation of productive resources which had grown up in the boom phase of the cycle reach their inflexion point where boom turns to bust.
The crisis was the moment of truth when suddenly all the plans, hopes and inane euphoria which were formed during the upswing were put to the test. Many of them were found wanting and those responsible would have to face the consequences of their actions.
The cycle took no prisoners. If your business failed, well, tough shit. No namby-pamby bailouts for the losers in the great game of rags to riches and back again. All very reminiscent of the film starring Eddy Murphy – Trading Places – a down and out street hustler who was groomed by two eccentric millionaires and became a stock-market player with considerable success.
Moreover:
This process was not just necessary to keep capitalism efficient; it was also necessary to keep capitalism moral. Only if market agents bore responsibility for their actions of prudence, reliability, sound judgement and trust, upon which capitalism was based, would the system be upheld. The crisis of capitalism was in a double sense – both practical and moral.” [1]
This process has undergone a fundamental change as will be discussed later.
THE RISE AND FALL OF BRETTON WOODS
Mr Mullan situated the latest phase of the Kondratiev Wave, or as he determines it, The Long Depression, during the initial upswing which started in about 1944. The period lasted from its early formulations which were implemented by 1945 lasting until approximately 1975. This era became known as Les Trente Glorieuses.
Thus was born the Bretton Woods system.[2] Key to this system was the anchoring of currencies of all of the major western economies to the US$-Gold nexus. The US dollar was linked to gold which held at US$35 per oz and was convertible into gold upon request.
But trouble was brewing. Owing to the costs of America’s wars in Indo-China together with the profligate spending of President Johnson’s ‘Great Society’ programme, surplus dollars began to flow abroad, particularly to Europe.
The Europeans – particularly De Gaulle – saw this as an opportunity to trade in these surplus dollars for payment in gold. This led to an outflow of gold from the US to Europe at which point the then President (Nixon) suspended US$ gold convertibility as of 15 August 1971. Speaking to his fellow Americans on a nationwide TV appearance he stated that this policy involved a ‘temporary’ expedient, but this soon morphed into a permanent arrangement.
This signalled what was in fact the end of the Bretton Woods system, and the beginning of the second phase of the Kondratiev downturn or as Mr Mullan puts it the beginning of the Long Depression. The new world order now rested on the rather dubious moorings of a fiat system – a system in which currencies float in a rather unstable relationship with each other in an increasingly volatile global environment.
THE NEW ORDER & ITS DESIGN FAULTS
This new economic disorder becomes increasingly chaotic as fundamental and seemingly intractable problems became increasingly apparent. Mr Mullan notes:
To maintain a semblance of vitality, western capitalism has become increasingly dependent on expanding debt levels and on the expansion of fictitious capital.[3] This layer of financial assets that are only symbols of value, not real values. For example, company shares are traded like goods and services do not, in the same way, embody value.
They are tokens which represent part ownership of a company and the potential distribution of future profits in the form of dividends. The paper or electronic certificate itself is not a genuine value that can create more value. Rising share/stock prices are often presented as a healthy economy, but the amount of money a share/stock changes hand for says nothing definitive about the value of a company’s assets or about its productive capacity. On the contrary, it is when real capital stagnates that the amount of fictitious capital tends to expand.[4]
Thus, during a property boom prices may reach astronomical levels where those who own their houses feel they are getting richer but come the down phase they wonder what happened to their new-found wealth which seems to have disappeared during the market correction.
The fact of the matter is that it was never there in the first place. It was fictitious.
The chief characteristics of the 1980/90s was the growing reliance on debt, and, in addition, the growth of financialization; this in order to stimulate growth. Debt in all its forms: corporate, household, financial, student loans, car loans and sovereign debt were a function of easy money – QE and ultra-low interest rates – and bore witness to increasing levels of leverage which kept the system going.
Debt was cheap. Its costs had fallen since the 1980s. Interest rates had been declining for over three decades.
The United States shows this clearly – and its rates remain the dominant influence across the mature economies because of the dollar’s role as a world money. Real commercial bank interest rates averaged 7% during the 1980s, 5.5% during the 1990s 4% during the 2000s for the period leading up to the financial crash of 2008 and have been below 2% ever since.[5]
Financialization [6] was the other leg of a system which in, Mr Mullen’s words artificially propped up – a ‘decaying system.’ Free monies from the Central banks was used by banks and other financial institutions to buy up and speculate on various markets including in particular stock and bond markets.
It was financialization and debt which acted as an increasingly counter-balancing force to the long-run tendency of decline in the productive industries.
Unfortunately, the productive sector was the creator of real value whereas the rent-seeking nature of debt-driven finance capital was essentially a parasitic outgrowth on the productive sector.
DIMINISHING RETURNS TO ZERO AND MINUS RETURNS
During the same period debt was and still is rising faster than national income, and indeed growth seemed to be in a long downward trajectory. At the present time growth has come to a stop in Europe. (In alphabetical order).
France GDP Growth
Quarterly: 0.3%
Annual: 1.4%
Germany GDP Growth
Quarterly: 0.1%
Annual: 0.5%
Italy GDP Growth
Quarterly: 0.1%
Annual: 0.3%
UK GDP Growth
Quarterly: 0.3%
Annual: 1.0%
EU area GDP Growth
Quarterly: 0.2%
Annual: 1.2%
(Source: Trading Economics)
10-Year Bond Yields Yearly
France: –0.73%
Germany: -0.54%
Italy: –1.69%
UK: 0.67%
EU Area: 0.3%
(Source: countryeconomy.com)
No ifs or buts, these really are depression figures. European industry is not merely slowing to a crawl but is actually becoming negative. Mr Mullan attributes this decline in value production as systemic under-investment due to the Tendency of the Rate of Profit to Fall (TPRF). No guesses from what source that came.
THE TENDENCY OF THE RATE OF PROFIT TO FALL AND DECLINING INVESTMENT
The Labour theory of value began life with Adam Smith (1723-1790) was subject to further elaboration with David Ricardo (1772-1823) and additional further final touches by Karl Marx (1818-1883).
Briefly stated the theory rests on the thesis that capital or value represents the objectified process of past human labour. Actually, existing value/capital is nothing more than labour which has already been expended.
Thus, a potter will start with a piece of clay on his wheel, and through several stages of moulding, painting, and baking, the piece of clay has become a vase, a commodity, with a value and price. As labour becomes more productive and innovative, output (growth) expands in both a quantitative and qualitative sense.
This process did not simply represent the output of the individual labourer, it involved the aggregated social labour of the economy as a whole which produced goods and services.
In modern parlance – growth qua capital stock. It should be said that the value of a commodity doesn’t always coincide with its price (which is the phenomenal form of value) due to supply and demand pressures. In contemporary economic parlance this process would be described as productivity growth and value-added growth. Goods become cheaper and markets expand to purchase these new goods. We have seen this in the production of among other items, cars, I-Phones and shoes.
Of course, the whole process is underpinned by businesses quest for profit and this is central to the theory of capitalist crisis.
One cycle of accumulation will (I hope!) serve to clarify this.
Let M stand for money capital, C stand for Capital consisting of both living labour, workers, and dead labour, machinery and raw materials, and P for the production process.
Here we go: M – C … P … C’- M’
Let us suppose this is car manufacture.
Money capital is transformed into dead and living capital. M to C. These factor inputs are brought together during the process of production P. Thus, emerges new capital as a Car C’. But what is the significance of the ‘ or C’?
Well the ‘ is the surplus labour time (or value) which is part of total value of ’ which also includes necessary labour time which represents costs to the capitalist i.e., wages. Surplus labour time is the source of surplus value and ultimately money profit. The workers worked for 10 hours but were paid for 8.
The 2 hours were a surplus over and above what was paid to the workers. And this would be the case at any level of production. It is the source of surplus value and profit. Finally: M’ or the transition to C’- M’ This is sometimes referred to as the realisation problem, but simply means how does C’ become M’. This takes place in the final phase of the process where the cars are on sale in the dealership courtyard waiting to be sold.
Having appropriated the M’ surplus value, the business can restart the whole cycle once again, – ceteris paribus. However there maybe problems of transforming the surplus value into prices of production (that is to say converting C’ into M’) due to the level of aggregate demand. (For further discussion refer to Michael Roberts and David Harvey*).
It is essential that profit maximization is the driving force of capital and the accumulation process. If profit starts to undergo a secular decline, this will have serious implications to the system as a whole. This is exactly what Mr Mullan picks up.
Investment is in decline due to the falling rate of profit. And the rate of profit is declining due to the fact that labour input into each successive unit of output has declined. It may sound strange to say but declining profitability is due precisely to the increased efficiency and productivity of the system.
Marx argued that:
(i) each individual capitalist can increase their own competitiveness through increasing the productivity of his workers.
(ii) The way to do this is by using a greater quantity of dead capital —tools, machinery and so on—for each worker. There is a growth in the ratio of the physical extent of the capital to the amount of labour power employed, a ratio that Marx called the “technical composition of capital”.
(iii) But a growth in the physical extent of the means of production will also be a growth in the investment needed to buy them. So, this too will grow faster than the investment in the workforce.
(iv)The growth of this ratio, which he calls the “organic composition of capital”, is a logical corollary of capital accumulation.
(v)Yet the only source of value for the system as a whole is labour. If investment grows more rapidly than the labour force, it must also grow more rapidly than the value created by the workers, which is where profit comes from.
(vi) In short, capital investment grows more rapidly than the source of profit. As a consequence, there will be a downward pressure on the ratio of profit to investment—the rate of profit must therefore decline.
Each capitalist has to push for greater productivity in order to stay ahead of competitors. But what seems beneficial to the individual capitalist is disastrous for the capitalist class as a whole.
Each time productivity rises there is a fall in the average amount of labour in the economy as a whole needed to produce a commodity (what Marx called “socially necessary labour”), and it is this which determines what other people will eventually be prepared to pay for that commodity.
So today we can see a continual fall in the price of goods such as computers or DVD players produced in industries where new technologies are causing productivity to rise fastest.
Thus, according to Mr Mullan, falling profitability is the root cause of curtailed business investment.[7] Moreover, this observation has been observed in a number of authoritative sources.[8]
COUNTERACTING FORCES TO THE TRPF
Although the declining rate of profit is a necessary feature of the capitalist accumulation process there are counter-acting forces.
These include the increase in the mass of profit which offsets the decline in the rate of profit, and the rate of surplus value which also slows down the decline in the rate of profit. The two deep economic slumps of 1974-5 and 1980-2 had sufficiently reduced the value of constant capital. At the same time, the slumps had driven up unemployment and weakened the ability of the labour movement to protect wages (the cost of variable capital).
The productivity of labour rose as new techniques (and hi-tech ones at that) were introduced to many sectors of the economy, while wages were not allowed to rise as much. The wage share in the US economy plunged. The rate of surplus value rose. Additionally, subsidies to business and low interest rates helped to mitigate declining profits but could not stop it in the longer run. (Again, see Roberts and/or Harvey for a more detailed explanation.)
THE LEFT BOTTLES IT
In football parlance a player bottles it when he/she pulls out of a 50-50 tackle. A referee bottles it when he gives a dubious decision to the home team. The political left ‘bottled it’ when they gave up on socialism or communism circa 1989/90. There was a turbulent period of class struggle – the Miners’ Strike in the UK – and the air traffic controllers’ strike in the US, launched and overseen by Thatcher and Reagan circa 1984. This was also a period which bore witness to the collapse of communism in Eastern Europe.
Neoliberalism was to carry the day to such an overwhelming extent that even ‘left’ political parties were seemingly entranced by the new order. Strange they couldn’t tell the difference between revolution and counter-revolution.
One of the first things the incoming Labour government – in the shape of Gordon Brown – did after the 1997 election was to grant independence to the Bank of England! No more fiscal policy! Carry on entrenching Mrs T’s pet projects.
We know the rest. The new order was established from Washington to Moscow being imposed by the IMF, World Bank and WTO. The left had been neutered and was officially declared dead.
Mr Mullan explains:
It was ironic that it was not the strength of the alternatives to capitalism, but their demise that eventually crystallised the elites intellectual crisis. The return to depressed economic conditions had already put the establishment on the defensive. But capitalism’s self-confidence to its next blow came not from the vehemence of its former adversaries attacks but by the reverse. Opposition withered away not just in the Soviet Union as its international enemy, but from the domestic challenges from the left and from organized labour.” [9]
A similar view was put forward at an earlier date by Peter Gowan, who wrote,
We had thought that the interwar capitalist society was a thing of the past, a deviation overcome by post-war social progress. But it turns out that the post-war social gains were a deviation and the inter-war state and society is again the norm. Post-war social progress, was, it seems, a tactical aberrant form of European capitalism made necessary by the challenge of communism.
We now know the second part of the sentence whose first half, so strongly believed in 1989, stated: ‘Western-style welfare capitalism is better than Eastern Communism … ‘ The second half went unnoticed 10 years ago: It reads: ‘But western style welfare capitalism only existed because of communism.’ Europe seems to be drifting towards a divided, turbulent and ugly future.”[10]
THE ZOMBIE ECONOMY
What has seemed to have emerged in the neoliberal era was a wholly unexpected form of capitalist decline. This has been termed a zombie economy.
Low interest rates create zombie companies. Weak businesses survive (when they ought to have gone out of business) directing cash flow to cover interest on loans – but not the principal – that cannot be repaid but that banks will not write off. With capital tied up, banks reduce lending to productive enterprises, especially small and medium sized ones, which account for a large proportion of economic activity and employment.
Firms do not dispose of or restructure unproductive investments. The creative destruction of the slump when businesses of this type go out of existence and debts are wiped out and the reallocation of resources necessary to restore the economy does not take place.
Thus, a zombie economy, where failed businesses are kept artificially afloat is one where the necessary adjustments including liquidation of unproductive enterprises and assets are allowed to continue and the necessary restructuring fails to take place. This thus results in a semi-permanent depressed condition, until the next downturn comes along.
As opposed to Mr Mullan’s enthusiasm for a Schumpeterian policy of creative destruction we have been served up with an ever-deepening economic and social stasis by a brain-dead political and business class.
This has been eerily reminiscent of the British Prime Minster, Stanley Baldwin, who fought the 1929 general election on a “Safety First” ticket. Stabilisation and ‘muddling through’ has become the policy of successive western governments, particularly in the EU still labouring under the Stability and Growth Pact.
Schumpeter writing in Capitalism, Socialism and Democracy (1941) described a bourgeoisie which was losing not just its wealth in the economic crisis but also its sense of purpose. This loss of belief in their own functions, capability and sense of moral leadership is becoming increasingly evident. They are a corrupt and decadent force in society and more and more of them and society at large are beginning to realise it.
This purpose was reinstalled as a result of WW2. National economies of the belligerent nations were cranked up to full capacity and to all intents and purposes ceased to be capitalism and began to be command economies.
In the United States for example Roosevelt’s New Deal actually began to move away from the economic orthodoxies of the 1930s toward a more organized economic system, this process carried on until the US entered WW2 where it was taken even further.
…the war economy did not stimulate the US private sector it replaced the free market and capitalist investment for profit. Consumption did not restore economic growth as Keynesians argued … instead it was weapons of destruction.
In many industries, corporate executives resisted converting to military production because consumer market share would go to competitors who did not. Conversion thus became a goal of public officials and labour leaders.
Auto companies only fully converted to war production in 1942 and only began substantially contributing to aircraft production by 1943 … From the beginning of preparedness to the peak of war production in 1944, the war economy could not be left to the capitalist sector to deliver.
To organize a war economy and ensure that it produced the goods needed for war, the Federal Government created an array of mobilization agencies, which often purchased goods, closely directed those goods manufacture, and heavily influenced the operation of private companies and whole industries.
The US Treasury introduced the first income tax in US history and war bonds were sold to the public. Income tax payees rose from 4 million in 1939 to 43 million by 1945.[11]
Moreover, all types of technological discoveries were part of this process. Radar, aircraft design, chemicals, pharmaceuticals, the jet engine, plastic surgery for treating aircraft crew who suffered burns. And this in the most capitalist of all countries!
So, what couldn’t possibly be done, was done. A revolution had occurred because it was needed. And where there’s a will…
So Mullan’s arguments for a desperately needed change seem all too plausible and necessary even from a common-sense point of view. He argues:
Escaping from the grip of the Long Depression will not be easy, but it is necessary, and it is possible … there are many barriers to economic health, yet none is insuperable. The biggest challenges are not economic constraints. They lie in the realms of, ideas and imagination, culture and politics.” [12]
Agreed, but the ideological hegemony of the ‘Washington Consensus’ permeates all levels of social being smothering any attempt to break out of the template. From globalization and what are called ‘free-markets’, to hyper-individualism and identity politics, the orthodoxy of the power-elites seems escape proof.
It is what Max Weber called the escape proof ‘Iron Cage’ of bureaucracy, or in our own time the iron cage of the deep-state/media/security/corporate matrix. It seems a lost cause. But I wonder? The late-capitalist monolith may not be as powerful and impregnable as it would have us believe and as it really is. We shall see.
La Lotta Continua
[1] The Spectre at the Feast – Andrew Gamble – p.46
[2] The 1944 Bretton Woods agreement was negotiated in the small town of Bretton Woods in New Hampshire. It was to establish a new global monetary system. It replaced the gold standard with the U.S. dollar as the global currency. By so doing, it established America as the dominant power in the world economy. After the agreement was signed, America was the only country with the ability to print dollars. The agreement created the World Bank and the International Monetary Fund. These U.S.-backed organizations would monitor the new global system.
[3] Fictitious capital: Karl Marx made a simple yet profound discovery in the course of his critique of the contemporary political economy. He pointed out that money is not capital; it is only capital’s representation. It is a real representation only when and till there is continuous creation of capital during the production process. Money unrelated to the production process is fictitious as it is valueless
[4] Creative Destruction – Mullan – p.22
[5] Mullen, Ibid., p112.
[6] The term financialization is generally used as a reference to that part of the economy indicated by the acronym FIRE (Finance, Insurance and Real Estate) and its growing importance in the economy in both qualitative and quantitative terms.
Financialization is a process whereby financial markets, financial institutions, and financial elites gain greater influence over economic policy and economic outcomes. Financialization transforms the functioning of economic systems at both the macro and micro levels. Its principal impacts are to…
(A) elevate the significance of the financial sector relative to the real value -producing sector,
(B) transfer income from the real value-producing sector to the financial sector, and
(C) increase income inequality and contribute to wage stagnation
Since 1970 this part of the economy has grown from almost nothing to 8% of US Gross Domestic Product (GDP). This means that one dollar in every ten is associated with finance. In terms of corporate profits finance’s contribution now represents 40% of all corporate profits in the US. This is a significant figure and, moreover it does not include those overseas earnings of companies whose profits are repatriated to their countries of origin.
Thus, the increasing presence and role of finance in overall economic activity and the increase of profits channelled to the financial sector represent the salient indicators as to what has been termed financialization. It is argued by some that financialization may put the economy at risk of debt deflation and prolonged recession.
Financialization operates through three different conduits: changes in the structure and operation of financial markets, changes in the behaviour of nonfinancial corporations, and changes in economic policy. Countering financialization calls for a multifaceted agenda that
(D) restores policy control over financial markets,
(E) challenges the neoliberal economic policy paradigm encouraged by financialization,
(F) makes corporations responsive to interests of stakeholders other than just financial markets, and
(G) reforms the political process so as to diminish the influence of corporations and wealthy elites.
This ongoing transformative process represents a structural change in the nature of the late capitalist economy. Principally the relationship between the value-creating manufacturing sector and the FIRE sector – that is to say, the creative part of the economy and the distributive part.
In the earlier phase of capitalism, the financial sector was much smaller and served to grease the wheels of industry by providing investment capital and credit obtained from depositors. That symbiotic relationship has now ended, and finance has increasingly taken on a life form of its own relegating manufacturing industry to the second tier.
Financialization is a pattern of accumulation that relies increasingly on profit making through financial channels even for firms which are not financial. General Motors in the US, for example, had a trading and finance sector which was to grow larger than the original auto-vehicle operations.
[7] Mullan op.cit., p.116
[8] Mullan op.cit p.116 footnotes -35, 36, 37.
[9] Mullen, Ibid., p.200
[10] The Global Gamble – Peter Gowan, p.319
[11] The Long Depression – Michael Roberts – pp.56/57
[12] Ibid., Mullan – p.265.
The comments are worth reading too.
After more than a decade of worsening economic and financial folly, it can come as no surprise that we’re living with extraordinarily elevated levels of risk.
But what form does that risk take, and where is it most acute?
According to SEEDS – the Surplus Energy Economics Data System – the riskiest countries on the planet are Ireland, France, the Netherlands, China, Canada and the United Kingdom.
The risks vary between economies. Some simply have debts which are excessive. Some have become dangerously addicted to continuing infusions of cheap credit. Some have financial systems vastly out of proportion to the host economy. Some have infuriated the general public to the point where a repetition of the 2008 “rescue” would inflame huge anger. Many have combinations of all four sorts of risk.
Here’s the “top six” from the SEEDS Risk Matrix. Of course, the global risk represented by each country depends on proportionate size, so China (ranked #4 in the Matrix) is far more of a threat to the world economy and financial system than Ireland, the riskiest individual economy. It’s noteworthy, though, that the three highest-risk countries are all members of the Euro Area. It’s also noteworthy that, amongst the emerging market (EM) economies, only China and South Korea (ranked #9) make the top ten.
Risk and irresponsibility
Before we get into methodologies and detailed numbers, it’s worth reflecting on why risk is quite so elevated. As regular readers will know, the narrative of recent years is that prosperity has been coming under increasing pressure ever since the late 1990s, mainly because trend ECoE (the energy cost of energy) has been rising, squeezing the surplus energy which is the source of all economic output and prosperity.
This is a trend which the authorities haven’t understood, recognizing only a vague “secular stagnation” whose actual root causes elude them.
Even “secular stagnation” has been unacceptable to economic and financial systems wholly predicated on “growth”. Simply put, there‘s been too much at stake for any form of stagnation, let alone deterioration, to be acceptable. The very idea that growth might be anything less than perpetual, despite the finite nature of the planet, has been treated as anathema.
If there isn’t any genuine growth to be enjoyed, the logic goes, then we’d better fake it. Essentially, nobody in authority has been willing to allow a little thing like reality to spoil the party, even if enjoyment of the party is now confined to quite a small minority.
Accordingly, increasingly futile (and dangerous) financial expedients, known here as adventurism, have been tried as “solutions” to the problem of low “growth”. In essence, these have had in common a characteristic of financial manipulation, most obvious in the fields of credit expansion and monetary dilution.
These process are the causes of the risk that we are measuring here, but risk comes in more than one guise. Accordingly, each of the four components of the SEEDS Risk Matrix addresses a different type of exposure.
These categories are:
- Debt risk
- Credit dependency risk
- Systemic financial risk
- Acquiescence risk
One final point – before we get into the detail – is that no attempt is made here to measure political risk in its broader sense. Through acquiescence risk, we can work out which populations have most to complain about in terms of worsening prosperity. But no purely economic calculation can determine exactly when and why a population decides to eject the governing incumbency, or when governments might be tempted into the time-dishonoured diversionary tactic of overseas belligerence. We can but hope that international affairs remain orderly, and that democracy is the preferred form of regime-change.