Posts Tagged ‘Free Market Economics’

Reichwing Watch: How the Billionaires Brainwashed America

November 16, 2016

This is another excellent video from Reichwing Watch. Entitled Peasants for Plutocracy: How the Billionaires Brainwashed America, it’s about how wealthy industrialists, like the multi-billionaire Koch brothers, created modern Libertarianism and a stream of fake grassroots ‘astroturf’ organisations, in order to attack and roll back Roosevelt’s New Deal and the limited welfare state it introduced. And one of the many fake populist organisations the Koch brothers have set up is the Tea Party movement, despite the Kochs publicly distancing themselves from it.

The documentary begins with footage from an old black and white American Cold War propaganda movie, showing earnest young people from the middle decades of the last century discussing the nature of capitalism. It then moves on to Noam Chomsky’s own, very different perspective on an economy founded on private enterprise. Chomsky states that there has never been a purely capitalist economy. Were one to be established, it would very soon collapse, and so what we have now is state capitalism, with the state playing a very large role in keeping capitalism viable. He states that the alternative to this system is the one believed in by 19th century workers, in that the people, who worked in the mills should own the mills. He also states that they also believed that wage labour was little different from slavery, except in that it was temporary. This belief was so widespread that it was even accepted by the Republican party. The alternative to capitalism is genuinely democratic self-management. This conflicts with the existing power structure, which therefore does everything it can to make it seem unthinkable.

Libertarianism was founded in America in 1946/7 by an executive from the Chamber of Commerce in the form of the Foundation for Economic Education. This was basically a gigantic business lobby, financed by the heads of Fortune 500 companies, who also sat on its board. It’s goal was to destroy Roosevelt’s New Deal. Vice-President Wallace in an op-ed column in the New York Times stated that while its members posed as super-patriots, they wanted to roll back freedom and capture both state and economic power. The video also quotes Milton Friedman, the great advocate of Monetarism and free market economics, on capitalism as the system which offers the worst service at the highest possible profit. To be a good businessman, you have to be as mean and rotten as you can. And this view of capitalism goes back to Adam Smith. There is a clip of Mark Ames, the author of Going Postal, answering a question on why the media is so incurious about the true origins of Libertarianism. He states that they aren’t curious for the same reason the American media didn’t inquire into the true nature of the non-existent WMDs. It shows just how much propaganda and corruption there is in the American media.

The documentary then moves on to the Tea Party, the radical anti-tax movement, whose members deliberately hark back to the Boston Tea Party to the point of dressing up in 18th century costume. This section begins with clips of Fox News praising the Tea Party. This is then followed by Noam Chomsky on how people dread filling out their annual tax returns because they’ve been taught to see taxation as the state stealing their money. This is true in dictatorships. But in true democracy, it should be viewed differently, as the people at last being able to put into practice the plan in which everyone was involved in formulating. However, this frightens big business more than social security as it involves a functioning democracy. As a result, there is a concerted, and very successful campaign, to get people to fear big government.

The idea of the Tea Party was first aired by the CNBC reporter Rick Santilli in an on-air rant. Most of the Party’s members are normal, middle class Americans with little personal involvement in political campaigning. It is also officially a bi-partisan movement against government waste. But the real nature of the Tea Party was shown in the 2010 Tea Party Declaration of Independence, which stated that the Party’s aims were small government and a free market economy. In fact, the movement was effectively founded by the Koch brothers, Charles and David Koch. Back in the 1980s, David Koch was the Libertarian Party’s vice-president. The Libertarian Party’s 1980 platform stated that they intended to abolish just about every regulatory body and the welfare system. They intended to abolish the Department of Energy, Environmental Protection Agency, Food and Drug Authority, Occupational Health and Safety Administration, Federal Communications Commission, Federal Trade Commission, National Labor Relations Board, the FBI, CIA, Federal Reserve, Social Security, Welfare, the public (state) schools, and taxation. They abandoned this tactic, however, after pouring $2 million of their money into it, only to get one per cent of the vote. So in 1984 they founded the first of their wretched astroturf organisation, Citizens for a Sound Economy. The name was meant to make it appear to be a grassroots movement. However, their 1998 financial statement shows that it was funded entirely by wealthy businessmen like the Kochs. In 2004 the CSE split into two – Freedom Works, and Americans for Prosperity. The AFP holds an annual convention in Arlington, Virginia, attended by some of its 800,000 members. It was the AFP and the Kochs who were the real organising force behind the Tea Party. Within hours of Santilli’s rant, he had been given a list of 1/2 million names by the Kochs. Although the Koch’s have publicly distanced themselves from the Tea Party, the clip for this section of the documentary shows numerous delegates at the convention standing up to declare how they had organised Tea Parties in their states. But it isn’t only the AFP that does this. Freedom Works, which has nothing to do with the Kochs, also funds and organises the Tea Parties.

Mark Crispin Miller, an expert on propaganda, analysing these astroturf organisations makes the point that for propaganda to be effective, it must not seem like propaganda. It must seem to come either from a respected, neutral source, or from the people themselves. Hence the creation of these fake astroturf organisations.

After its foundation in the late 1940s, modern Libertarianism was forged in the late 1960s and ’70s by Charles Koch and Murray Rothbard. Libertarianism had previously been the ideology of the John Birch Society, a group harking back to the 19th century. Koch and Rothbard married this economic extreme liberalism, with the political liberalism of the hippy counterculture. They realised that the hippies hated the state, objecting to the police, drug laws, CIA and the Vietnam war. Ayn Rand, who is now credited as one of the great founders of Libertarianism for her extreme capitalist beliefs, despised them. The film has a photo of her, next to a long quote in which she describes Libertarianism as a mixture of capitalism and anarchism ‘worse than anything the New Left has proposed. It’s a mockery of philosophy and ideology. They sling slogans and try to ride on two different bandwagons… I could deal with a Marxist with a greater chance of reaching some kind of understanding, and with much greater respect.’

The documentary also goes on to show the very selective attitude towards drugs and democracy held by the two best-known American Libertarian politicos, Ron and Rand Paul. Despite the Libertarians’ supposedly pro-marijuana stance, the Pauls aren’t actually in favour of legalising it or any other drugs. They’re just in favour of devolving the authority to ban it to the individual states. If the federal government sends you to prison for weed, that, to them, is despotism. If its the individual state, it’s liberty.

And there’s a very telling place piece of footage where Ron Paul talks calmly about what a threat democracy is. He states clearly that democracy is dangerous, because it means mob rule, and privileges the majority over the minority. At this point the video breaks the conversation to show a caption pointing out that the Constitution was framed by a small group of wealthy plutocrats, not ‘we the people’. This is then followed by an American government film showing a sliding scale for societies showing their positions between the poles of democracy to despotism, which is equated with minority rule. The video shows another political scientist explaining that government and elites have always feared democracy, because when the people make their voices heard, they make the wrong decisions. Hence they are keen to create what Walter Lipmann in the 1920s called ‘manufacturing consent’. Real decisions are made by the elites. The people themselves are only allowed to participate as consumers. They are granted methods, which allow them to ratify the decisions of their masters, but denied the ability to inform themselves, organise and act for themselves.

While Libertarianism is far more popular in America than it is over here, this is another video that’s very relevant to British politics. There are Libertarians over here, who’ve adopted the extreme free-market views of von Hayek and his fellows. One of the Torygraph columnists was particularly vocal in his support for their doctrines. Modern Tory ideology has also taken over much from them. Margaret Thatcher was chiefly backed by the Libertarians in the Tory party, such as the National Association For Freedom, which understandably changed its name to the Freedom Foundation. The illegal rave culture of the late 1980s and 1990s, for example, operated out of part of Tory Central Office, just as Maggie Thatcher and John Major were trying to ban it and criminalise ‘music with a repetitive beat’. Virginian Bottomley appeared in the Mail on Sunday back in the early 1990s raving about how wonderful it would be to replace the police force with private security firms, hired by neighbourhoods themselves. That’s another Libertarian policy. It comes straight from Murray Rothbard. Rothbard also wanted to privatise the courts, arguing that justice would still operate, as communities would voluntarily submit to the fairest court as an impartial and non-coercive way of maintain the peace and keeping down crime. The speaker in this part of the video describes Koch and Rothbard as ‘cretins’. Of course, it’s a colossally stupid idea, which not even the Tory party wanted to back. Mind you, that’s probably because they’re all in favour of authoritarianism and state power when its wielded by the elite.

I’ve no doubt most of the Libertarians in this country also believe that they’re participating in some kind of grassroots, countercultural movement, unaware that this is all about the corporate elite trying to seize more power for themselves, undermine genuine democracy, and keep the masses poor, denied welfare support, state education, and, in Britain, destroying the NHS, the system of state healthcare that has kept this country healthy for nearly 70 years.

Libertarians do see themselves as anarchists, though anarcho-individualists, rather than collectivists like the anarcho-syndicalists or Communists. They aren’t. This is purely about expanding corporate power at the expense of the state and the ordinary citizens it protects and who it is supposed to represent and legislate for. And it in practice it is just as brutal as the authoritarianism it claims to oppose. In the 1980s the Freedom Association became notorious on the left because of its support for the death squads in Central America, also supported by that other Libertarian hero, Ronald Reagan.

Libertarianism is a brutal lie. It represents freedom only for the rich. For the rest of us, it means precisely the opposite.

Owen Jones Meets Critic of Neoliberal Economics, Ha-Joon Chang

August 16, 2016

Ha-Joon Chang Pic

In his series of videos on YouTube, Owen Jones, the author of Chavs: The Demonisation of the Working Class, goes to meet with various public figures. These include Jeremy Corbyn, Peter Hitchens and so on. In this video he talks to Ha-Joon Chang, a South Korean economics professor at Cambridge University. Chang’s interesting as he’s a critic of Neoliberalism, the free market economics that has been this country’s political dogma since the Margaret Thatcher. I put up a post a little while ago on Chang’s 23 Things They Don’t Tell You About Capitalism.

The conversation begins by Chang attacking the government’s decision to cut public spending in order to shrink the debt. He says that public debt represents public demand, and if you shrink it, the economy will also shrink, and you’ll still be left with a massive debt. This is what has happened to Greece. It’s far better actually to put more money into the economy. When Jones asked him if Osborne was stupid for pursuing this policy, Chang states very clearly that Osborne did it for other reasons – to undermine and destroy the welfare state, and make the country more like America.

The two then discuss whether it really is a case of capitalism for the poor, and Socialism for the rich. The welfare net for the poor is being destroyed, but there are massive subsidies for the rich. Chang makes the point that big business demands these subsidies, but when the issue of taxation is raised, that’s an entirely voluntary matter, and they’ll start an offshore bank account to avoid paying it. He also discounts the Libertarian attitude that ‘taxation is theft’. He makes the point that wealth is socially created. The attitude that taxation is theft may have made sense in the 16th century, when most people were independent farmers, but it doesn’t apply today, when you need a whole ranges of services to create wealth. They also remark on the double standards about the issue of inequality and greed. Libertarians and neoliberals like greed, because it supposedly stimulates the economy. But as soon the poor start resenting the excessive wealth of the rich, then they denounce them for being envious. Chang states that you can’t have inequality, as it means the poor and rich aren’t living in the same world. They might inhabit the same geographical area, but it’s like one was living in the 22nd Century and the other in the 18th and 19th.

Jones makes the point that whenever anybody discusses nationalisation, they automatically go back to the 1970s and the inefficiency of the services then. Chang states that nationalisation isn’t necessarily the answer, as if something is properly regulated you can have the benefits of nationalisation without it. However, there are examples where private enterprise, or at least unregulated private enterprise doesn’t work. He compares the British and Japanese rail networks. The British rail network now consumes massive subsidies, and is the most expensive in Europe. It doesn’t work, because you can’t have a competitive system on the same piece of railway.

Jones also tackles him about the welfare state. Isn’t it true that it’s bloated, and encourages people to be lazy and feckless. Chang states that there is one aspect to that question that he does agree with. He believes the welfare state does need some reform, as it was created in the 1940s-50s. Now people are living longer, nearly 30 years after their retirement. But he says there’s little evidence that it makes people lazy, and criticises the way people have stopped talking about it as an important form of social security. He makes the point that in countries with a strong welfare state, people are much more willing to accept corporate restructuring. Such as in Sweden, for example. This is not to say they prefer it, but they are willing to accept it. In countries like America where there is little in the way of a welfare state, workers, even if not unionised, are much more resistant to change because they can lose everything.

Chang also talks about the difference between classical liberalism, democracy and neoliberalism. Neoliberalism is a return to the economic doctrines of the 18th and 19th century, when the only form of liberty that mattered was the liberty to own and use property how you wanted. Initially, liberals weren’t democrats, because they feared that democracy would limit the freedom of the property-owners to do as they wished. Neoliberalism is a return to this system, with a bit of democracy. However, the political situation is altered so that democracy does not interfere with the liberties of the propertied classes. For example, they’re in favour of an independent central banks, as then it doesn’t have to be accountable to government over interest rates and the effect that may have on society. They’re also in favour of independent regulatory authorities, as that won’t allow government to interfere with private industry either.

Lastly, Jones asks him if he believes that the system will ever change. Chang makes the point that the past several decades have seen changes that people did not believe would happen. He talks about how Maggie Thatcher 25 years ago said that there would never been Black majority rule in South Africa. If you go back fifty years, then the leaders of the African independence movements were all hunted men in British prisons. It may not happen for decades, but eventually change will come. He quotes a proverb, which says that you must be a pessimist in your head, and an optimist in your heart. Above all, you have to keep fighting, as they won’t give you anything.

Here’s the video:

Ha-Joon Chang on the Failings of Free Market Capitalism

March 30, 2016

Chang Capitalism Book pic

Ha-Joon Chang is a Korean-born Cambridge economist, who has popped up here and there because of his criticisms of Neo-Liberal free market economics. Mike over at Vox Political, for example, has reblogged a meme quoting him on how trickle down economics don’t work, and are merely there to transfer wealth upwards to the rich in the form of tax cuts. He’s also the author of a popular book on economics and the failings of the free market, 23 Things They Don’t Tell You About Capitalism (London: Penguin 2010).

Chang makes it clear that his book is not an attack on capitalism per se. He states in the Introduction

This book is not an anti-capitalist manifesto. Being critical of free-market ideology is not the same as being against capitalism. Despite its problems and limitations, I believe that capitalism is still the best economic system that humanity has invented. My criticism is of a particular version of capitalism that has dominated the world in the last three decades, that is, free-market capitalism. This is not the only way to run capitalism, and certainly not the best, as the record of the last three decades shows. The book shows that there are ways in which capitalism should, and can, be made better.

He is, however, very clear on the devastation that has been wrought across the globe by the doctrine of the unrestrained free market.

The result of these policies has been the polar opposite of what was promised. Forget for a moment the financial meltdown, which will scar the world for decades to come. Prior to that, and unbeknown to most people, free-market ideologies had resulted in slower growth, rising inequality and heightened instability in most countries. In many rich countries, these problems were masked by huge credit expansion; thus the fact that US wages had remained stagnant and working hours increased since the 1970s was conveniently fogged over by the head brew of credit-fuelled consumer boom. the problems were bad enough in the rich countries, but they were even more serious for the developing world. Living standards in Sub-Saharan Africa have stagnated for the last three decades, while Latin America has seen its per capita growth rate fall by two-thirds during the period. There were some developing countries that grew fast (although with rapidly rising inequality) during this period, such as China and India, but these are precisely the countries that, while partially liberalizing, have refused to introduce full-blown free-market policies.

Thus, what we were told by the free-marketeers – or, as they are often called, neo-liberal economists, are at best only partially true and at worst plain wrong. As I will show throughout this book, the ‘truths’ peddled by free-market ideologues are based on lazy assumptions and blinkered visions, if not necessarily self-serving notions. My aim in this book is to tell you some essential truths about capitalism that the free-marketeers won’t.

Which is more than enough to give the late Mrs Thatcher a fit of the vapours.

Ha-Joon Chang Pic

Chang states that his goal is to empower people to make decisions and have opinions on these issues, whereas they might otherwise leave them to the experts on the grounds that they don’t have enough technical expertise, and so become active citizens demanding the right course of action from decision-makers.

The book itself has a rather eccentric organisation. Instead of chapters, there are ‘Things’, meaning different topics, so the contents include the following

Thing 1 There is no such thing as the free market.

Thing 2 Companies should not be run in the interest of their owners.

Thing 3 Most people in rich countries are paid more than they should be.

Thing 4 The washing machine has changed the world more than the internet has.

Thing 5 Assume the worst about people and you will get the worst.

Thing 6 Greater macroeconomic stability has not made the world any more stable.

Thing 7 Free-market policies rarely make poor countries rich.

Thing 8 Capital has a nationality.

Thing 9 We do not live in a post-industrial age.

Thing 10. the US does not have the highest living standard in the world.

Thing 11 Africa is not destined for underdevelopment.

Thing 12. Governments can pick winners.

Thing 13 Making rich people richer doesn’t make the rest of us richer.

Thing 14 Us managers are over-priced.

Thing 15 People in poor countries are more entrepreneurial than people in rich countries.

Thing 16 We are not smart enough to leave things to the market.

Thing 17 More education in itself is not going to make a country richer

Thing 18 What is good for General Motors is not necessarily good for the United States.

Thing 19 Despite the fall of Communism, we are still living in planned economies.

Thing 20 Equality of opportunity may not be fair.

Thing 21 Big government makes people more open to change.

Thing 22 Financial markets need to become less, not more, efficient.

Thing 23 Good economic policy does not require good economists.

Conclusion: How to rebuild the world economy.

He also makes seven suggestions how you can read the book, to answer certain queries, reading selected chapters to answer such questions as what capitalism is, or if you think politics is a waste of time or if you think the world is an unfair place, but there isn’t much you can do about it.

And while the book isn’t an attack on capitalism itself, some of the solutions to its problems do involve an element of Socialism or worker participation. For example, in the ‘Thing’ about why companies should not be run in the interests of the people who own them, Chang points out that the ownership of a country by shareholders means in practice that these have less interest than traditional owner managers in it being profitable or viable, as they can always take their shares out and put them somewhere else. As a result, the countries which have some of the most stable, and hence, most profitable companies, are those which have encouraged long-term investment or encouraged their workers to have a stake in them. Such as France, where several companies are part-owned by the state, or Germany and Austria, which have a degree of worker’s control through works’ councils.

It’s a fascinating and very necessary critique of the free-market capitalism beloved by the Blairites in Labour, and the Tories. Economics is notoriously the ‘dismal science’, but this is well and engagingly written for the ordinary reader, and I hope it encourages more people to criticise and bring down this deeply flawed and iniquitous system.