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National Community Activists Network

Neoliberalism and corruption in America (should we be more careful)

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Thanks for the link Tony, it really helps when someone points you in the right direction.

I've read the review of 'Capital as Power'  and noted the comment - the economic crisis is forcing serious rethinking of economic theory.

I'm trying to work may way through the posts here http://www.yorku.ca/cmass/forum/index.php  You never stop learning eh?

Too true, Joe - and thanks to you for the Critical Mass link. My brain is going to get addled!

I've just finished reading 'The Enigma of Capital and the Crisis of Capitalism' by David Harvey

I marked passages that seemed to hit the spot and they are shown below. 

There's a fair amount to read through but it might be worth doing.

>>>

There’s class warfare, all right, but it’s my class, the rich class, that’s making war and we’re winning (Warren Buffet – The Sage of Omaha)

 

How then are we to interpret the current mess? Does this crisis signal, for example, the end of free-market neoliberalsim as a dominant economic model for capitalist development? The answer depends on what is meant by the word neoliberalsim. My view is that it refers to a class project that coalesced in the crisis of the 1970’s.  Masked by a lot of rhetoric about individual freedoms, liberty, personal responsibility and the virtues of privatisation, the free market and free trade, it legitimised draconian policies designed to restore and consolidate capitalist class power.  This project has been successful, judging by the incredible centralisation of wealth and power observable in all those countries that took the neoliberal road.

 

One of the basic pragmatic principals that emerged in the 1980’s, for example, was that state power should protect financial institutions at all costs.

 

Put crudely, the policy was: privatise profits and socialise risks; save the banks and put the screws on the people.

 

Banks behave badly because they do not have to be responsible for the negative consequences of high-risk behaviour.  The current bailout is the same old story, only bigger…

 

Current policies propose to exit the crisis with a further consolidation and centralisation of capitalist class power.

 

As Andrew Mellon (US banker, Secretary of the Treasury 1921-32) once famously remarked, ‘In a crisis, assets return to their rightful owners’ (i.e. him).  And it will be the same this time unless an alternative political movement arises to stop it.

 

This does not mean that they are not going to redesign the financial architecture because they must. But who are they going to redesign it for?

 

Will the powers that currently hold sway seek merely to clean up the problems at popular expense and then give the banks back to the class interests that got us into the mess?  This is almost certainly where we are headed unless a surge of political opposition dictates otherwise.

 

Meanwhile, the big banks that remain are stashing away funds to resume payment of the huge bonuses they paid before the crash.

 

Whether we can get out of this crisis in a different way depends very much upon the balance of class forces. It depends upon the degree to which the mass of the population rises up and says, ‘Enough is enough, let’s change this system.’

 

Alan Budd, Thatcher’s chief economic advisor, later admitted that ‘the 1980’s polices of attaching inflation by squeezing the economy and public spending were a cover to bash the workers’ and so create an ‘industrial reserve army’ which would undermine the power of labour and permit capitalists to make easy profit ever after.’

 

Labour availability is no problem now for capital, and it has not been for the last twenty-five years.  But disempowered labour means low wages, and impoverished workers...

But inflation in asset values cannot go on forever. Now it is the turn of the United States to experience the pain of falling asset values, even as US policy makers do their level best to export their perverse versions of capitalism to the rest of the world.

 

In a desperate attempt to find more places to put the surplus capital, a wave of privatisation swept round the world carried on the backs of the dogma that sate-run enterprises are by definition inefficient and lax and that the only way to improve their performance is to pass them over to the private sector.  This dogma does not stand up to any detailed scrutiny. Some state-run enterprises are indeed inefficient and some are not. Travel the French train network and compare it to the pathetically privatised US and British systems.  And nothing could possibly be more inefficient and profligate than the privately insured health care system in the United Sates.

 

Government polices have exacerbated rather than assuaged the problem. The term ‘bail-out’ is inaccurate. Taxpayers are simply bailing out the banks, the capitalist class, forgiving then their debts, their transgressions, and only theirs. And the banks are using the money, not to lend to anybody but to reduce their leveraging and to buy other banks.  They are busy consolidating their power.

 

The problem is that the economic theories and orthodoxies, which manifestly failed to predict the crisis, continue to infirm our debates, dominate our thinking and underpin political action.  Without challenging these dominant mental conceptions there can be no alternative (as Margaret Thatcher liked to say) other than a botched return to the sort of capitalism that got us into this mess in the first place.

 

The capital-labour relation always plays a central role in the dynamics of capitalism and my lie at the root of the crisis. But these days the main problem lies in the fact that capital is too powerful and labour too weak, rather than the other way around.

 

With one of the largest public budgets at that time (1975) in the capitalist world, New York City, surrounded by sprawling affluent suburbs, went broke.  The local situation, orchestrated by an uneasy alliance between state power and financial institutions, pioneered the neoliberal ideological and practical political turn that was to be deployed worldwide in the struggle to perpetuate and consolidate capitalist power.  The recipe was simply enough: crush the power of labour, institute wage repression, let the market do its work, all the while putting the power of the state at the service of capital in general and in investment finance in particular.  This was the solution of the 1970s that lies at the root of the crisis of 2008-9.

 

The neoliberal movement that began in the 1970s, for example, constituted a radical ideological assault upon what the state should be about. To a degree it was successful (and often is was not) it led a wide-ranging state-sponsored changes in daily life (the promotion of individualism and an ethic of personal responsibility against a background of diminishing state provision), as well as in the dynamics of capital accumulation.  Margaret Thatcher dissolved the London City Council in 1986 because it resisted her neoliberalising project…

 

One of the key transformations that occurred in the character of the state after the mid 1970s was the devolution of powers to local administrations.  Controlled devolution turned out to be one of the very best means to exercise and consolidate centralised control.

 

At times of crisis, the irrationality of capitalism becomes plain for all to see.  Surplus capital and surplus labour exist side by side with seemingly no way to put them back together in the midst of intense human suffering and unmet needs. In the midsummer of 2009, one third of the capital equipment in the United States stood idle, while some 17% of the workforce were either unemployed, enforced part-timers or ‘discouraged’ workers. What could be more irrational that that?

 

In effect, the neoliberal revolution succeeded in privatising the production of the surplus. It liberated capital producers from constraints – including geographical constraints – and in the process undermined the progressive redistributive character of state functions.  This produced the rapid increase in social inequality.

 

The central problem to be addressed is clear enough. Compound growth for ever is not possible and the troubles that beset the world these last thirty years signal that a time is looming to continuous capital accumulation that cannot be transcended except by creating fictions that cannot last.  Add to this the facts that so many people in the world live in conditions of abject poverty, that environmental degradations are spiralling out of control, that human dignities are everywhere being offended even as the rich are piling up more and more wealth under their command, and that the levers of political, institutional, judicial, military and media power are under such tight dogmatic political control as to be incapable of doing much more than perpetuating the status quo. 

 

Yet the absolute necessity for a coherent anti-capitalist revolutionary movement must also be recognised. The fundamental aim of that movement has to be to assume social command over both the production and the distribution of surpluses.

 

Designing a society without capital accumulation is no different in principle to designing a city without cars.  Why can’t we all just work alongside each other without class distinction?

 

Universities continue to promote the same useless courses on neoclassical economics or rational choice political theory as if nothing has happened and the vaunted business schools simply add a course or two on business ethics or how to make money out of other people’s bankruptcies. After all, the crisis arose out of human greed and nothing can be done about that.

 

The current knowledge structure is clearly dysfunctional and equally clearly illegitimate. The only hope is that a new generation of perceptive students (in the broad sense of those who seek to know the world) will clearly see this and insist of changing it.

 

The first lesson it must lean is that an ethical, non-exploitive and socially just capitalism that redounds to the benefit of all is impossible.  It contradicts the very nature of what capitalism is about.

 

The great betrayal of the intellectuals who became so complicitous with neoliberal politics from the 1980’s onwards has first to be reversed before any meaningful alliances can be constructed with the deprived and the dispossessed.

 

It seems sometimes as if there is a systematic plan to expel low-income and unwanted populations from the face of the earth.

 

The wave of financeialisation that occurred after the mid-1970’s has been spectacular for its predatory practices style. Stock promotions, and market manipulations; Ponzi schemes and corporate fraud; asset stripping through mergers and acquisitions; the promotion of debt incumbency that reduces whole populations, even in the advanced capitalist countries, to debt peonage; disposition of assets (the raiding of pension funds and their decimation by stock and corporate collapses) – all these features are central to what contemporary capitalism is about.

 

Crisis may be, for this reason, orchestrated, managed and controlled to rationalise the irrational system that is capitalism.  This is what the state-administered austerity programmes, making use of the key levers of interest rates and the credit system, are often all about.

 

Deliberate provocation of crisis by state policies and collective corporate actions is a dangerous game. While there is no evidence of active and narrow conspiracies to create such a crisis, there are plenty of influential ‘Chicago School’ macroeconomists and economic policy makers around the world, along with all sorts of entrepreneurial opportunists, who believe that a good bout of creative destruction is required now and again for capitalism to survive and for the capitalist class to be reformed. They hold that attempts by governments to ward off crises with stimulation packages and the like are profoundly misguided.  Better by far, they say, to let a market-led ‘structural adjustment’ process (of the sort typically mandated by the IMF) do its work. Such medicine is necessary to keep capitalism economically healthy.  The closer capitalism gets to its death’s door, the more painful the medicine.  The trick is to not to let the patient die.

 

The present economic difficulties both in the US and Britain, as well as throughout Europe, are essentially being deepened for a political reason rather than out of economic necessity.  That political reason is the desire to have done with capital’s responsibility to cover the costs of social reproduction.

 

There is, evidently, a grand divide in the political strategy emerging. Much of the West is perusing the holy grail of deficit reduction (resulting in reductions in standards of living) through austerity, while the East, along with the emerging markets of the South, follows an expansionary Keynesian strategy.  If global growth is to revive, them it will be because the Eastern path of Keynesian stimulus prevails.

 

The logic of endless capital accumulation of endless growth is always with us.  It internalises hidden imperatives, of which the invisible hand of the market is but one, to which we either willingly or mindlessly submit, no matter our ethical inclinations.

 

And while it may seem perversely appropriate to condemn North America and Europe to slow growth and endless austerity, this is only done in the name of defending the privileges of the plutocracy and goes nowhere when it comes to…the impossibility of endless compound growth.

 

The problem of endless compound growth through endless capital accumulation will have to be confronted and overcome.  This is the political necessity of our times.

 

The Enigma of Capital – David Harvey

 

Just finished reading a new book (published 2011) that analyses the history of social movements, from the 18th century struggle for the vote in England to the present, to see why some movements fail but others succeed. 
 
The answer (and the name of the book) is 'Counterpower' - the power that the 'have-nots' can use to resist the power of the 'haves'.
 
The author, Tim Gee, draws lessons from (among many others) Gandhi's independence movement in India, the anti Vietnam War movement, the battle against apartheid in South Africa, the suffragettes, the fight against the poll tax, the miner's strike, the women's movement, the climate change issue, the Iraq War protests, the struggle against global poverty, the Arab Spring and the campaigns against the effects of neo-liberal economics.
 
Below are quotes from the book to give you an idea of what he is advocating and quotes by famous figures that the author used in the book to support his hypothesis.
 
The book is well worth reading and is a really valuable tool for activists at all levels.

>>>>

The more I read the more convinced I became that successful campaign is an unfinished revolution and that a revolution is the result of a series of successful campaigns.

 

When governments, corporations or other ruling institutions yield power, it is not through the goodness of their hearts. It is to save face when the people themselves have already claimed power.

 

The classic definition of power – associated with the theorist Robert Dahl – is ‘the ability of A to get B to do something that B would not otherwise have done’.  Counterpower turns traditional notions of power in their heads. Counterpower is the ability of B to remove the power of A.

 

In the hands of the few, power can be called oppression, repression, exploitation or authoritarianism – the ability to do a lot at the expense of the many.  Meanwhile, movements for freedom, emancipation, liberation, human rights and democracy have a common idea at heart. That idea is Counterpower.

 

Politicians bemoan people’s lance of interest in politics. When they do so, they are usually bemoaning the lack of people supporting their politics. Because when a real political movement rises to challenge a government, that government will do everything it can to hold the people concerned back. Governments will try discrediting the movement, smearing it, co-opting it, dividing and ruling it, or – if all else fails – crushing it.

 

Those who dominate a society have a whole range of tools available to them to keep certain issues off the agenda.  They can deny there is a problem; they can concede that this is a problem but declare that the maintenance of the problematic situation is necessary in context of a bigger ‘demon’; or, most insidious of all, they can declare that something is already being done about a certain problem while actually doing the exact opposite.

 

Yet despite these important reforms, the battle for gender equality had still not been won…Even by 2011 only 30% of MPs in the British parliament were female.  Across the world, women only constitute 20% of parliamentarians.  Meanwhile, studies show a link between the arrangements of global trade along neoliberal lines and the further impoverishment of women.  

 

Neither has the redistribution of political opportunity for men and woman fully translated into the redistribution of economic opportunity, as rich elites have found other ways of maintaining their power – including ownership of the media, promulgation of rightwing ideologies and the co-opting of the institutions of the centre left.

 

As early as 1918, Sylvia Pankhurst declared that, were a Labour government to be elected, it ‘would be swept along in the wake of capitalist policy’.  Her prediction proved prescient long into the future. Following the rise of neo-liberalism in the 1980s and 1990s, every mainstream political party in Britain signed up to capitalism’s most extreme manifestation.

 

After centuries of struggle for the redistribution of power within the state, campaigners at the turn of the millennium faced a new challenge.  As Joel Bakean’s documentary film The Corporation puts it: ‘150 years ago the business corporation  was a relatively insignificant institution.  Today it is all-pervasive.  Like the church, the monarchy and the Communist Party in other times, the corporation is today’s dominant institution.

 

Whether feudal, capitalist or communist, elites have promoted the view that change had stopped happening as a shroud to disguise the over-concentration of power. Neoliberals in the US in the 1990s such as Francis Fukuyama claimed that the world had already reached ‘the end of history’.  Some declared the Soviet Union a utopia.  As has been quoted, as far back as 1794, Judge Braxfield declared that ‘the British constitution is the best that ever was since the creation of the world and that it is not possible to make it better’. But it is always possible to make things better.  Every time elites abuse power, people use Counterpower to challenge them.

 

Tim Gee – Counterpower


'Disobedience, in the eyes of anyone who has read history, is man's original virtue. It is through disobedience that progress has been made, through disobedience and through rebellion.'

 

Oscar Wilde

 

Freedom is never given voluntarily by the oppressor; it must be demanded by the oppressed

 

Martin Luther King

 

A nonviolent revolution is not a program of seizure of power. It is a program of transformation of relationships ending in a peaceful transfer of power.

 

Even the most powerful cannot rule without the co-operation of the ruled.

 

First they ignore you, then they laugh at you, then they fight you, then you win.

 

Mohandas Gandhi

 

It is not power that corrupts but fear.  Fear of losing power corrupts those who wield it and fear of the scourge of power corrupts those who are subject to it.

 

Aung San Sun Kyi

 

Another world is not only possible, she is on her way. On a quiet day I can hear her breathing.

 

Arundhati Roy

 

We cannot say that in the process of revolution someone liberates someone else, nor yet that someone liberates himself, but rather that human beings in communion liberate each other.

 

Paulo Freire

 

Those who make peaceful revolution impossible make violent revolution inevitable.

 

John F Kennedy


It's hard to argue with these points from http://bit.ly/uJuElQ

 

1. Our global system is unsustainable. It is undemocratic and unjust, driven by profit in the interest of the few.

2. An economic system based on infinite growth, but which relies on finite resources, is leading humanity and the environment to destruction. As long as this system remains in place, people of the world continue to suffer from an increasingly unfair share of income and wealth.

3. We seek a global system that is democratic, just and sustainable. The world’s resources must not go to the military or corporate profit, but instead go towards caring for people’s needs: water, food, housing, education, health, community.

joe taylor said:

Just finished reading a new book (published 2011) that analyses the history of social movements, from the 18th century struggle for the vote in England to the present, to see why some movements fail but others succeed. The answer (and the name of the book) is 'Counterpower' - the power that the 'have-nots' can use to resist the power of the 'haves'...

A nonviolent revolution is not a program of seizure of power. It is a program of transformation of relationships ending in a peaceful transfer of power.

Even the most powerful cannot rule without the co-operation of the ruled.

First they ignore you, then they laugh at you, then they fight you, then you win.

Mohandas Gandhi

_______________________________________________________

This is a good quote. I was inspired by the same message in Gene Sharp's handbook From Dictatorship to Democracy http://www.aeinstein.org/organizations98ce.html  I think you may have given us the link to this some months ago.

This is the key bit it seems to me: Even the most powerful cannot rule without the co-operation of the ruled.

The challenge is to find ways to withdraw cooperation without being slaughtered. They were mainly successful in Tunisia and Egypt, but not in Libya and Syria where the peaceful withdrawal of power got many killed. As soon as the western Occupy movement started I felt it was on these same lines. Here we need to withdraw our cooperation from the financiers and the huge corporations and others who are controlling our global system and driving it to disaster.  So it has been exciting to watch the developments in London at St Paul's where the tussle about violence went on in various quarters and to sense the rising of the spirit linked with the Gene Sharp kind of understanding. 

The sentiment expressed in the paragraph below seems to becoming increasingly widespread.

It is impossible not to look sceptically at neoliberal claims that liberalising markets will lead to prosperity for all, or that the “third way” variant of this, that the introduction of markets to public services will make them more efficient and thus protect them.  It is equally unconvincing now to argue that financial self-regulation and innovation will increase economic stability by spreading risk, or that flexible labour markets and de-unionised workplaces will improve job security.  And even the belief that increasing dependence on capital markets means a parallel increase in democracy, freedom, and equality is no longer credible.  The crisis has shown these neoliberal claims to be ideological rubbish.

 

In and Out of Crisis – Abo/Gindi/Panitch 2010

David Harvey (The Enigma of Capital) addressed the Occupy London rally on the 12th of November.  Attached is a transcript of what he had to say - comments please.

 

Attachments:

Just finished reading ‘In And Out Of Crisis – The Global Financial Meltdown and Left Alternatives’ by Greg Aldo, Sam Gindin and Leo Panitch:

The quotes below are taken in chronological order from the book: (might be an idea to read the last one first!)

It is impossible not to look sceptically at neoliberal claims that liberalising markets will lead to prosperity for all, or that the “third way” variant of this, that the introduction of markets to public services will make them more efficient and thus protect them. It is equally unconvincing now to argue that financial self-regulation and innovation will increase economic stability by spreading risk, or that flexible labour markets and de-unionised workplaces will improve job security.  And even the belief that increasing dependence on capital markets means a parallel increase in democracy, freedom, and equality is no longer credible. The crisis has shown these neoliberal claims to be ideological rubbish. 

The importance of the U.S. state to the marketing of neoliberalsim and the world market as it exists today should already have once and for all dispelled the illusion that capitalist markets can thrive without state intervention. It was through the type of policies the U.S. advanced to promote free capital movements, international property rights, and labour-market flexibility that the era of free trade and globalisation was unleashed.  And this era has been kept going as long as it has by the repeated coordinated interventions undertaken by central banks and financial ministries, under the leadership of the Federal Reserve and the American Treasury, to contain the periodic crises to which such a volatile system of global finance gives rise.

Since at least the election of Ronald Regan in 1980 [Margaret Thatcher 1979), the US and other states [countries] have embraced an ideology of scaling back the role of government in economic life and letting the invisible hand of the unfettered market work its magic. Rhetoric notwithstanding, this has not meant a withdrawal of the state from regulating economic activities nor from an active role in managing class relations. Instead, it has signalled the institutionalisation of public policies and state regulations directed at increasing the power of the dominant capitalist firms in industry as well as financial markets and an enhanced role for markets in determining income distribution and public priorities. This political project has become associated in all parts of the world with the term neoliberalsim – a term now of general derision amongst vast swaths of the world’s population.

Neoliberalsim should be understood as a particular form of class rule and state power that intensifies competitive imperatives for both firms and workers, increases dependence on the market in daily life and reinforces the dominant hierarchy of the world market, with the U.S. at its apex.

The financial crisis of the first decade of the 21st century afforded an opportunity for a genuinely radical government to nationalise the banks and turn them into a democratic public utility. This opportunity was wasted.

Of all 20th century industries, the auto sector had best captured the sway of capitalism and the rise of American dominance over the world market.

At mid-century, with Europe and Japan emerging from the devastation of the war, 80 percent of the world’s cars travelled on North American roads.  In this context, catching up with the U.S. example became a common aspiration across the developed capitalist countries.

In the seventy-seven years before the fateful events of 2008, General Motors was the largest of the large in the auto industry.

The humbling of General Motors as an icon of American culture and power raises various questions and an especially common one has been whether this represents a failure specific to GM and the U.S. auto industry, or speaks to the decline of U.S. manufacturing more generally and with it, American economic power. But, as we’ll argue, a more important issue – because it is so central to the challenging of U.S. power both at home and abroad – is the extent to which the losses imposed on the auto unions reflected a momentous defeat of the broader working class…

Capitalist competition implies winners and losers and a constant restructuring of not just work, jobs and communities, but of class relationships. While competition destroys individual businesses, and may include a period of crisis in particular sectors, and the end of the day capitalists as a class have emerged more powerful out of this process.

For the working classes, however, greater competition meant something quite different. Global ‘competitiveness’ has been the greatest disciplinary force confronting workers (directly in the private sector, indirectly in the public sector): ‘compete or lose your job and livelihood: compete or our country won’t be able to afford social programs.’ As the competition between companies was translated into competition between workers, workers were pushed to identify with their own employer, whilst undermining each other in the desperation to hang on to their jobs. Competition consequently fragmented the working classes. It eroded their one ultimate strength – solidarity.

A crucial part of the strength of U.S. capital and the U.S. state lie in the weakness of its labour movement, which provides, as this crisis has sadly shown, the U.S. elite with the flexibility it needs to solve its problems on terms favourable to it.  Had the U.S. workers demonstrated a capacity to limit concessions or foreclosures, to demand a democratisation of the banks rather than simply ‘fixing’ them, to insist on a radical correction in the gross inequalities that emerged on the way to this crisis, to focus on rebuilding social infrastructures and cities rather than simply ‘stimulus,’ the crisis would have had confronted much deeper uncertainties – and a more ambitious and far-reaching set of alternatives might have reached the public agenda.

If we are to more than hope for the crisis to be over so we can return to a capitalism that didn’t address our needs earlier, and more than passively watch as capitalism narrows our lives even further, then a new historic project must be placed on the agenda. And if this is to happen, organised labour will have to be one of the central agents in advancing it.

It is only through a great deal of ideological obfuscation and re-writing of history that market freedoms can be equated with the development of political freedoms.

But militancy by itself won’t be enough. Public sector unions and services have been under attack for thirty years now and no effective response has developed during that time. That failure is most evident at this moment: given the financial crisis has exposed the spectacular failure of the market and neoliberal governance, it is not the public sector workers who should be on the defensive. It is absolutely necessary to avoid the notion that the ‘new reality’ means that public sector workers must now accommodate and work more closely with the employer to solve the budgetary problems.  This is a dead end: it essentially means the unions giving up. The relationships public sector unions need to deepen are not with governments as employers, as that will only further divide working people.  New relationships need to be built with other workers and social movements.

What unions face today is rooted in the way North American unions failed to organise themselves in much better economic times to prepare themselves for times like the present. Workers are now suffering from this lack of preparation. While corporations have become more radical an aggressive, the labour movement has become more cautious and defensive.  The most important question for the labour movement is to come to grips with those past failures and the need to become as radical as the other side.  If we don’t develop a vision that fundamentally questions the anti-social logic of capitalism, and build collective capacities that can challenge corporate power, things won’t just stay the same.  They are likely to get worse.

This is why it is so important to raise not merely the regulation of finance but the transformation and democratisation of the whole financial system. What is in fact needed is to turn the whole banking system into a public utility so that the distribution of credit and capital would be undertaken in conformity with democratically established priorities, rather than short-term profit.  

If democracy is a kind of society and not just a form of government, the economy – which is so fundamental to shaping our lives – will eventually have to be democratised.

Reducing the number of hours people work every day, week, and year, as a way of avoiding layoffs and opening up new jobs can be very important in certain sectors and is also a valuable solidaristic principal.  But the greatest significance lies in the recognition that effective political participation demands the time to do it – the time to read, think, learn, attend meetings and events, debate, take part in strategising, and engage in organising others.

However deep the crisis, however confused and demoralised the financial elite inside and outside the state, and however widespread the popular outrage against them, this will require hard and committed work by a great many activists.

Here's a video featuring Gerry Epstine from the Peri Institure talking about Neoliberalism and the Undoing of the Welfare State.  http://bit.ly/si2ayc

Robin Smith a former Tory councillor, who is now camped out at St Pauls as part of the occupy movement, recommended  ‘Poverty and Progress’ by Henry George, published 1879, twenty years after the publication of ‘Origin of the Species’ and before the production of automobiles in the United States began in 1895. Back then he could see what was wrong, why it was happening and what to do about it. 

Below are quotes from the book.

 

Yes, in certain ways, the poorest now enjoy what the richest could not a century ago. But this does not demonstrate an improvement – not so long as the ability to obtain the necessities of life has not increased.

 

What we call progress does not improve the conditions of the lowest class in the essentials of healthy, happy human life. In fact it tends to depress their conditions even more.

 

These new forces do not act on society from underneath.  Rather, it is as though an immense wedge is being driven through the middle. Those above are elevated, but those below are crushed.

 

So long as the increased wealth that progress brings goes to building great fortunes and increased luxury, progress is not real. When the contrast between the haves and the have-nots grows ever sharper, progress cannot be permanent.

 

To base a state with glaring social inequalities on political institutions where people are supposed to be equal is to stand a pyramid on its head. Eventually it will fall.

 

The old theory of wages had the support of the highest authorities, and was firmly rooted in common prejudices. Until proven groundless, it prevented any other theory from even being considered.  Similarly the theory that the earth was the centre of the universe prevented any consideration that the earth circled the sun. There is in fact a striking resemblance between the science of political economy, as currently taught, and astronomy prior to Copernicus.

 

We are able to explain social phenomena that have appalled philanthropists and perplexed statesmen all over the civilised world. We have found the reason why wages constantly tend to a minimum, giving but a bare living, despite increase in productive power.

 

As productive power increases, rent (the price of monopoly rising from individual ownership of the natural elements which human exertion can neither produce or increase) tends to increase even more – constantly forcing down wages.


Rent (as understood above) does not in any way, represent any aid or advantage to production. Rent is simply the power to take part of the results of production.

 

Land is required for the exertion of labour in the production of wealth. Therefore, to control the land is to command all the fruits of labour, except only enough to enable labour to exist.


The simple truth, and its application to social and political problems, is hidden from the masses – hidden partly by its very simplicity and in greater part by widespread fallacies and erroneous habits of thought. These lead us to look in every direction but the right one for an explanation of the evils that oppose and threaten the civilised world.

 

In the back of these elaborate fallacies in misleading theories is an active, energetic power. This is the power that writes the laws and moulds thought. It operates in every country, no matter what its political forms may be. It is the power of a vast and dominant financial interest.

 

The great cause of inequality in the distribution of wealth is inequality in the ownership of land.


Unequal ownership of land causes unequal distribution of wealth and because unequal ownership of land is inseparable from the recondition of individual property in land, it necessarily follows that there is only one remedy for the unjust distribution of wealth:

 

We must make land common property.


But this is a truth that will arouse the most bitter antagonism, given the present state of society.

 

Vice and misery, poverty and pauperism, are not the legitimate results of growing populations and industrial development. They follow them only because land is treated as private property. They are the direct and necessary result of violating the supreme law of justice – giving to the excusive possession of a few, what nature has provided for all.

 

The unjust distribution of wealth stemming from this fundamental wrong is separating modern society into the very rich and the very poor. The continuous increase of rent is the price labour is forced to pay for the use of land. It strips the many of wealth they justly earn and heaps it in the hands of the few who do nothing to earn it. The few receive without producing while others produce without receiving. One is unjustly enriched – the other is robbed.

 

Ownership of land is the basis of aristocracy. It was not nobility that gave land, but the possession of land that gave nobility. All the enormous privileges of the nobility of medieval Europe flowed from their position as owners of the soil. This simple principal of ownership produced the lord on one side and the vassal on the other. One having all the rights, the other having none.

 

Of all kinds of slavery, this is probably the most cruel and relentless. Labours are robbed of their production and forced to toil for mere subsistence. But their taskmasters assume the form of inescapable demands. It does not seem to be one human who drives another but ‘the inevitable laws of supply and demand.’ And for this, no one in particular is responsible. Even the selfish interest that prompted the master to look after the well-being of his slaves is lost.

 

It seems to be the inexorable laws of supply and demand that forces the lower classes into the slavery of poverty. And an individual can no more dispute this power than the winds and the tides.

 

But in reality it is the same cause that always has and always must result in slavery:

 

The monopolisation by some of what nature meant for all.


We are so used to treating land as individual property that the vast majority of people never thing about questioning it. It is thoroughly recognised in our laws, manners and customs.

 

The dangerous classes politically are the very rich and the very poor.

 

A tax on land values is the only tax that cannot be passed on to others. It falls only on the landowners. There is no way they can shift the burden to anyone else. Hence, a large and powerful interest is opposed to taxing land values.

 

Businesses do not oppose taxes they can easily shift from their own shoulders. In fact, they frequently try to maintain them. So do other powerful interests that might profit from the higher prices such taxes bring about. A multitude of taxes had been imposed with a view toward private advantage, rather than raising revenue.

 

The ingenuity of politicians has been applied to devising taxes that drain the wages of labour and the earnings of capital. Nearly all these taxes are ultimately paid by that indefinable being, ‘the consumer’.

 

All civilised countries have unequal distribution of wealth that grows steadily worse. The cause… is that ownership of land provides greater and greater power to appropriate the wealth produced by labour and capital as the material progress goes on. We can counteract this tendency by removing all taxes on labour and capital – and putting them on rent.  If we went so far as to take all the rent in taxes, the cause of inequality would be totally destroyed.

 

If it were possible to calculate the full cost of poverty, it would be appalling…Yet spending by government, private charities and individuals combined is merely the smallest item on the agenda. Consider the following items: the lost earnings of wasted labour; the social costs of reckless and idle habits; the appalling statistics on mortality, especially infant mortality, among the poor; the proliferation of liquor stores and bars as poverty deepens; the thieves, prostitutes, beggars and tramps bred by poverty; and the cost of guarding society against them.

 

These are just part of the full burden that unjust distribution of wealth places on the aggregate society. The ignorance and vice produced by inequality show themselves in the stupidity and corruption of government and the waste of public funds.

 

(Tax on land value would mean that) Wealth would no longer concentrate in those who do not produce, taken from those who do. The idle rich would no longer lounge in luxury while those who actually produce settle for the barest necessities…The great cause of inequality - monopoly of land - would be gone.

 

We could eliminate an immense and complicated network of government machinery needed to collect taxes, prevent and punish evasion and check revenue from many different sources.

 

A similar saving would occur in the administration of justice. Much or the business of civil courts arises from disputes over the ownership of land. If all occupants were essentially rent-paying tenants of the state, such cases would cease.

 

Wages would rise and everyone would be able to make an easy and comfortable living. This would immediately reduce…thieves, swindlers and other criminals who arise from the unequal distribution of wealth. This would lighten the administration of criminal law, with all its paraphernalia of police, prisons and penitentiaries. We should eliminate not only many judges, bailiffs, clerks and jailers, but also the great host of lawyers now maintained at the expense of those who actually produce wealth.

 

Governments would change its character and become the administrator of a great cooperative society. It would merely be the agency by which common property was administered for the benefit of all.

 

We are apt to assume that greed is the strongest human motive and that fear of punishment is required to keep people honest. It seems selfish interests are always stronger than common interests. Nothing could be further from the truth.

 

The changes I have proposed would destroy the conditions that distort these impulses. It would transmute forces that now disintegrate society into forces that unite it. Take, for the benefit of the whole community that which growth of community creates. The poverty would vanish.

 

One thing alone prevents harmonious social development: the wrong that produces inequality.

 

Association in equality is the law of human progress.


But the greatest inequality is the natural monopoly given by possession of land.

When population is sparse, ownership of land merely ensures that the just reward of labour goes to the one who uses and improves it. As population becomes dense, rent appears. This institution ultimately operates to strip the producer of wages earned.

 

Once inequality is established, ownership of land tends to concentrate as development goes on. This finally counteracts the force by which improvements are made and society advances.

 

Inequality dried up the strength and destroyed the vigour of the Roman world. Long before Vandal of Goth broke through the legions, Rome was dead at heart.  Great estates – latifundia – ruined Italy. The barbarism that overwhelmed Rome came not from without, but from within. It was the inevitable product of a system that carved provinces into estates for senatorial families. Serfs and slaves replaced independent farmers. Governance became dictatorship, patriotism became subservience… Everywhere inequality produced decay: political, mental, moral and material.

 

Civilisations advance as their social arrangements promote justice. They advance as they acknowledge equality of human rights. The advance as they insure equal liberty of every other person. As they fail in these, advancing civilisations come to a halt and recede.

 

Every pervious civilisation has been destroyed by the unequal distribution of wealth and power. When the first emperor was changing Rome from brick to marble and extending the frontier, who would have said Rome was entering its decline. Yet such was the case.

 

 Yet anyone who looks will see that the same cause that doomed Rome is operating today – with increasing force. The more advanced the community, the greater the intensity. Wages and interest fall, while rents rise. The rich get richer, the poor get poorer and the middle class is swept away.

 

A representative government may become a dictatorship without formally changing its constitution or abandoning popular elections. Forms are nothing when substance had gone. From there despotism advances in the name of the people. Once that single source of power is secured, everything is secured.  An aristocracy of wealth will never struggle while it can bribe a tyrant.

 

When the disparity of condition increases, democratic elections make it easy to seize power. Many feel no connection with the conduct of the government. Embittered by poverty, they are ready to sell their vote to the highest bidder or to follow the most blatant demagogue. One class has become too rich to be stripped of its luxuries, no matter how public affairs are administrated. Another class is so poor that promises of a few dollars will outweigh abstract considerations on election day. A few roll in wealth while the many seethe with discontent at things they don’t know how to remedy.

 

Honest and patriotism are handicapped, while dishonesty brings success. The best sink to the bottom, the worse float to the top. The vile are ousted only by the viler. Unequal distribution of wealth inevitably transforms popular government into despotism. Political parties are passing into the control of what might be considered oligarchies and dictatorships

 

Many believe that there is no honest person in public office; or worse, that if there were one, he or she would be a fool not to seize opportunities. Democratic government is running the course that must inevitably follow under conditions producing unequal distribution of wealth.

 

Civilisations do not decline along the same paths they came up. Governments will not take us back from democracy to monarchy and to feudalism. It will take us to dictatorship and anarchy

 

Invention marches on, our cities expand. Yet civilisation had began to wane when, in proportion to population, we have more prisons, more welfare, more mental illness. Society does not die from top to bottom; it dies from bottom to top. 

 

The evils arising from the unequal and unjust distribution of wealth become more apparent as modern civilisation goes on.

 

Poverty, with all the evils that flow from it, springs from the denial of justice. By allowing the few to monopolise opportunities nature freely offers to all, we have ignored the fundamental law of justice. 

 

Equal political rights will not compensate for denying equal rights to the gifts of nature. Without equal rights to land, political liberty is merely the right to compete for employment at starvation wages.

 

Allowing one person to own the land – on which and from which others must live – makes them slaves. The degree, or proportion, of slavery increases as material progress goes on.

 

This is what turns the blessing of material progress into a curse, what crowds human beings into squalid tenement houses, and what fills prisons and brothels. This is what plagues people with want and consumes them with greed.

 

It is a universal fact – seen everywhere – that the contrast between wealth and want grows as the value of land increases. The greatest luxury and the most pathetic poverty exist side by side where land values are highest.

 

In short, the value of land depends entirely on the power that ownership of land gives to appropriate the wealth created by labour. Land values always increase at the expense of labour.  The reason greater productive power does not increase wages is because it increases the value of land. Rent swallows up the whole gain.

 

That is why poverty accompanies progress.


Progress and Poverty – Henry George

From the onset, this discussion made me realise that I need to know more a lot about Neoliberalsim - I think we all do. 

I'm currently reading 'A Brief History of Neoliberalsim' by David Harvey. 

I will try to pick out relevant snips from the book and post them here. 

Below are the first set of those snips.

Many people are extremely worried about what is happening and what might happen in the future


This book gives penetrating insights into how we got into this position.

>>

Neoliberalsim is in the first instance a theory of political economic practices that proposes that human well being can best be advanced by liberating individual entrepreneurial freedoms and skills within an international framework characterised by strong private property rights, free markets and free trade. The role of the state is to create and preserve an institutional framework appropriate to such practices. The state has to guarantee, for example, the quality and integrity of money. It must also set up those military, defence, police and legal structures and functions required to secure private property rights and to guarantee, by force if need be, the proper functioning of markets. Furthermore, if markets do not exist (in areas such as land, water, education, health care, social security, or environmental pollution) then they must be created, by state action if necessary. But beyond these tasks, the state should not venture. State interventions in markets (once created) must be kept to a bare minimum because, according to the theory, the state cannot possibly possess enough information to second-guess market signals (prices) and because powerful interest groups will inevitably distort and bias state intervention (particularly in democracies) for their own benefit.

Redistributive effects and increasing social inequality has in fact been such a persistent feature of neoliberalisation as to be regarded as structural to the whole project. Gérard Duménil and Dominique Lévey, after careful reconstruction of the data, have concluded that that neoliberalisation was from the very beginning a project to achieve a restoration of class power.

In October 1979 Paul Volker, chairman of the US Federal Reserve Bank under President Carter, engineered a draconian shift in US monetary policy. The long standing commitment in the US liberal democratic state to the principals of the New Deal, which meant broadly Keynesian fiscal and monetary policies with full employment as the key objective, was abandoned in favour of a policy designed to quell inflation no matter what the consequences might be for employment.

Thus began ‘a long deep recession that would empty factories and break unions in the US and drive debtor countries to the brink of insolvency, beginning the long era of structural adjustment’.

And so began the momentous shift towards greater social inequality and the restoration of economic power to the upper class.

The US imperial tradition had been long in the making, and to a great degree defined itself against the imperial traditions of Britain, France, Holland, and other European powers…The paradigm case was worked out in Nicaragua in the 1920s and 1930s,when US marines were deployed to protect US interests…The answer was to find a local strongman…and provide economic and military assistance to him and his family and immediate allies so that they could repress or buy off the opposition and accumulate considerable wealth and power for themselves. In return they would always keep their country open to the operations of US capital and support, and when necessary promote US interests both in the country and the region...

In the post-war period, much of the non-communist world was opened up to US domination by tactics of this sort…The stories told in John Perkins’s Confessions of a Economic Hit Man are full of ugly and unsavoury details of how this was all too often done.

While the consent of local ruling elites could be purchased easily enough, the need to coerce oppositional or social democratic movements associated the US with a long history of largely covet violence throughout much of the developing world.

The IBM and the World Bank thereafter became the centres for the propagation and enforcement of ‘free market fundamentalism’ and neoliberal orthodoxy. In return for debt rescheduling, indebted countries were required to implement institutional reforms, such as cuts in welfare expenditures, more flexible labour market laws and privatisation.

What the Mexico case demonstrated, however, was a key difference between liberal and neoliberal practice: under the former lenders take the losses that arise from bad investment decisions, while under the latter the borrowers are forced by the state and international powers to take on board the cost of debt repayments no matter what the consequences for the livelihood and well-being of the local population. 

In the event of conflict between Main Street and Wall Street, the latter was to be favoured. The real possibility then arises that while Wall Street does well the rest of the US (as well as the rest of the world) does badly…While the slogan was often advanced in the 1960s that what was good for General Motors was good for the US, this had changed by the 1990s to the slogan that what is good for Wall Street is all that matters.

One substantial core of raising class power under neoliberalism lies, therefore, with the CEOs, the key operators on corporate boards, and the leaders in the financial, legal, and technical apparatus that surrounds this inner sanctum of capitalist activity.

While there are obvious links between these sorts of activities and the world of finance, the incredible ability not only to amass large personal fortunes but also to exercise a controlling power over large segments of the economy confers on these few individuals an immense economic power to influence political processes.

In complex societies he [Karl Polanyi] pointed out, the meaning of freedom becomes contradictory and as fraught as its incitements to action are compelling. There are, he noted, two kinds of freedom, one good and the other bad. Among the latter he listed ‘the freedom to exploit one’s fellows, or the freedom to make inordinate gains without commensurable service to the community, the freedom to keep technological inventions from being used for public benefit, or the freedom to profit from public calamities secretly engineered for private advantage.

‘Planning and control are being attacked as a denial of freedom. Free enterprise and private ownership are declared to be essentials of freedom. No society built on other foundations is said to deserve to be called free. The freedom that regulation creates is denounced as un-freedom; the justice, liberty and welfare if offers are decried as camouflage for slavery’.

The idea of freedom ‘thus degenerates into a mere advocacy of free enterprise’, which means ‘the fullness of freedom for those whose income, leisure and security need no enhancing, and a mere pittance of liberty for the people, who may in vain attempt to make use of their democratic rights to gain shelter from the owners of property.

Liberal or neoliberal utopianism is doomed in Polanyi’s view to be frustrated by authoritarianism, or even outright fascism. The good freedoms are lost and the bad ones take over.

How is it then that ‘the rest of us’ have so easily acquiesced in this sate of affairs?

What Gramsci calls 'common sense' (defined as sense held in common) typically grounds consent.

Common sense is constructed out of long standing practices of cultural socialisation often rooted deep in regional or national conditions. It is not the same as 'good sense' that can be constructed out of critical engagement with the issues of the day. Common sense can, therefore be profoundly misleading, obfuscating or disguising real problems under cultural prejudices. Cultural and traditional values (such as belief in God and country or views about the position of women in society) and fears (of communists, immigrants or 'others') can be invoked that mask specific strategies beneath vague rhetorical devices.

An open project around the restoration of economic power to a small elite would probably not gain much popular support. But a programmatic attempt to advance the cause of individual freedoms could appeal to a mass base and so disguise the drive to restore class power. Furthermore, once the state apparatus made the neoliberal turn it could use its powers of persuasion, co-optation, bribery, and treat to maintain the climate of consent necessary to perpetuate its power. This was Thatcher and Reagan’s particular forte…

 

Coercion can produce a fatalistic, even abject, acceptance of the idea that there was and is, as Margaret Thatcher kept insisting, ‘no alternative’.

 

The worldwide political upheavals of 1968, for example, were strongly inflected with the desire for greater personal freedoms. This was certainly true of the students…they demanded freedom from parental, educational, corporate, bureaucratic, and state constraints. But the ’68 movement also had social justice as a primary objective.

 

Values of individual freedoms and social justice are not, however, necessary compatible. Pursuit of social justice presupposes social solidarities and a willingness to submerge individual wants for, say, social equality or environmental justice.

 

Why it is not impossible to bridge such differences, it is not hard to see how a wedge might be driven between them. Neoliberal rhetoric, with its foundational emphasis upon individual freedoms, has the power to split off libertarianism, identity politics, multi-culturalism, and eventually narcissistic consumerism from the social forces ranged in pursuit of social justice through the conquest of state power.

 

Neoliberalism did not create these distinctions, but it could easily exploit, if not foment, them.

In the early 70s those seeking individual freedoms and social justice could make common cause in the face of what many saw as a common enemy. Powerful corporations in alliance with an interventionist state were seen to be running the world in individually oppressive and socially unjust ways.

But capitalist corporations, business, and the market system were also seen as primary enemies, requiring redress if not revolutionary transformation: hence the threat to capitalist class power. By capturing ideals of individual freedoms and turning them against the interventionist and regulatory practices of the state, capitalist interests could hope to protect even restore their position.

In 1971, Lewis Powel, about to be appointed as a Supreme Court judge by Richard Nixon, wrote in a confidential memo to the US Chamber of Commerce that - criticism of and opposition to the US free enterprise system had gone too far and that 'the time has come - indeed it is long overdue - for the wisdom, ingenuity and resources the American business to be marshalled against those who would destroy it'. 'Strength' he wrote, 'lies in organisation, in careful long-range planning and implementation, in consistency of action over an indefinite period of years, in the scale of financing available only through joint effort, and in the political power available only through united action and national organisations'. The National Chamber of Commerce', he argued, 'should lead an assault upon the major institutions - universities, schools, the media, publishing, the courts - in order to challenge how individuals think 'about the corporation, the law, culture and the individual'. US business did not lack resources for such an effort, particularly when pooled.

...the American Chamber of Commerce subsequently expanded its base from around 60,000 firms in 1972 to over a quarter of a million ten years later. Jointly with the National Association of Manufacturers it amassed an immense campaign chest to lobby Congress and engage in research. The Business Roundtable 'committed to the aggressive pursuit of political power for the corporation'...The corporations involved accounted for 'about half of the GNP of the United States' during the 1970s...Think tanks...were formed with corporate backing both to polemicise and where necessary...to construct serious technical and empirical studies and political-philosophical studies in support of neoliberal policies.

 

Nearly half of the financing for the highly respected National Bureau of Economic Research came from the leading companies on the Fortune 500 list. Closely integrated with the academic community, the NBER was to have a very significant impact on thinking in the economic departments and business schools of the major universities.

 

In singling our universities for particular attention, Powel pointed out an opportunity as well as am issue, for these were indeed centres of anti-corporate sentiment. But many students were affluent and privileged, or at least middle-class, and in the US the values of individual freedom have long been celebrated as primary. Neoliberal themes could here find fertile ground for propagation.

 

But exactly how was state power to be deployed to reshape common sense understanding? One line of response to the double crisis of capital accumulation and class power arose in the trenches of the urban struggles of the 1970s. The New York fiscal crisis was an iconic case.

 

As the recession gathered pace, the gap between revenues and outlays in the New York City budget increased. At first the financial institutions were prepared to bridge the gap, but in 1975 a powerful cabal of investment bankers refused to roll over the debt and pushed the city into technical bankruptcy. The bail out that followed entailed the construction of new institutions that took over the management of the city budget. The effect was to curb the aspirations of the city’s powerful municipal unions, to implement wage freezes and cutbacks in public employment and social provision and to impose user fees. The final indignation was the requirement that unions should invest their pension funds in city bonds.

 

This amounted to a coup by the financial institutions against the democratically elected government of New York City, as it was every bit as effective and the military coup that had earlier occurred in Chile. Wealth was redistributed to the upper class in the midst of a fiscal crisis. It was an early, perhaps decisive battle in a new war, the purpose of which was to show others that what was happening in New York could and in some cases would, happen to them.

 

The management of the New York fiscal crisis pioneered the way for neoliberal practices both domestically under Reagan and internationally through the IMF in the 1980s. It established the principal that in the event of a conflict between the integrity of financial institutions on bondholders’ returns, on one hand, and the well being of the citizens on the other, the former was to be privileged.  It emphasised that the role of government was to create a good business climate rather than look to the needs and well being of the population at large.

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