|Home||Switchboard||Unix Administration||Red Hat||TCP/IP Networks||Neoliberalism||Toxic Managers|
May the source be with you, but remember the KISS principle ;-)
Bigger doesn't imply better. Bigger often is a sign of obesity, of lost control, of overcomplexity, of cancerous cells
|News||Neoliberalism||Recommended Links||Globalization of Financial Flows||Neoliberalism Bookshelf||Philip Pilkington: The Origins of Neoliberalism, Part I||Honoring the Death of a Stateless Bastard|
|Frederick Von Hayek||Friedman --founder of Chicago school of deification of market||Neoliberalism as secular religion, "idolatry of money"||Pope Francis on danger of neoliberalism|
|Corporatist Corruption: Systemic Fraud under Clinton-Bush-Obama Regime||Amorality and criminality of neoliberal elite||Audacious Oligarchy and "Democracy for Winners"||The Iron Law of Oligarchy||The Deep State||Resurgence of neo-fascism as reaction on crisis of neoliberalism|
|The Great Transformation||Techno-fundamentalism||Over-consumption of Luxury Goods as Market Failure||Globalization of Corporatism||Greenspan as the Chairman of Financial Politburo||Greenspan humor||Etc|
The Origins of Neoliberalism
Neoliberalism as a break from Keysianism
Nov 14, 2016 | www.theguardian.comThe book was The Constitution of Liberty by Frederick Hayek . Its publication, in 1960, marked the transition from an honest, if extreme, philosophy to an outright racket. The philosophy was called neoliberalism . It saw competition as the defining characteristic of human relations. The market would discover a natural hierarchy of winners and losers, creating a more efficient system than could ever be devised through planning or by design. Anything that impeded this process, such as significant tax, regulation, trade union activity or state provision, was counter-productive. Unrestricted entrepreneurs would create the wealth that would trickle down to everyone.
This, at any rate, is how it was originally conceived. But by the time Hayek came to write The Constitution of Liberty, the network of lobbyists and thinkers he had founded was being lavishly funded by multimillionaires who saw the doctrine as a means of defending themselves against democracy. Not every aspect of the neoliberal programme advanced their interests. Hayek, it seems, set out to close the gap.
He begins the book by advancing the narrowest possible conception of liberty: an absence of coercion. He rejects such notions as political freedom, universal rights, human equality and the distribution of wealth, all of which, by restricting the behaviour of the wealthy and powerful, intrude on the absolute freedom from coercion he demands.
Democracy, by contrast, "is not an ultimate or absolute value". In fact, liberty depends on preventing the majority from exercising choice over the direction that politics and society might take.
He justifies this position by creating a heroic narrative of extreme wealth. He conflates the economic elite, spending their money in new ways, with philosophical and scientific pioneers. Just as the political philosopher should be free to think the unthinkable, so the very rich should be free to do the undoable, without constraint by public interest or public opinion.
The ultra rich are "scouts", "experimenting with new styles of living", who blaze the trails that the rest of society will follow. The progress of society depends on the liberty of these "independents" to gain as much money as they want and spend it how they wish. All that is good and useful, therefore, arises from inequality. There should be no connection between merit and reward, no distinction made between earned and unearned income, and no limit to the rents they can charge.
Inherited wealth is more socially useful than earned wealth: "the idle rich", who don't have to work for their money, can devote themselves to influencing "fields of thought and opinion, of tastes and beliefs". Even when they seem to be spending money on nothing but "aimless display", they are in fact acting as society's vanguard.
role="main" itemtype="http://schema.org/NewsArticle" itemscope="" data-test-id="article-root"> Thatcherism and Reaganism were not ideologies in their own right: they were just two faces of neoliberalism. Their massive tax cuts for the rich, crushing of trade unions, reduction in public housing, deregulation, privatisation, outsourcing and competition in public services were all proposed by Hayek and his disciples. But the real triumph of this network was not its capture of the right, but its colonisation of parties that once stood for everything Hayek detested.
Bill Clinton and Tony Blair did not possess a narrative of their own. Rather than develop a new political story, they thought it was sufficient to triangulate . In other words, they extracted a few elements of what their parties had once believed, mixed them with elements of what their opponents believed, and developed from this unlikely combination a "third way".
It was inevitable that the blazing, insurrectionary confidence of neoliberalism would exert a stronger gravitational pull than the dying star of social democracy. Hayek's triumph could be witnessed everywhere from Blair's expansion of the private finance initiative to Clinton's repeal of the Glass-Steagal Act , which had regulated the financial sector. For all his grace and touch, Barack Obama, who didn't possess a narrative either (except "hope"), was slowly reeled in by those who owned the means of persuasion.Play Video
This is a modal window.Facebook Twitter Pinterest -> What will be the first actions Trump takes as president?
As I warned in April, the result is first disempowerment then disenfranchisement. If the dominant ideology stops governments from changing social outcomes, they can no longer respond to the needs of the electorate. Politics becomes irrelevant to people's lives; debate is reduced to the jabber of a remote elite. The disenfranchised turn instead to a virulent anti-politics in which facts and arguments are replaced by slogans, symbols and sensation. The man who sank Hillary Clinton's bid for the presidency was not Donald Trump. It was her husband.
The paradoxical result is that the backlash against neoliberalism's crushing of political choice has elevated just the kind of man that Hayek worshipped. Trump, who has no coherent politics, is not a classic neoliberal. But he is the perfect representation of Hayek's "independent"; the beneficiary of inherited wealth, unconstrained by common morality, whose gross predilections strike a new path that others may follow. The neoliberal thinktankers are now swarming round this hollow man, this empty vessel waiting to be filled by those who know what they want. The likely result is the demolition of our remaining decencies, -> beginning with the agreement to limit global warming .
Those who tell the stories run the world. Politics has failed through a lack of competing narratives. The key task now is to tell a new story of what it is to be a human in the 21st century. It must be as appealing to some who have voted for Trump and Ukip as it is to the supporters of Clinton, Bernie Sanders or Jeremy Corbyn.
A few of us have been working on this, and can discern what may be the beginning of a story. It's too early to say much yet, but at its core is the recognition that – as modern psychology and neuroscience make abundantly clear – human beings, by comparison with any other animals, are both remarkably social and remarkably unselfish . The atomisation and self-interested behaviour neoliberalism promotes run counter to much of what comprises human nature.
Hayek told us who we are, and he was wrong. Our first step is to reclaim our humanity.The stories you need to read, in one handy email Sign up to The Guardian Today and get the must-read stories delivered straight to your inbox each morning Read more
Hayek softened his opposition to monopolies and hardened his opposition to trade unions. He lambasted progressive taxation and attempts by the state to raise the general welfare of citizens. He insisted that there is "an overwhelming case against a free health service for all" and dismissed the conservation of natural resources. It should come as no surprise to those who follow such matters that he was awarded the Nobel prize for economics .
By the time Thatcher slammed his book on the table, a lively network of thinktanks, lobbyists and academics promoting Hayek's doctrines had been established on both sides of the Atlantic, abundantly financed by some of the world's richest people and businesses , including DuPont, General Electric, the Coors brewing company, Charles Koch, Richard Mellon Scaife, Lawrence Fertig, the William Volker Fund and the Earhart Foundation. Using psychology and linguistics to brilliant effect, the thinkers these people sponsored found the words and arguments required to turn Hayek's anthem to the elite into a plausible political programme.
Feb 11, 2019 | theecologist.orgAn excitable Keith Joseph met with Ralph Harris of the Institute of Economic Affairs and his deputy Arthur Seldon at one of his favourite Westminster restaurants, Lockets, in February 1974.
Heath's intention must have been to give Joseph a chemistry set with which he would hopefully blow himself up.
Joseph was at the time a member of the Shadow Cabinet and the third most influential politician in the Conservative party. He had invited his close friends from the IEA to lunch so he could get their clearance to set up a rival free market think tank.
His new Centre for Policy Studies would be overtly political and use the methods of the Socialist Fabians to win the battle of ideas in favour of radical liberalism within Britain's natural party of government.
This was cloak and dagger politics. An audacious, secret, plan to challenge seize the party leadership, win the forthcoming election and install a new Cabinet dedicated to making Hayek's economic prescriptions official policy for the first time. "My aim was to convert the Tory party," Joseph would later explain.
Joseph would become known even among his closest friends as the "Mad Monk" in part because of the purity and forcefulness of his political thought. He would concede that he was "a convenient madman".
He had relied on Harris's instruction and help in economics and social policy, devouring the stack of books, reports and articles that the IEA recommended over the previous months.
"Harris assured Joseph that he was not troubled by the fact that there would be two organisations promoting roughly the same message. In fact Harris and Seldon could not have been more helpful," records Antony Fisher biographer Gerald Frost.
The CPS was in fact "the logical next step" in the battle against the State. Antony Fisher was just as welcoming of Joseph's bold move and paid a visit "to assure him of his personal support and to offer encouragement".
Joseph was the Marcus Brutus of his time, convinced that disloyally disposing of his leader, Edward Heath, would be good for his party, his city, his empire. He was the leader of this conspiracy.
Strangely considering his part in the internal leadership coup, Lawson would describe his friend Joseph as being: "Tormented by self-doubt, devoid of guile, and with a passion to educate, he laboured under the delusion that everyone else, friend or foe, was as intellectually honest and fundamentally decent, as lacking in malice and personal ambition, as he was."
Heath was deeply suspicious that his colleagues were secretly plotting a leadership bid but gave his approval to the new think tank only half convinced it would study Polish economic policy. "Heath's intention must have been to give Joseph a chemistry set with which he would hopefully blow himself up," said one contemporary.
Joseph recruited Margaret Thatcher as vice chairman of the CPS in May 1974. "His was a risky, exposed position, and the fear of provoking the wrath of Ted and the derision of the left-wing commentators was a powerful disincentive - but I jumped at the chance," Thatcher recalled years later.
"From Keith and Alfred I learned a great deal. I renewed my reading of the seminal works of liberal economics and conservative thought.
"I also regularly attended lunches at the Institute of Economic affairs where Ralph Harris, Arthur Seldon, Alan Walters and others - in other words all those who had been right when we in government had gone wrong - were busy marking out a new non-socialist economic and social path for Britain."
Joseph prescribed Friedrich von Hayek's The Road to Serfdom as required reading. Gerald Frost, was a member of the CPSboard and would hand books and reports to Richard Ryder, Thatcher's political secretary, for her to read over the weekend including the latest output from the IEA.
"Joseph was also responsible for ensuring that Mrs Thatcher struck up relations with the IEA directors, and through them, Hayek and Friedman," recalls Frost.
The new Conservative think tank operated on an annual budget of £150,000 from private donors - which included the largess of the tobacco companies.
The official founding meeting of the CPS was held in Room G of the House of Commons on 12 June 1974. Joseph was joined by Thatcher and Sherman and also an industrialist named Nigel Vinson.
Vinson had written an article for the IEA and shortly after was called by Fisher and taken to lunch. Vinson was invited by Fisher to join the board of trustees of the IEA.
Vinson agreed because he "admired him hugely". Thirty years later he told me: "That's the link between the IEA and the Centre for Policy Studies: that's me. I, Maggie Thatcher and Keith Joseph, we were the first three directors of the Centre for Policy Studies."
The IEA, he explained, wanted to form opinions over decades and also protect the charitable status as educational rather than party political. The CPS, on the other hand, wanted to transform British politics in the next months and years.
Joseph went on a speaking tour while Britain was in tumult. Edward Heath had taken on the mining unions and lost.
The election in February had delivered a hung parliament and when negotiations between the Conservatives and Liberals collapsed, Labour formed a minority government. Harold Wilson and his Labour party won the second general election of the year, on 10 October 1974, but only by three votes.
"The result was much less of a disaster for the Tories than it might have been," according to Geoffrey Howe, who would later become chancellor under Thatcher. "We had lost, certainly. But disaster had been averted".
It was well understood that Heath would not last long as Tory leader. After the election he put Thatcher in charge of housing, and she in turn asked Nigel Lawson to join her clique.
Lawson was born in Hampstead, now one of the most desirable parts of the capital, in March 1932. His father was a successful City of London tea merchant and his mother's father was a wealthy stockbroker.
His childhood home was "complete with nanny, cook and parlourmaid". Lawson during his formative years immediately after the war developed the distinctive distrust that would make him amenable to the free market philosophy.
"It seemed to me that in every respect the socialism the Labour Government was seeking to put into practice went against the grain of human nature - not least its Utopian disregard of original sin or of what Anthony Quinton has called 'man's moral and intellectual imperfection'."
Lawson won a maths scholarship and went up to Oxford University to study philosophy, politics and economics under the tutelage of professor Roy Harrod, an ardent Keynesian.
He specialised in philosophy and was influenced by the Linguistic Analysis school which would prove a useful foundation for his elegant rhetoric during his political career.
He joined Chatham, the "somewhat decadent high Tory dining club" and played poker. After university he joined the navy and in 1955 married Vanessa Salmon, a wealthy tobacco heiress. He then joined the Financial Times as an oil correspondent.
His son Dominic, currently a climate skeptic columnist, and his celebrity daughter Nigella, were both born during this period. Lawson then moved from the newsroom to the political backroom.
Oliver Poole, chairman of the FT and of the Conservative party, recognised his shrewdness and way with words hired him as a speechwriter to Harold MacMillan, the prime minister. Lawson would edit the right-wing Spectator and then the city pages of the newly launched Sunday Telegraph when in 1970 he stood unsuccessfully as an MP for Slough.
He was finally elected to Parliament on the eve of his 42nd birthday in 1974 and in the same year had a hand in drafting the Conservative party manifesto, committed the Tories to creating an ministry for energy and then found himself in Thatcher's policy group.
"This was my first experience of working with Margaret," Lawson would note. The proximity to Thatcher meant proximity to Joseph who at that time was the free market cabal's great hope for leadership.
Lawson recalled: "Keith was the founder member of the group of Tory radicals which, under Margaret's leadership, were the government's driving force during the first two Thatcher parliaments. The only other full members of that group were Geoffrey Howe, Norman Tebbit and myself."
Delinquents and Denizens
Howe made it clear that he wanted Joseph to join the leadership. "I [told] Joseph that he would have our support if he chose to stand, and no doubt others were doing the same. Keith seemed willing to accept the challenge."
But then disaster. Joseph would during the course of one speech wreck his leadership ambitions on the rocks of public good will and tolerance. "The balance of our population, our human stock is threatened", Joseph warned at Edgbaston in October 1974.
"A high and rising proportion of children are being born to mothers least fitted to bring children into the world and bring them up."
He continued: "Many of these girls are unmarried, many are deserted or divorced or soon will be. Some are of low intelligence, most of low educational attainment. They are producing problem children, the future unmarried mothers, delinquents, denizens of our borstals, sub-normal educational establishments, prisons, hostels for drifters!"
The blame for this apparent malaise was clear. "The Socialist method would take away from the family and its members the responsibilities which give it cohesion".
Almost before he had sat down after the address there was a storm of protest across the country. Many working class families were deeply offended and Joseph was "accused of being a racist and an advocate of eugenics".
The speech would in fact do for Joseph just as the "rivers of blood" had killed the political career of his close friend and fellow IEA advocate Enoch Powell years earlier. He was no longer a serious contender for the Conservative leadership and future prime minister.
"Keith, naive rather than deliberately provocative, was genuinely surprised by the fuss," according to Howe. "Sadly, I concluded that Keith's judgment was too erratic for him to be entrusted with leadership of the party." [Howe, 1994: 89].
Hostility to Women
Shortly after the speech a humbled Joseph called at Thatcher's offices at the Houses of Parliament. "I am sorry," he told his unofficial campaign leader. "I just can't run. Ever since I made that speech, the press has been outside the house. They have been merciless. My wife can't take it and I have decided I just can't stand."
The free market advocates had to decide what to do. They were deeply unhappy at the prospect that Heath and his national consensus would grind on for ever. Thatcher's ambitions were limited to that of chancellor, especially because of the hostility to women that dominated the Conservatives at that time. Her husband, Denis, had sold the family oil business to Castrol in the 1950s for what would today be many millions.
She was therefore comfortably off enough to risk everything. "Look, Keith, if you're not going to stand," she said finally. "I will." Thatcher's victory in the election for the Tory leadership was decisive. Two days later she met with the 1922 Committee of Conservative back bench MPs. "The room was packed," Howe recalls. "Tears came to my eyes. The Conservative Party had elected its first woman leader. By her almost reckless courage she had won their support, if not yet their hearts. A new bond of loyalty had been forged."
Thatcher quickly assembled her team. She surprised almost everyone by making Geoffrey Howe, the IEA supporter and member of the Mont Pelerin Society, her chancellor and therefore putting him in charge of the country's economy.
In doing so, she looked over Keith Joseph, although he remained at her side as a policy advisor. Howe concluded: "Keith Joseph was widely, and rightly, seen as the man who had blazed the trail for Margaret's victory."
She then recruited a team of young, privately-educated free market thinkers to help her meet the terrifying prospect of confronting Harold Wilson - still a "cunning and attractive parliamentary performer" - in the House of Commons.
The Gang of Four was led by Nigel Lawson.
Adam Curtis, the BBC filmmaker, captured the significance of this moment in the transformation of British political life. "She turned to the Institute of Economic Affairs to create the policies for a future government. What Fisher and Smedley had dreamt of twenty years before had finally happened.
"Once upon a time their Think Tank had been marginalised and despised - now it was at the centre of a counter-revolution that was about to triumph."
Brendan Montague is editor of The Ecologist, founder of Request Initiative and co-author of Impact of Market Forces on Addictive Substances and Behaviours: The web of influence of addictive industries (Oxford University Press) . He tweets at @EcoMontague. This article first appeared at Desmog.uk .
Feb 11, 2019 | jacobinmag.com
- An interview with
- Stephanie L. Mudge
ince the late 1970s political parties all over the world have embraced a politics of free markets, privatization, and financialization. While promising freedom, this political project -- typically referred to as neoliberalism -- has brought record levels of economic inequality and significant democratic retrenchment, particularly in the advanced capitalist world.
Scholars often explain this shift by pointing to the victory of the New Right -- personified by figures like Ronald Reagan and Margaret Thatcher. But a new book by sociologist Stephanie Mudge tells a different story.
In Leftism Reinvented: Western Parties from Socialism to Neoliberalism , Mudge looks at left parties in advanced capitalist countries over the last century and shows how the experts aligned with those parties pushed them in the direction of spin doctors and markets. In the process, left parties' ability to represent the interests of their own working-class constituencies was eroded -- and ordinary people were shut out of the halls of power.
Political organizer and socialist activist Chase Burghgrave recently spoke with Mudge about her new book, the role of experts in democratic societies, and whether a more vibrant, egalitarian politics is possible.
CB You state at the beginning of your book that leftism actually went through two reinventions in the last century, first from socialist to Keynesian , and then from Keynesian to neoliberal . Why did you think it was important to analyze both of these reinventions within leftism? SM The short answer is that the second reinvention couldn't have happened without the first.
The longer answer is that socialism, Keynesianism (or what I call "economistic leftism"), and neoliberalism are not just political ideologies floating in the ether; they emerged out of certain institutional arrangements.
Economistic leftism was grounded in a strong, and historically novel, relationship between academic economics professions and left parties. This relationship was what made the Democratic Party "left," in a Keynesian sense, in the 1930s and 1940s. And this relationship was also key to the move from Keynesianism to neoliberalism -- after all, both systems of thought were primarily formulated inside economics professions.
Now, I hasten to add that neither economistic nor neoliberal leftism should be understood as left parties or politicians simply parroting the things economists say. But once left parties came to depend on economics, it did matter in a whole new way how economists saw things. CB You compared four political parties of the Left in your book: the British Labour Party, the German Social Democratic Party (SPD), the Swedish Social Democratic Party (SAP), and the US Democratic Party. Why did you think it was important to study leftism's trajectory through these four parties? And given that the Democratic Party was never a socialist party, why do you think the Democratic Party should be studied in an analysis of socialism's eventual transformation into neoliberalism? SM
I had pretty specific historical reasons for the parties I included in the book. For starters, I only wanted to deal with parties that were more or less continuous organizations for the whole twentieth century (this is a little complicated for the German SPD, which was banned in Nazi Germany, but in fact it did survive in exile during that time).
I also wanted to make sure that I included parties that have been especially influential internationally -- which varies across time periods. The German SPD was the first, and hands down the most powerful, mass party of the socialist left at its founding in 1875, so it had to be included if you wanted to understand the socialist period. The Swedish SAP then became the most successful social-democratic party in the West in the wartime and post–World War II periods and was very influential internationally for that reason. The British Labour Party, meanwhile, became very important when it came to power after World War II, and was a driver of the internationalization of "third way" politics in the 1990s.
The Democratic Party is trickier, because of its very different history. It has always been a mass party in a certain sense, but not a socialist or ideological one. I include it because, when the leading liberal or New Deal faction of the Democratic Party embraced Keynesianism around the time of the 1937 recession, it became somewhat comparable to social-democratic and labor parties. And, last but not least, in the 1990s the Democratic Party was a major exporter of "third way" politics to Europe and elsewhere. So that is why it needed to be part of the story. CB At the center of your analysis of leftism's reinventions are political parties and people you call "party experts." Why are party experts important for explaining the trajectory of Western leftism over the last century? SM First, a definition is in order: I conceive of party experts very broadly, as the people in and around parties who make themselves valuable as strategists, speechwriters, and analysts -- that is, people who spend their time producing arguments about how things are and what parties and governments should do about it. The focus is on what people do, or the role they play, inside parties, regardless of their formal training, credentials, positions, or titles. So a party expert could be a consultant, journalist, economist, or politician, or anything else.
The reason party experts are important is that they shape what's on offer in democratic politics -- that is, what is political, or what it is possible to vote for . So, it matters a lot how party experts see things.
In the book I make the argument that party experts matter in a special way in left politics. Historically speaking, left parties play a very special role because they claim to be the best representatives of poor, disempowered, and disenfranchised groups -- that is, groups that lack time, money, connections, and other resources that facilitate full political participation. So left party experts articulate the interests of the least powerful in democratic politics. This is a very, very important responsibility. CB I was surprised reading your book to find that many of the party experts of early left parties came out of socialist associations, clubs, left newspapers, and journals. How was this background important for early party experts? SM Yes, this is sort of surprising, especially from a present-day perspective. Politics today is absolutely saturated with professionals -- consultants, strategists, think tank policy specialists, media talking heads. But it was not always thus. It's very clear that in the late 1800s and early 1900s, journalists and newspapermen were the most important party experts, especially on the Left. In the book I call these figures "party theoreticians," because they often wrote and edited for journals and newspapers that were party-supported, and so they depended on political parties to make a living.
Party theoreticians were important for a few reasons. First, if we go back far enough to recognize the tremendous importance of journalists in the production of socialist theory -- which describes many of the most important early socialist and Marxian intellectuals -- we have a very useful analytical starting point. We can trace their origins (how they became party experts) and what happened to them: why did they decline, such that we're now surprised to find such a figure at all? And, of course, we can ask whether the fact that party theoreticians were party-dependent journalists mattered for how they saw things.
They were also important because journalists changed the course of political history. It's not clear that Marxism specifically, or socialist theory more generally, could have become the basis of an enduring international discussion without them. Marx himself was academically trained, but much of his writing was done as a journalist . Some argue that the camaraderie, collaboration, cross-criticism, and political engagement that characterized life as a journalist in the mid to late 1800s directly informed the socialist and Marxian imaginary. So if we agree that socialist theory has been one of the most important lines of thinking in modern history, then we should also agree that party-dependent and party-affiliated journalists are among history's most important intellectual figures.
There is one more reason the party theoretician is important, which bears on politics today. The fact that journalists' past influence is surprising to us now shows that perceptions of "experts" or "expertise" are both historically variable and politically determined. There is a lesson in this: contemporary political parties have a special capacity to consecrate (in a sense, to make ) experts, regardless of what kind of credentials, schooling, skills, or professional positions people have. They can valorize certain types of skills, forms of knowledge, and modes of communicating; they can also, of course, exclude or marginalize.
Left parties should take this capacity more seriously. There are too many wonks, strategists, and talking heads, and too few people who don't have fancy credentials but do have firsthand knowledge of suffering in their communities, featured in today's political debates. Maybe if left parties took their capacity to make experts more seriously, they could cultivate a more inclusive and representative politics. CB How did this relationship between left political parties and the economics discipline form, and what were its effects? SM In the book I argue that a new "interdependence" between mainstream economics professions and left parties formed during the Great Depression and the wartime period. There were a few reasons this happened.
One is that everyone agreed that there were big economic problems, but economic facts were matters of dispute (remember that this period predates widely available, standardized economic statistics). So there was a great deal of political demand for people who could pinpoint, for instance, the scale and causes of unemployment.
Another cause was located in economics: economics professions (which were then much smaller, and still in the making) attracted lots of new students who were interested in problems of poverty, labor relations, income distribution, and unemployment, but those students often found that economics professors wouldn't (or couldn't) speak to those concerns. This kicked off a sort of generational rebellion, and new kinds of economists were born (there are similar things happening now, by the way).
Third, in Western Europe, left parties were becoming established enough to invest in recruiting a younger, college-educated generation of leadership. In the Democratic Party, this kind of recruitment began via FDR's campaign (in the making of the famed " Brain Trust ").
So, in sum, in the 1920s and 1930s, a new generation of technically adept economists who spoke to left political concerns were in the making, even as left parties formed closer ties with universities and economics professions.
The effects, I think, were tremendous. In a sense, interdependence made "Keynesianism" mainstream -- that is, it helped Keynesian economics become orthodoxy. Interdependence also underpinned left parties' ability to form coalitions, win elections, and govern postwar economies. Last but not least, interdependence created a sort of backdoor into influencing left politics -- through economics professions, rather than through parties. CB The party experts that came to replace socialist party theoreticians had what you refer to as a "Keynesian ethics." What are "Keynesian ethics," and where did they come from? SM "Keynesian ethics" refer to the way left parties' dominant economic experts in the 1960s -- people I call "economist theoreticians" -- saw economists, politics, and the relationship between the two. The hallmark of the Keynesian ethic was an assumption that the economist's job was to provide strategically useful analysis and advice -- that is, advice that helped left parties hold together coalitions, deal with the demands of organized labor, facilitate negotiation, support redistributive and welfarist policies, and appeal to broader publics. In other words, "good" economic advice was also politically useful .
The sociological argument here is that the Keynesian ethic was linked to economist theoreticians' situation: they had one foot in left parties and the other in the economics profession. In other words, Keynesian ethics expressed economists' very real experience of being prominent economists and also political strategists, advisers, or government appointees. For people who had this experience, Keynesian ethics were common sense. CB Keynesian economist theoreticians were displaced within the left political parties when Keynesian economics as a discipline went into crisis in the 1970s. Why did this happen, and what kind of party expert replaced them? SM The standard answer is that "stagflation" -- increasing rates of both unemployment and inflation in the 1960s and 1970s -- killed Keynesianism, because it confirmed monetarist arguments (in particular, Milton Friedman's). So stagflation was proof that Keynesianism was a faulty science, and Keynesian economists were faulty scientists.
But the actual history is much more complicated. Economic events are real -- if gas prices are suddenly really high, that's pretty clear to everyone -- but interpreting what those events mean is a whole different thing. People do the interpretation, and people always have investments. In the book I point out that the stagflation-killed-Keynesianism narrative was produced by people with investments -- sometimes political, sometimes professional, and sometimes both.
The stagflation critique was political, not just scientific. And, among economists, those who declared Keynesian economics dead in the 1970s were academics, financial economists, international economists, and sometimes conservative or center-right-party-affiliated economists -- they were, in other words, not left-party-affiliated economist theoreticians. So the stagflation-killed-Keynesianism narrative also had a professional aspect to it -- that is, it was partly an "ivory tower" critique of economists who were too politically involved, and therefore not scientific enough. And that critique clearly won, which fundamentally changed the economics profession by killing Keynesian ethics.
So, what comes next -- to whom did left parties turn? They turned to new kinds of economists, who saw the world, and their role in politics, in a very different way. In the book I call these new kinds of economists "TFEs" (which stands for Transnational, Finance-oriented Economists). I argue that TFEs were not "neoliberals," but they had what we might call "neoliberal ethics": they saw their responsibilities in terms of expanding and sustaining markets (a term that is sometimes code for specifically financial markets), even if this worked directly against the interests of left constituencies -- and, by extension, left parties. CB Do you think the growth of neoliberalism is better explained by left parties' acceptance of neoliberalism than the political victory of the Right? SM
Yes. Right parties have never pretended to be representatives of the disempowered or advocates of policies that insulate people from market forces. The Right's embrace of free markets in the 1980s was important, but it was not surprising. And I think it's disputable that this was really a popular move, electorally speaking -- this was a period of growing political alienation and declining turnout across the board. In this context, left parties were the only political force that was capable of critically engaging with market logic. But they did the opposite of this in the 1990s.
I think this had electoral and cultural consequences. Electorally, the "losers" of "globalization" -- that is, a whole lot of people, including whole communities -- ended up with no party that spoke for them. Culturally, criticism of the neoliberal order was marginalized and hived off as a province of the "radical" left, rather than being the stuff of mainstream political discourse -- where it should have been all along. CB You write that the growth of transnationalized, finance-oriented economists (TFEs) and left party political strategists and policy wonks are actually related. Why is that? SM
TFEs were left party advisers who took it for granted that markets were forces "out there." They specialized in how to keep markets happy and reasoned that market-driven growth was good for everyone. But all of this was built on half-truths. First: markets, especially of the financial sort, become forces "out there" if humans construct them, insulate them from public or government oversight, and prop them up when they fail. Left parties in government in the late 1990s and early 2000s, with the input of TFEs, did exactly this. Second: what's good for markets is not necessarily good for families, communities, young people, older people, wage-earners, or victims of discrimination -- among others. This is especially true if by "markets" we really mean financial markets. Recent history is proof enough on both of these points.
So what do left parties do if they no longer have a way of responding to their constituencies' economic concerns, but they still want to win elections? They turn to spin: that is, they try to build appeal by marketing rather than substance. This is a sort of functional argument in the book: TFEs represented markets instead of constituents, and created a new need for strategic expertise. But it wasn't enough, and left political coalitions disintegrated. CB What have been the electoral consequences of TFEs and strategists, of this new generation of party experts in left parties? SM
In short: disastrous. Left politics has to speak for actual people, not a fictional ideal-type "mainstream" or "median" voter. Left parties' turn to markets, spin, and strategy is a symptom of a failure of meaningful representation. Voters know the difference between marketing and substance: sooner or later people see the game for what it is, and they lose faith. I think recent history is proof enough on this, too. CB You seem to indicate in your book's conclusion that what Western left parties need are a new generation of party experts capable of giving voice to the voiceless and acting as intermediaries between parties of the Left and those they are supposed to represent. What kind of party expert do you hope replaces TFEs, political strategists, and policy wonks? SM
This is the big question, isn't it? The short answer is that left politics needs experts who make spin unnecessary. Left politics should have intuitive appeal because it speaks to people's real needs and concerns.
That said, I don't think new experts will magically cure the ills of left politics. Nor is it my place to say who the next left party experts should be. I think that party experts can be anyone -- and maybe, in the current moment, left parties should be dedicating their resources to playing the long game by radically broadening the profiles of the people we consider "experts."
But I will say this: it is absolutely essential that left parties cultivate people's ability to understand, and critically engage with, the structure and logic of contemporary financial capitalism. I think Alexis de Tocqueville once said that you have to "educate democracy." I would give this a Marxian twist: you have to educate capitalist democracy. There can be no left politics without a shared understanding of today's specific economic circumstances, which are not like the circumstances of the 1930s or the 1970s. We live in a complicated world that is dominated by finance and holders of financial wealth, and this world needs to be unmasked.
And, to be honest, I'm skeptical that the contemporary economics professions can lead the way here, because they operate "on high" -- they speak a highly specialized language that is designed to be exclusive, not inclusive; they are constrained in the kinds of questions they can ask and the techniques they can use to answer them. So, maybe I should modify my previous statement: left parties should be dedicating their resources to cultivating critical economic analysis and radically broadening the profiles of the people we consider "economists." About the Author
Stephanie L. Mudge is an associate professor of sociology at the University of California, Davis and the author of Leftism Reinvented: Western Parties from Socialism to Neoliberalism .
Dec 23, 2018 | failedevolution.blogspot.comFrom David Harvey's A Brief History of Neoliberalism
Part 10 – How Margaret Thatcher systematically destroyed the British industry along with the trade unions
While there were many elements out of which consent for a neoliberal turn could be constructed, the Thatcher phenomenon would surely not have arisen, let alone succeeded, if it had not been for the serious crisis of capital accumulation during the 1970s. Stagflation was hurting everyone. In 1975 inflation surged to 26 per cent and unemployment topped one million. The nationalized industries were draining resources from the Treasury.
This set up a confrontation between the state and the unions. In 1972, and then again in 1974, the British miners (a nationalized industry) went on strike for the first time since 1926.
The miners had always been in the forefront of British labour struggles. Their wages were not keeping pace with accelerating inflation, and the public sympathized. The Conservative government, in the midst of power blackouts, declared a state of emergency, mandated a three-day working week, and sought public backing against the miners. In 1974 it called an election seeking public support for its stand. It lost, and the Labour government that returned to power settled the strike on terms favourable to the miners.
The victory was, however, pyrrhic. The Labour government could not afford the terms of the settlement and its fiscal difficulties mounted. A balance of payments crisis paralleled huge budget deficits. Turning for credits to the IMF in 1975–6, it faced the choice of either submitting to IMF-mandated budgetary restraint and austerity or declaring bankruptcy and sacrificing the integrity of sterling, thus mortally wounding financial interests in the City of London. It chose the former path, and draconian budgetary cutbacks in welfare state expenditures were implemented . The Labour government went against the material interests of its traditional supporters. But it still had no solution to the crises of accumulation and stagflation. It sought, unsuccessfully, to mask the difficulties by appealing to corporatist ideals, in which everyone was supposed to sacrifice something for the benefit of the polity.
Its supporters were in open revolt, and public sector workers initiated a series of crippling strikes in the ' winter of discontent ' of 1978. ' Hospital workers went out, and medical care had to be severely rationed. Striking gravediggers refused to bury the dead. The truck drivers were on strike too. Only shop stewards had the right to let trucks bearing "essential supplies" cross picket lines. British Rail put out a terse notice "There are no trains today" . . . striking unions seemed about to bring the whole nation to a halt. '
The mainstream press was in full cry against greedy and disruptive unions, and public support fell away. The Labour government fell, and in the election that followed Margaret Thatcher won a significant majority with a clear mandate from her middle-class supporters to tame public sector trade union power .
The commonality between the US and the UK cases most obviously lies in the fields of labour relations and the fight against inflation. With respect to the latter, Thatcher made monetarism and strict budgetary control the order of the day. High interest rates meant high unemployment (averaging more than 10 per cent in 1979–84, and the Trades Union Congress lost 17 per cent of its membership in five years ). The bargaining power of labour was weakened.
Alan Budd, an economic adviser to Thatcher, later suggested that ' the 1980s policies of attacking inflation by squeezing the economy and public spending were a cover to bash the workers ' . Britain created what Marx called ' an industrial reserve army ', he went on to observe, the effect of which was to undermine the power of labour and permit capitalists to make easy profits thereafter. And in an action that paralleled Reagan's provocation of PATCO in 1981, Thatcher provoked a miners' strike in 1984 by announcing a wave of redundancies and pit closures (imported coal was cheaper).
The strike lasted for almost a year, and, in spite of a great deal of public sympathy and support, the miners lost. The back of a core element of the British labour movement had been broken. Thatcher further reduced union power by opening up the UK to foreign competition and foreign investment. Foreign competition demolished much of traditional British industry in the 1980s –– the steel industry (Sheffield) and shipbuilding (Glasgow) more or less totally disappeared within a few years, and with them a good deal of trade union power.
Thatcher effectively destroyed the indigenous nationalized UK automobile industry, with its strong unions and militant labour traditions, instead offering the UK as an offshore platform for Japanese automobile companies seeking access to Europe. These built on greenfield sites and recruited non-union workers who would submit to Japanese-style labour relations.
The overall effect was to transform the UK into a country of relatively low wages and a largely compliant labour force (relative to the rest of Europe) within ten years. By the time Thatcher left office, strike activity had fallen to one-tenth of its former levels. She had eradicated inflation, curbed union power, tamed the labour force, and built middle-class consent for her policies in the process .
[ 1 ] [ 2 ] [ 3 ] [ 4 ] [ 5 ] [ 6 ] [ 7 ] [ 8 ] [ 9 ] [ 11 ]
Dec 30, 2018 | www.europeanfinancialreview.com
Neoliberalism, the Free Market, and the Decline of Managerial Capitalism
April 23, 2014 • EUROPE , WORLD , Economic Thoughts , Commentary , Business & Economy , Politics & Policy , Eurozone Crisis & DebateTwitter Facebook LinkedIn Google+ Pinterest Line Viber WhatsApp
By Alexander Styhre
Neoliberalism is a most troubled term, one that denotes a variety of ideologies, beliefs, policies and practices. This article outlines some of the changes concerning corporate governance, managerial control, and employee relations and points at the interrelations between the scholarly debates and theoretical contributions, macroeconomic conditions, and political agenda all being part of the century-long history of neoliberalism.
The roots of neoliberalism runs deep in Western thinking and the history of the term is more complex than is generally recognized, especially among those who associate the term with laissez-faire policies and what at times has been rejected as "market fundamentalism." Liberalism as a political and economic term is of British origin, but the neoliberal tradition of thinking derives from the continent, and from Austria and Germany in particular. 1 The Austrian School of Economics, represented by Friedrich von Hayek and Joseph Schumpeter and the so-called Ordo-liberals at Freiburg University in Germany represent two distinct branches of economic liberalism. While Hayek early on warned against an expanded role of the state as the central planner of economic activities, the German group of liberal economists was more ready to recognize the role of the state as the legitimate regulator of the economy.
Hayek was a peripheral figure in the economic profession in the interwar period, but the anti-Keynesian sentiments at London School of Economics, best represented by the economist Lionel Robbins, served to advance Hayek as an alternative to the widely endorsed Keynesian economic theory and its application in policy. In 1950, Hayek was offered a position at LSE on the basis of a private donation. A few years earlier, in 1947, Hayek had founded the Mont Pèlerin Society (MPS), a community of intellectuals including economists such as Frank Knight, Milton Friedman, and Lionel Robbins and the philosopher Karl Popper. This group was committed to advancing a liberal economic agenda and to counteracting collectivist solutions to economic problems. For more than two decades, MPS was operating out of the limelight as Keynesianism effectively enabled economic growth and handled the issue of the distribution of economic resources through the use of progressive taxation in the emerging welfare states. In both economics departments and in policy-making quarters, Keynesianism became highly influential, at times hegemonic. However, by the mid-1960s, the profit rates started to decline in American industry and during the first oil crisis in the 1970s, caused by political conflicts, industry's profit rates sharply declined as energy costs soared.
Liberalism as a political and economic term is of British origin, but the neoliberal tradition of thinking derives from the continent, and from Austria and Germany in particular
The remainder of the 1970s were characterized by the new phenomenon of stagflation , high inflation in combination with rising unemployment, and the new monetarist economic theory advocated by Milton Freidman proposed a high interest-rate policy to curb inflation and to promote economic growth. Paul Volcker, the new chairman of the Federal Reserve named by President Carter, announced a high interest rate policy that would last well into the 1980s. By the mid-1970s, the predominant Keynesianist economic policy came under attack and neoliberal intellectuals could advance their positions.
The triumph of neoliberalism in the 1980s was caused by both macroeconomic and political changes in American society. First, the combination of high overseas savings, primarily in Japan reporting significant trade surplus, an overrated dollar, and the high-interests policy of the Fed led to an inflow of capital into the American economy, creating an oversupply of capital in the 1980s. 2 In addition, Ronald Reagan was elected president in 1980 on the basis of a pro-business agenda, and the Reagan Administration recruited economic advisors and co-workers from neoliberal and neoconservative think tanks that were either formed. or significantly increased their budgets, in the 1970s, as private capital owners donated money to advance free market policies. The new administration wanted to promote economic growth by implementing new regulatory policies based on the idea of the virtues of "small governments" as prescribed by Hayek's work published during the war years and thereafter. One of the key targets in this neoliberal framework were the trade unions, which were widely regarded as representing a collectivist solution that poorly fitted with the free-market policy advocated by neoliberal intellectuals. In addition, substantial tax reforms in the 1980s were justified on the basis of what was branded "trickle-down economics" by its critics, the idea that reduced taxes would create their own economic momentum as the supply of capital would "trickle down" the economic system and generate economic growth through increased demand.
By the mid-1980s, a wave of hostile takeovers strongly contributed to the decline in managerial capitalism, the economic regime characterized by large, public corporations run by professional managers representing various functional domains of expertise, and promoted a shift to "investor capitalism.
The tax-reforms reduced the federal income but the inflow of foreign capital into the American economy enabled the Reagan Administration to eat the cake and have it too: while Reagan was fond of speaking of "rolling back the state," he had larger budget deficits than any other post-World War II president, and government bonds served to finance the sharp increase in military spending in the 1980s. In fact, the issuing of government bonds closely followed the budget deficits in the Reagan era. 3
The new economic advisors, equipped with the new finance theory, advocated a liberalization of regulatory frameworks enabling new financial operations. By the mid-1980s, a wave of so-called hostile takeovers strongly contributed to the decline in managerial capitalism, the economic regime characterized by large, public corporations run by professional managers representing various functional domains of expertise, and promoted a shift to "investor capitalism," an economic regime closely bound up with the emergence of an increasingly dominant finance industry. As the American economy overflowed with capital, there were opportunities for a new class of professional finance professionals to raise capital, to buy large conglomerate firms being underrated after 1970s bear markets, and to divest them. Permissive regulators endorsed economic theories that regarded hostile takeovers as a legitimate mechanism serving to eliminate poorly managed firms with low-growth opportunities and therefore playing a key role in renewing and invigorating the economy. Such theoretically logical arguments were, however, not supported by empirical evidence as it was primarily sound and well-functioning companies that were subject to hostile takeover bids. 4
Regardless of the legitimacy of the new forms of financial engineering, strongly dependent on the ability to issue junk bonds popular among the new generation of finance industry actors such as Michael Milken, the new threat to corporate survival made CEOs and directors aware of the need to pay close attention to the market valuation of the stock. The popularity of agency theory and its insistence on the creation of shareholder value as the sole legitimate objective of the corporation further underlined the firm's orientation towards the finance market. In the new political and regulatory environment of the 1980s, the focus shifted from long-term survival and economic stability, i.e., virtues of managerial capitalism, to short-term capital accumulation and the ability to live with the turmoil of the ups and downs of the economy. Managers had traditionally been paid to secure long-term and stable growth and to cater to a variety of constituencies, while in the new economic regime, that of investor capitalism, high returns on investment and the one-sided focus of shareholder enrichment were rewarded. Managers started to "think like shareholders."
The popularity of agency theory and its insistence on the creation of shareholder value as the sole legitimate objective of the corporation further underlined the firm's orientation towards the finance market.
The inflow of capital into the U.S. economy had also created a new form of finance industry actor, the fund manager. While fund managers controlled 20% of shares of a stock-listed company in 1970, in 2005, the comparable figure was 60%. 5 In the ideal case of market-based transactions, an investor being unsatisfied with the financial performance of the firm acts through exit rather than voice (in Albert Hirschman's terms), i.e., he or she sells the stock. In the case where one single actor holds large shares of the stock, the selling of the shares would affect the market price, and therefore fund managers started to influence how CEOs and directors were recruited to the firms in which they held stocks, that is, they increasingly turned to voice rather than exit . As a consequence, CEOs and the directors with a background in finance that shared a belief in finance market efficiency and the virtue of shareholder value creation were increasingly recruited. As both fund managers and CEOs were now compensated on the basis of their ability to report a growth in the value of the stock, the interests of CEOs, directors, and owners converged as they were now all serving the same finance market. In an agency theory view, this led to a reduction of the so-called agency costs. Unfortunately, there was evidence of new forms of behavior that were not anticipated by free-market protagonists.
If markets were efficient, why would firms invest their so-called "free cash flow" to manipulate the price of their stock rather than investing the money in productive capital, or transfer the capital to the owners as dividends?
For instance, in the period of 1987-2007, the amount of annual repurchases of stocks by individual firms increased eighteen-fold. 6 Agency theory makes the assumption that finance markets are effectively pricing assets, that is, all publically available information is reflected in a financial asset's market price. Yet, the de-regulation of the finance markets from the 1980s to promote market efficiency coincides with a strong preference of firms to repurchase their own stock. If markets were efficient, why would then firms invest their so-called "free cash flow" to manipulate the price of their stock rather than investing the money in productive capital, or transfer the capital to the owners as dividends? The literature on stock repurchases offers a number of explanations but fails to provide a unified and comprehensive view. 7 Under all conditions, stock repurchases remain a puzzling phenomenon for free-marketeers.
In the new regime of investor capitalism, dominated by neoclassic economic theory favouring market transactions and skeptical of the role of organizations altogether (as they to some extent represent a market failure in terms of offering lower transaction costs vis-à-vis comparable market transactions), managerial authority has been moved to the outside of the corporation. First of all, to repeat, the shareholder value creation policy locates the shareholders who know better than executives inside the firm where to invest the free-cash flow; if there are promising potentials within the focal firm, capital owners will buy more shares, but if there are higher expected returns elsewhere, the capital will be invested accordingly. Second, as a consequence of the suspicion that executives are at risk to act opportunistically, various forms of auditing, accreditations, and credit ratings are widely used in an attempt to move the corporate control outside of the firm. The extensive literature on auditing and the issuing of accreditations and credit ratings unfortunately reveal that it is complicated to maintain the arm's-length distance needed between the auditor and the auditee, 8 and in the case of credit-rating, the so-called "issuer pays" policy leads to a series of governance problems. 9
Third, the orientation towards finance markets and its emphasis on high returns over long–term stability -- there is ample evidence of a sharp growth of recurrent financial crises after 1980 10 -- has led to new human resources and employment practices, wherein a larger proportion of the workforce is hired on short-term contracts and receive lower pay and fewer benefits. In addition, in the U.S., and the U.K., the two epicentra of neoliberal reforms, the level of unionization has been in decline, further reducing the collective bargaining power of workers. 11 The perhaps largest explanatory factor regarding the decline in long-term stability in employment is the loss in manufacturing jobs in the U.S., and the succession of service-industry jobs offering both lower pay and lower demands for technical expertise. In addition, in the attempt to boost shareholder value, downsizing and off-shoring have been popular among finance market-oriented executives. By and large, the shift from the managerial capitalism of the Keynesian, post-World War II period to the neoliberal investor capitalism brought a new theory of the firm, novel corporate governance practices, an accentuated short-term perspective on economic value creation, and not least, a new vocabulary of how to address and speak about managerial practices and firm performance.
The triumph of free-market thinking and neoliberal policy is perhaps not so much to be treated as the ultimate evidence of the superior rationality of the market, as it is indicative of the decline of the U.S. and U.K. economies and the West more broadly speaking on the global scale.
In hindsight, after five decades of consolidation and organization, free-market protagonists managed to move from the periphery of economic policy-making and into its very centres by the end of the 1970s. Those who were initially regarded as outsiders and eccentrics started to claim the Nobel Memorial Prizes in Economic Sciences by the mid-1970s, but this is, skeptics may say, not so much about "being right" (in terms of making adequate predictions or providing policies that regulate the economy effectively) as much as it is indicative of the ability to capitalize on strong political and economic interests being mobilized when, for example, trade unions' influence and demands for economic equality were regarded to be too far advanced by certain groups. In addition to the ability to align capital owners and intellectuals in financing academic departments and think tanks in the post-World War II period and in the crisis-ridden 1970s in particular, 12 macroeconomic conditions were beneficial for the free-market cause. At the same time, it is complicated to predict the outcome from policy-making, and there are significant influences from unforeseen events and unanticipated consequences of purposeful action in the history of neoliberalism and free market reforms. Therefore, the triumph of free-market thinking and neoliberal policy is perhaps not so much to be treated as the ultimate evidence of the superior rationality of the market as economists like Friedrich von Hayek and Milton Friedman would assume, as it is indicative of the decline of the U.S. and U.K. economies and the West more broadly speaking on the global scale as suggested by economic statistics. 13
While finance theory professors are fond of speaking of finance markets as being "the brain of capitalist system," the events of 2008 rendered such statements subject to doubt, to say the least.
The enormous growth of financial markets and the finance industry is also a topic subject to much scholarly and media attention, and while finance theory professors are fond of speaking of finance markets as being "the brain of capitalist system," the events of 2008 rendered such statements subject to doubt, to say the least. In addition, the free-market capitalism being dreamed about by neoliberal intellectuals since the 1930s does by no means imply a diminished state but rather the government and state agencies becoming an ally of capital owners, serving to rearticulate the welfare state into a "neoliberal ownership society state." Whether that is a sustainable role of the state, or if it rewards certain groups at an intolerable level is subject to ongoing discussions.
This article draw on A. Styhre (2014) Management and Neoliberalism: Connecting Policies and Practices (New York & London: Routledge)Go to top
About the Author
Alexander Styhre , Ph.D (Lund University) is Chair of Organization Theory and Management, School of Business, Economics and Law, University of Gothenburg, Sweden. Styhre has published widely in the field of organization studies and is the author of several research monographs and textbooks. Alexander is the Editor-in-Chief of Scandinavian Journal of Management.
Dec 29, 2018 | failedevolution.blogspot.com
From David Harvey's A Brief History of Neoliberalism
Part 11 – The Reagan/Thatcher neoliberal legacy: a bizarre form of a sinister political doctrine from which it would be difficult one to escape
But Thatcher had to fight the battle on other fronts. A noble rearguard action against neoliberal policies was mounted in many a municipality –– Sheffield, the Greater London Council (which Thatcher had to abolish in order to achieve her broader goals in the 1980s), and Liverpool (where half the local councillors had to be gaoled) formed active centres of resistance in which the ideals of a new municipal socialism (incorporating many of the new social movements in the London case) were both pursued and acted upon until they were finally crushed in the mid-1980s.
She began by savagely cutting back central government funding to the municipalities, but several of them responded simply by raising property taxes, forcing her to legislate against their right to do so. Denigrating the progressive labour councils as 'loony lefties' (a phrase the Conservative-dominated press picked up with relish), she then sought to impose neoliberal principles through a reform of municipal finance. She proposed a 'poll tax' –– a regressive head tax rather than a property tax –– which would rein in municipal expenditures by making every resident pay. This provoked a huge political fight that played a role in Thatcher's political demise .
Thatcher also set out to privatize all those sectors of the economy that were in public ownership. The sales would boost the public treasury and rid the government of burdensome future obligations towards losing enterprises. These state-run enterprises had to be adequately prepared for privatization, and this meant paring down their debt and improving their efficiency and cost structures, often through shedding labour.
Their valuation was also structured to offer considerable incentives to private capital –– a process that was likened by opponents to 'giving away the family silver'. In several cases subsidies were hidden in the mode of valuation –– water companies, railways, and even state-run enterprises in the automobile and steel industries held high-value land in prime locations that was excluded from the valuation of the enterprise as an ongoing concern.
Privatization and speculative gains on the property released went hand in hand. But the aim here was also to change the political culture by extending the field of personal and corporate responsibility and encouraging greater efficiency, individual/corporate initiative, and innovation. British Aerospace, British Telecom, British Airways, steel, electricity and gas, oil, coal, water, bus services, railways, and a host of smaller state enterprises were sold off in a massive wave of privatizations.
Britain pioneered the way in showing how to do this in a reasonably orderly and, for capital, profitable way. Thatcher was convinced that once these changes had been made they would become irreversible: hence the haste. The legitimacy of this whole movement was successfully underpinned, however, by the extensive selling off of public housing to tenants. This vastly increased the number of homeowners within a decade. It satisfied traditional ideals of individual property ownership as a working-class dream and introduced a new, and often speculative, dynamism into the housing market that was much appreciated by the middle classes, who saw their asset values rise –– at least until the property crash of the early 1990s .
Dismantling the welfare state was, however, quite another thing. Taking on areas such as education, health care, social services, the universities, the state bureaucracy, and the judiciary proved difficult. Here she had to do battle with the entrenched and sometimes traditional upper-middle-class attitudes of her core supporters .
Thatcher desperately sought to extend the ideal of personal responsibility (for example through the privatization of health care) across the board and cut back on state obligations. She failed to make rapid headway. There were, in the view of the British public, limits to the neoliberalization of everything. Not until 2003, for example, did a Labour government, against widespread opposition, succeed in introducing a fee-paying structure into British higher education .
In all these areas it proved difficult to forge an alliance of consent for radical change. On this her Cabinet (and her supporters) were notoriously divided (between 'wets' and 'drys') and it took several years of bruising confrontations within her own party and in the media to win modest neoliberal reforms. The best she could do was to try to force a culture of entrepreneurialism and impose strict rules of surveillance, financial accountability, and productivity on to institutions, such as universities, that were ill suited to them.
Thatcher forged consent through the cultivation of a middle class that relished the joys of home ownership, private property, individualism, and the liberation of entrepreneurial opportunities. With working-class solidarities waning under pressure and job structures radically changing through deindustrialization, middle-class values spread more widely to encompass many of those who had once had a firm working-class identity .
The opening of Britain to freer trade allowed a consumer culture to flourish, and the proliferation of financial institutions brought more and more of a debt culture into the centre of a formerly staid British life. Neoliberalism entailed the transformation of the older British class structure, at both ends of the spectrum.
Moreover, by keeping the City of London as a central player in global finance it increasingly turned the heartland of Britain's economy, London and the south-east, into a dynamic centre of ever-increasing wealth and power. Class power had not so much been restored to any traditional sector but rather had gathered expansively around one of the key global centres of financial operations. Recruits from Oxbridge flooded into London as bond and currency traders, rapidly amassing wealth and power and turning London into one of the most expensive cities in the world.
While the Thatcher revolution was prepared by the organization of consent within the traditional middle classes who bore her to three electoral victories, the whole programme, particularly in her first administration, was far more ideologically driven (thanks largely to Keith Joseph) by neoliberal theory than was ever the case in the US. While from a solid middle-class background herself, she plainly relished the traditionally close contacts between the prime minister's office and the 'captains' of industry and finance. She frequently turned to them for advice and in some instances clearly delivered them favours by undervaluing state assets set for privatization . The project to restore class power –– as opposed to dismantling working-class power –– probably played a more subconscious role in her political evolution.
The success of Reagan and Thatcher can be measured in various ways. But I think it most useful to stress the way in which they took what had hitherto been minority political, ideological, and intellectual positions and made them mainstream. The alliance of forces they helped consolidate and the majorities they led became a legacy that a subsequent generation of political leaders found hard to dislodge.
Perhaps the greatest testimony to their success lies in the fact that both Clinton and Blair found themselves in a situation where their room for manoeuvre was so limited that they could not help but sustain the process of restoration of class power even against their own better instincts. And once neoliberalism became that deeply entrenched in the English-speaking world it was hard to gainsay its considerable relevance to how capitalism in general was working internationally.
This is not to say, as we shall see, that neoliberalism was merely imposed elsewhere by Anglo-American influence and power. For as these two case studies amply demonstrate, the internal circumstances and subsequent nature of the neoliberal turn were quite different in Britain and the US, and by extension we should expect that internal forces as well as external influences and impositions have played a distinctive role elsewhere.
Reagan and Thatcher seized on the clues they had (from Chile and New York City) and placed themselves at the head of a class movement that was determined to restore its power. Their genius was to create a legacy and a tradition that tangled subsequent politicians in a web of constraints from which they could not easily escape . Those who followed, like Clinton and Blair, could do little more than continue the good work of neoliberalization, whether they liked it or not.
Dec 09, 2018 | www.ineteconomics.org
- mikem2 31 Oct 2018 00:22 7 8 Meet the Economist Behind the One Percent's Stealth Takeover of America
Ask people to name the key minds that have shaped America's burst of radical right-wing attacks on working conditions, consumer rights and public services, and they will typically mention figures like free market-champion Milton Friedman, libertarian guru Ayn Rand, and laissez-faire economists Friedrich Hayek and Ludwig von Mises.
James McGill Buchanan is a name you will rarely hear unless you've taken several classes in economics. And if the Tennessee-born Nobel laureate were alive today, it would suit him just fine that most well-informed journalists, liberal politicians, and even many economics students have little understanding of his work.
The reason? Duke historian Nancy MacLean contends that his philosophy is so stark that even young libertarian acolytes are only introduced to it after they have accepted the relatively sunny perspective of Ayn Rand. (Yes, you read that correctly). If Americans really knew what Buchanan thought and promoted, and how destructively his vision is manifesting under their noses, it would dawn on them how close the country is to a transformation most would not even want to imagine, much less accept.
That is a dangerous blind spot, MacLean argues in a meticulously researched book, Democracy in Chains , a finalist for the National Book Award in Nonfiction. While Americans grapple with Donald Trump's chaotic presidency, we may be missing the key to changes that are taking place far beyond the level of mere politics. Once these changes are locked into place, there may be no going back.
The greedy right wing want it all for themselves.
- Stephen Hancock 31 Oct 2018 00:04 3 4 Neo-liberalism will never die, it might mutate in to another parasitic ideology and the Liberals might re-brand their party, but as long as there's human greed to want more power and financial gain over others, people like Abbott and Joyce will continue to surface and thrive.
- ocratato 31 Oct 2018 00:03 5 6 I think declaring neoliberalism dead is way too premature.
The rich and powerful have their greedy hands on the levers of government in many countries. They are not going to give that up without a fight.
Basically neoliberalism will eventually go down kicking and screaming. Sadly it will take a lot of us with it. It is going to get nasty.
Dec 05, 2018 | www.bradford-delong.com
Margaret Thatcher Against Friedrich von Hayek's Pleas for a Lykourgan Dictatorship : "My dear Professor Hayek, Thank you for your letter of 5 February. I was very glad that you were able to attend the dinner so thoughtfully organised by Walter Salomon. It was not only a great pleasure for me, it was, as always, instructive and rewarding to hear your views on the great issues of our time...
Continue reading "Margaret Thatcher Against Friedrich von Hayek's Pleas for a Lykourgan Dictatorship in Britain: Hoisted from the Archives" "
December 03, 2018 at 05:19 PM in History , Moral Responsibility , Politics , Streams: (Tuesday) Hoisted from Archives , Streams: Cycle | Permalink | Comments (1)
Dec 05, 2018 | www.bradford-delong.com
Von Hayek, to put it bluntly, loved Pincohet's shooting people in soccer stadiums: the "Lykourgan Moment" in which unconstitutional and illiberal actions create the space for future stable libertarian capitalism was a recurrent fantasy of his.
Friedman saw his trips to Chile to be an opportunity to preach to the gentiles -- to primarily preach free markets and small government, but also respect for individuals, for their liberty, and for democracy. And he had no tolerance for those who said it was evil to try to make the Chilean people more prosperous because that might reinforce the dictatorship.
Buchanan... where was Buchanan on this spectrum, anyway? It's complicated:
Andrew Farrant and Vlad Tarko : James M. Buchanan's 1981 Visit to Chile: Knightian Democrat or Defender of the 'Devil's Fix'? :
"Buchanan has repeatedly argued that the 'political economist should not act as if he or she were providing advice to a benevolent despot' (Boettke Constitutional Political Economy, 25, 110–124, 2014: 112), but an increasingly influential body of scholarship argues that Buchanan provided a wealth of early 1980s policy advice to Augusto Pinochet's military dictatorship in Chile (e.g., Fischer 2009; Maclean 2017). In particular, Buchanan reportedly provided an analytical defense of military rule to a predominantly Chilean audience when he visited the country in late 1981...
...This paper draws upon largely ignored archival evidence from the Buchanan House Archives and Chilean primary source material to assess whether Buchanan provided a defense of Pinochet's "capitalist fascism" (Samuelson 1983) or whether he defended democracy when he visited Chile in 1981.
Aside from the importance of this for assessing Buchanan's own legacy, his constitutional political economy arguments presented in Chile also provide an interesting and distinct perspective on the connection between democracy and growth, which remains highly relevant to current debates. Despite a general agreement about the desirability of democracy, the view that authoritarian regimes can spur "growth miracles", or might even be a necessary stage in political-economic development, still has prominent supporters (e.g. Sachs 2012)...
Nov 27, 2018 | thenewkremlinstooge.wordpress.com
Northern Star November 26, 2018 at 4:23 pmAs the New deal unravels:
"The original "New Deal," which included massive public works infrastructure projects, was introduced by Democratic President Franklin Roosevelt in the 1930s amid the Great Depression. Its purpose was to stave off a socialist revolution in America. It was a response to a militant upsurge of strikes and violent class battles, led by socialists who were inspired by the 1917 Russian Revolution that had occurred less than two decades before.
American capitalism could afford to make such concessions because of its economic dominance. The past forty years have been characterized by the continued decline of American capitalism on a world stage relative to its major rivals. The ruling class has responded to this crisis with a social counterrevolution to claw back all gains won by workers. This has been carried out under both Democratic and Republican administrations and with the assistance of the trade unions.
Since the 2008 crash, first under Bush and Obama, and now Trump, the ruling elites have pursued a single-minded policy of enriching the wealthy, through free credit, corporate bailouts and tax cuts, while slashing spending on social services.
To claim as does Ocasio-Cortez that American capitalism can provide a new "New Deal," of a green or any other variety, is to pfile:///F:/Private_html/Skeptics/Political_skeptic/Neoliberalism/Historyromote an obvious political fiction."
Oct 30, 2018 | features.propublica.org
Zytor-LordoftheSkies , Thursday, March 22, 2018 11:55 AMA quick search of the article doesn't find the word "buy backs" but this is a big part of the story. IBM spent over $110 BILLION on stock buy backs between 2000 and 2016. That's the number I found, but it hasn't stopped since. If anything it has escalated.Suzan Zytor-LordoftheSkies ,
This is very common among large corporations. Rather than spend on their people, they funnel billions into stock buy backs which raises or at least maintains the stock value so execs can keep cashing in. It's really pretty disgraceful. This was only legalized in 1982, which not-so-coincidentally is not long after real wages stalled, and have stalled ever since.Thanks for this bit of insanely true reporting. When laid off from Westinghouse after 14 years of stellar performance evaluations I was flummoxed by the execs getting million-dollar bonuses as we were told the company wasn't profitable enough to maintain its senior engineering staff. It sold off every division eventually as the execs (many of them newly hired) reaped even more bonuses.Georgann Putintsev Suzan ,Thank you ... very insightful of you. As an IBMer and lover of Spreadsheets / Statistics / Data Specalist ... I like reading Annual Reports. Researching these Top Execs, BOD and compare them to other Companies across-the-board and industry sectors. You'll find a Large Umbrella there.Carol Van Linda Suzan ,
There is a direct tie and inter-changeable pieces of these elites over the past 55 yrs. Whenever some Corp/ Political/ Government shill (wannbe) needs a payoff, they get placed into high ranking top positions for a orchestrating a predescribed dark nwo agenda. Some may come up the ranks like Ginny, but ALL belong to Council for Foreign Relations and other such high level private clubs or organizations. When IBM sells off their Mainframe Manufacturing (Poughkeepsie) to an elite Saudi, under an American Co. sounding name of course, ... and the U.S. Government ... doesn't balk ... that has me worried for our 1984 future.Sears is doing this alsoSuzan Carol Van Linda ,Details? Thanks!vibert Zytor-LordoftheSkies ,True in every large corporation. They use almost free money from the US Government to do it. (Taxpayer's money)DDRLSGC vibert ,Yeah, it is amazing how they stated that they don't need help from the government when in reality they do need government to pass laws that favor them, pack the court system where judges rule in their favor and use their private police and the public sector police to keep the workers down.Johnny Player DDRLSGC ,Why do you put disqus in your name? . Is that so you can see if they sell your info and you know where it originated from?Theo Geauxvan Zytor-LordoftheSkies ,I wonder how many billions (trillions?) have been funneled from corporate workers pockets this way? It seems all corporations are doing it these days. Large-scale transfer of wealth from the middle class to the wealthy.Stevie Ponders Theo Geauxvan ,It's called asset stripping. Basically corporate raiding (as in pillage) from the inside.R. J. Smith , Thursday, March 22, 2018 9:06 AM"Member of the IBM family" -- BS. Your employer is not your family.Randall Smith R. J. SmithNot anymore. With most large companies, you've never been able to say they are "family." Loyalty used to be a thing though. I worked at a company where I saw loyalty vanish over a 10 year period.marsto R. J. SmithExcept when your employer is the one preaching associate loyalty and "we are family" your entire career. Then they decide you've been too loyal and no longer want to pay your salary and start fabricating reasons to get rid of you. ADP is guilty of these same practices and eliminating their tenured associates. Meanwhile, the millennials hired play ping pong and text all day, rather than actually working.DDRLSGC marstoYeah, and how many CEOs actually work to make their companies great instead of running them into the ground, thinking about their next job move, and playing golfMary Malley R. J. Smith ,I have to disagree with you. I started with IBM on their rise up in those earlier days, and we WERE valued and shown that we were valued over and over through those glorious years. It did feel like we were in a family, our families mattered to them, our well-being. They gave me a month to find a perfect babysitter when they hired me before I had to go to work!Georgann Putintsev Mary Malley ,
They helped me find a house in a good school district for my children. They bought my house when I was moving to a new job/location when it didn't sell within 30 days.
They paid the difference in the interest rate of my loan for my new house from the old one. I can't even begin to list all the myriad of things that made us love IBM and the people we worked with and for, and made us feel a part of that big IBM family.
Did they change, yes, but the dedication we gave was freely given and we mutually respected each other. I was lucky to work for them for decades before that shift when they changed to be just like every other large corporation.The Watson family held integrity, equality, and knowledge share as a formidable synthesis of company ethics moving a Quality based business forward in the 20th to 21st century. They also promoted an (volunteer) IBM Club to help promote employee and family activities inside/outside of work which they by-en-large paid for. This allowed employees to meet and see other employees/families as 'Real' & "Common-Interest" human beings. I participated, created, and organized events and documented how-to-do-events for other volunteers. These brought IBMers together inside or outside of their 'working' environment to have fun, to associate, to realize those innate qualities that are in all of us. I believe it allowed for better communication and cooperation in the work place.bookmama3 Georgann Putintsev , in reply to" aria-label="in reply to"> •
To me it was family. Some old IBMers might remember when Music, Song, Skits were part of IBM Branch Office meetings. As President of the IBM Clubs Palo Alto branch (7 yrs.), I used our Volunteer Club Votes to spend ALL that IBM donated money, because they <administratively> gave it back to IBM if we didn't.
Without a strong IBM Club presence, it gets whittled down to 2-3 events a year. For a time WE WERE a FAMILY.Absolutely! Back when white shirts/black suits were a requirement. There was a country club in Poughkeepsie, softball teams, Sunday brunch, Halloween parties in the fall, Christmas parties in December where thousands of age appropriate Fisher Price toys were given out to employee's kids. Today "IBMer" is used by execs as a term of derision. Employees are overworked and under appreciated and shortsighted, overpaid executives rule the roost. The real irony is that talented, vital employees are being retired for "costing too much" while dysfunctional top level folk are rewarded with bonuses and stock when they are let go. And it's all legal. It's disgraceful.OrangeGina R. J. Smith , in reply to" aria-label="in reply to"> •very true, however for many of us, our co-workers of a very long time ARE family. Corporations are NOT people, but they are comprised of them.HiJinks R. J. Smith , in reply to" aria-label="in reply to"> •It was true at one time, but no more.Herb Tarlick R. J. Smith , in reply to" aria-label="in reply to"> •This one was until the mid eighties.
Oct 15, 2018 | www.theverge.com
Microsoft co-founder Paul Allen died today from complications with non-Hodgkin's lymphoma. He was 65. Allen said earlier this month that he was being treated for the disease.
Allen was a childhood friend of Bill Gates, and together, the two started Microsoft in 1975. He left the company in 1983 while being treated for Hodgkin's lymphoma and remained a board member with the company through 2000. He was first treated for non-Hodgkin's lymphoma in 2009, before seeing it go into remission.
In a statement given to ABC News , Gates said he was "heartbroken by the passing of one of my oldest and dearest friends." He went on to commend his fellow co-founder for his life after Microsoft:
From our early days together at Lakeside School, through our partnership in the creation of Microsoft, to some of our joint philanthropic projects over the years, Paul was a true partner and dear friend. Personal computing would not have existed without him.
But Paul wasn't content with starting one company. He channelled his intellect and compassion into a second act focused on improving people's lives and strengthening communities in Seattle and around the world. He was fond of saying, "If it has the potential to do good, then we should do it." That's the king of person he was.
Paul loved life and those around him, and we all cherished him in return. He deserved much more time, but his contributions to the world of technology and philanthropy will live on for generations to come. I will miss him tremendously.
Microsoft CEO Satya Nadella said Allen's contributions to both Microsoft and the industry were "indispensable." His full statement is quoted below:
Paul Allen's contributions to our company, our industry, and to our community are indispensable. As co-founder of Microsoft, in his own quiet and persistent way, he created magical products, experiences and institutions, and in doing so, he changed the world. I have learned so much from him -- his inquisitiveness, curiosity, and push for high standards is something that will continue to inspire me and all of us as Microsoft. Our hearts are with Paul's family and loved ones. Rest in peace.
In a memoir published in 2011, Allen says that he was responsible for naming Microsoft and creating the two-button mouse. The book also portrayed Allen as going under-credited for his work at Microsoft, and Gates as having taken more ownership of the company than he deserved. It created some drama when it arrived, but the two men ultimately appeared to remain friends, posing for a photo together two years later.
After leaving Microsoft, Allen became an investor through his company Vulcan, buying into a diverse set of companies and markets. Vulcan's current portfolio ranges from the Museum of Pop Culture in Seattle, to a group focused on using machine learning for climate preservation, to Stratolaunch, which is creating a spaceplane . Allen's investments and donations made him a major name in Seattle, where much of his work was focused. He recently funded a $46 million building in South Seattle that will house homeless and low-income families.
Both Apple CEO Tim Cook and Google CEO Sundar Pichai called Allen a tech "pioneer" while highlighting his philanthropic work in statements on Twitter. Amazon CEO Jeff Bezos said Allen's work "inspired so many."
Allen has long been the owner of the Portland Trail Blazers and Seattle Seahawks as well. NFL Commissioner Roger Goodell said Allen "worked tirelessly" to "identify new ways to make the game safer and protect our players from unnecessary risk." NBA Commissioner Adam Silver said Allen "helped lay the foundation for the league's growth internationally and our embrace of new technologies."
He also launched a number of philanthropic efforts, which were later combined under the name Paul G. Allen Philanthropies. His "philanthropic contributions exceed $2 billion," according to Allen's own website, and he had committed to giving away the majority of his fortune.
Allen's sister, Jody Allen, wrote a statement on his family's behalf:
My brother was a remarkable individual on every level. While most knew Paul Allen as a technologist and philanthropist, for us he was a much loved brother and uncle, and an exceptional friend.
Paul's family and friends were blessed to experience his wit, warmth, his generosity and deep concern. For all the demands on his schedule, there was always time for family and friends. At this time of loss and grief for us – and so many others – we are profoundly grateful for the care and concern he demonstrated every day.
Some of Allen's philanthropy has taken a scientific bent: Allen founded the Allen Institute for Brain Science in 2003, pouring $500 million into the non-profit that aims to give scientists the tools and data they need to probe how brain works. One recent project, the Allen Brain Observatory , provides an open-access "catalogue of activity in the mouse's brain," Saskia de Vries, senior scientist on the project, said in a video . That kind of data is key to piecing together how the brain processes information.
In an interview with Matthew Herper at Forbes , Allen called the brain "hideously complex" -- much more so than a computer. "As an ex-programmer I'm still just curious about how the brain functions, how that flow of information really happens," he said . After founding the brain science institute, Allen also founded the Allen Institute for Artificial Intelligence and the Allen Institute for Cell Science in 2014, as well as the Paul G. Allen Frontiers Group in 2016 , which funds cutting-edge research.
Even back in 2012, when Allen spoke with Herper at Forbes , he talked about plans for his financial legacy after his death -- and he said that a large part of it would be "allocated to this kind of work for the future."
In a statement emailed to The Verge, The Allen Institute's President and CEO Allan Jones said:
Paul's vision and insight have been an inspiration to me and to many others both here at the Institute that bears his name, and in the myriad of other areas that made up the fantastic universe of his interests. He will be sorely missed. We honor his legacy today, and every day into the long future of the Allen Institute, by carrying out our mission of tackling the hard problems in bioscience and making a significant difference in our respective fields.
According to Quincy Jones, Allen was also an excellent guitar player .
Oct 15, 2018 | science.slashdot.org
bennet42 ( 1313459 ) , Monday October 15, 2018 @08:24PM ( #57483472 )Re:RIP Paul! ( Score: 5 , Informative)
Man what a shock! I was lucky enough to be working at a Seattle startup that Paul bought back in the 90s ( doing VoIP SOHO phone systems ). He liked to swing by office on a regular basis as we were just a few blocks from Dicks hamburgers on Mercer St (his favorite). He was really an engineer's engineer. We'd give him a status report on how things were going and within a few minutes he was up at the white board spitballing technical solutions to ASIC or network problems. I especially remember him coming by the day he bought the Seahawks. Paul was a big physical presence ( 6'2" 250lbs in those days ), but he kept going on about how after meeting the Seahawks players, he never felt so physically small in his life. Ignore the internet trolls. Paul was a good guy. He was a humble, modest, down-to-earth guy. There was always a pick-up basketball game on his court on Thursday nights. Jam session over at his place were legendary ( I never got to play with him, but every musician that I know that played with him was impressed with his guitar playing ). He left a huge legacy in the pacific northwest. We'll miss you Paul!Futurepower(R) ( 558542 ) writes: < MJennings.USA@NOT_any_of_THISgmail.com > on Monday October 15, 2018 @06:56PM ( #57482948 ) HomepageBill Gates was so angry, Allen left the company. ( Score: 5 , Interesting)
The book Paul Allen wrote avoids a full report, but gives the impression that Bill Gates was so angry, Paul Allen left the company because interacting with Bill Gates was bad for his health.
Quotes from the book, Idea Man [amazon.com] by Paul Allen.
THREE DECADES AFTER teaching Bill and me at Lakeside, Fred Wright was asked what he'd thought about our success with Microsoft. His reply: "It was neat that they got along well enough that the company didn't explode in the first year or two."
When Bill pushed on licensing terms or bad-mouthed the flaky Signetics cards, Ed thought he was insubordinate. You could hear them yelling throughout the plant, and it was quite a spectacle-the burly ex-military officer standing toe to toe with the owlish prodigy about half his weight, neither giving an inch.
Bill was sarcastic, combative, defensive, and contemptuous.
"For Bill, the ground had already begun shifting. At product review meetings, his scathing critiques became a perverse badge of honor. One game was to count how many times Bill confronted a given manager; whoever got tagged for the most "stupidest things " won the contest. "I give my feedback," he grumbled to me, "and it doesn't go anywhere."RubberDogBone ( 851604 ) , Monday October 15, 2018 @10:16PM ( #57483928 )toadlife ( 301863 ) , Monday October 15, 2018 @06:29PM ( #57482740 ) JournalRIP Dr. Netvorkian ( Score: 2 )
Rest well, Mr. Allen.
He used to have the nickname "Doctor NetVorkian" because many of the things he invested in promptly tanked in one way or another after his investment. He had a lot of bad luck with his investments.
For those who don't understand the joke, a certain Dr. Kervorkian became notorious for helping ill patients commit suicide.Heyyyyy! ( Score: 5 , Funny)hey! ( 33014 ) writes:
Allen had nothing to do with systemd!Re: ( Score: 2 )CohibaVancouver ( 864662 ) , Monday October 15, 2018 @06:44PM ( #57482862 )
What a ray of sunshine you are.Re:Now burning in hell ( Score: 5 , Informative)BitterOak ( 537666 ) , Monday October 15, 2018 @06:56PM ( #57482940 )
He is now burning in hell for Microsoft and Windows
Windows, Anonymous Coward? Allen left Microsoft in 1982. Windows 1.0 launched in 1985.
("The" Windows - Windows 3.1 - Didn't launch until 1992, a decade after Allen had left.)Re:Now burning in hell ( Score: 5 , Insightful)El Cubano ( 631386 ) writes:Microsoft created Windows and Allen co-founded Microsoft - he cannot wipe that blood off his hands!
But you can wipe Windows off your hard drive, so I don't get your point. Paul Allen was a great guy in many, many ways.Re: ( Score: 2 )110010001000 ( 697113 ) writes:But you can wipe Windows off your hard drive, so I don't get your point. Paul Allen was a great guy in many, many ways.
Agreed. Even if you could "blame" him for all or part of Windows, he did start the Museum of Pop Culture [wikipedia.org]. If you are ever in Seattle, it is a must see. I mean, they have what is probably the best Star Trek museum display anywhere (which is saying a lot since the Smithsonian has a very nice one as well), including most of the original series set pieces and I believe one of the only actual Enterprise models used for filming. In my mind, that gives him a great deal of geek cred. Plus, as I underRe: ( Score: 2 )110010001000 ( 697113 ) , Monday October 15, 2018 @07:20PM ( #57483078 ) Homepage Journal
Well if he donated guitars and liked Star Trek then he must have been a good guy.Re:And Then? ( Score: 1 )
You forgot he was a big Patent Troll. He won't be missed or remembered.110010001000 ( 697113 ) , Monday October 15, 2018 @10:28PM ( #57483964 ) Homepage JournalRe:And Then? ( Score: 2 )
I knew someone would say that. You are right. I won't. But he won't either. He was a patent troll. Oh but: RIP and thoughts and prayers, right? He was a great guy and will be missed.
Oct 14, 2018 | tech.slashdot.org
(qz.com) 50 While we're now on 4G networks, it was only 35 years ago this week that Ameritech (now part of AT&T) launched 1G , or the first commercial cell phone network. That network, called the Advanced Mobile Phone System (AMPS), went online on October 13, 1983, allowing people in the Chicago area to make and receive mobile calls for the first time. Ameritech president Bob Barnett, who made the first call, decided to make the historic moment count by ringing Alexander Graham Bell's grandson. A little more than a year later, UK's Vodafone hosted its first commercial call on New Year's Day. Israel's Pelephone followed suit in 1986, followed by Australia in 1987.
Cellphone technology had been around for quite a while before that. AMPS was in development for around 15 years, and engineers made the first mobile call on a prototype network a decade before the first commercial network call. It took that long to troubleshoot the various hardware, software, and radio frequency issues associated with setting up a fully functional commercial network.
Aug 01, 2018 | turcopolier.typepad.com
Bill Herschel • 2 days ago ,kao_hsien_chih Bill Herschel • a day ago ,
Very, very slightly off-topic.
Much has been made, including in this post, of the excellent organization of Russian forces and Russian military technology.
I have been re-investigating an open-source relational database system known as PosgreSQL (variously), and I remember finding perhaps a decade ago a very useful whole text search feature of this system which I vaguely remember was written by a Russian and, for that reason, mildly distrusted by me.
Come to find out that the principle developers and maintainers of PostgreSQL are Russian. OMG. Double OMG, because the reason I chose it in the first place is that it is the best non-proprietary RDBS out there and today is supported on Google Cloud, AWS, etc.
The US has met an equal or conceivably a superior, case closed. Trump's thoroughly odd behavior with Putin is just one but a very obvious one example of this.
Of course, Trump's nationalistic blather is creating a "base" of people who believe in the godliness of the US. They are in for a very serious disappointment.TTG kao_hsien_chih • a day ago ,
After the iron curtain fell, there was a big demand for Russian-trained programmers because they could program in a very efficient and "light" manner that didn't demand too much of the hardware, if I remember correctly.
It's a bit of chicken-and-egg problem, though. Russia, throughout 20th century, had problem with developing small, effective hardware, so their programmers learned how to code to take maximum advantage of what they had, with their technological deficiency in one field giving rise to superiority in another.
Russia has plenty of very skilled, very well-trained folks and their science and math education is, in a way, more fundamentally and soundly grounded on the foundational stuff than US (based on my personal interactions anyways).
Russian tech ppl should always be viewed with certain amount of awe and respect...although they are hardly good on everything.FarNorthSolitude TTG • a day ago ,
Well said. Soviet university training in "cybernetics" as it was called in the late 1980s involved two years of programming on blackboards before the students even touched an actual computer.
It gave the students an understanding of how computers works down to the bit flipping level. Imagine trying to fuzz code in your head.kao_hsien_chih FarNorthSolitude • 10 hours ago ,
I recall flowcharting entirely on paper before committing a program to punched cards. I used to do hex and octal math in my head as part of debugging core dumps. Ah, the glory days.
Honeywell once made a military computer that was 10 bit. That stumped me for a while, as everything was 8 or 16 bit back then.
That used to be fairly common in the civilian sector (in US) too: computing time was expensive, so you had to make sure that the stuff worked flawlessly before it was committed.
No opportunity to seeing things go wrong and do things over like much of how things happen nowadays. Russians, with their hardware limitations/shortages, I imagine must have been much more thorough than US programmers were back in the old days, and you could only get there by being very thoroughly grounded n the basics.
Sep 07, 2018 | science.slashdot.org
[Editor's note: all links in the story will lead you to Twitter] : In the 1970s the cost -- and size -- of calculators tumbled. Business tools became toys; as a result prestige tech companies had to rapidly diversify into other products -- or die! This is the story of the 1970s great calculator race... Compact electronic calculators had been around since the mid-1960s, although 'compact' was a relative term. They were serious, expensive tools for business . So it was quite a breakthrough in 1967 when Texas Instruments presented the Cal-Tech: a prototype battery powered 'pocket' calculator using four integrated circuits . It sparked a wave of interest. Canon was one of the first to launch a pocket calculator in 1970. The Pocketronic used Texas Instruments integrated circuits, with calculations printed on a roll of thermal paper. Sharp was also an early producer of pocket calculators. Unlike Canon they used integrated circuits from Rockwell and showed the calculation on a vacuum fluorescent display . The carrying handle was a nice touch!
The next year brought another big leap: the Hewlet-Packard HP35 . Not only did it use a microprocessor it was also the first scientific pocket calculator. Suddenly the slide rule was no longer king; the 35 buttons of the HP35 had taken its crown. The most stylish pocket calculator was undoubtedly the Olivetti Divisumma 18 , designed by Mario Bellini. Its smooth look and soft shape has become something of a tech icon and an inspiration for many designers. It even featured in Space:1999! By 1974 Hewlett Packard had created another first: the HP-65 programmable pocket calculator . Programmes were stored on magnetic cards slotted into the unit. It was even used during the Apollo-Soyuz space mission to make manual course corrections. The biggest problem for pocket calculators was the power drain: LED displays ate up batteries. As LCD displays gained popularity in the late 1970s the size of battery needed began to reduce . The 1972 Sinclair Executive had been the first pocket calculator to use small circular watch batteries , allowing the case to be very thin. Once LCD displays took off watch batteries increasingly became the norm for calculators. Solar power was the next innovation for the calculator: Teal introduced the Photon in 1977, no batteries required or supplied!
But the biggest shake-up of the emerging calculator market came in 1975, when Texas Instruments -- who made the chips for most calculator companies -- decided to produce and sell their own models. As a vertically integrated company Texas Instruments could make and sell calculators at a much lower price than its competitors . Commodore almost went out of business trying to compete: it was paying more for its TI chips than TI was selling an entire calculator for. With prices falling the pocket calculator quickly moved from business tool to gizmo : every pupil, every student, every office worker wanted one, especially when they discovered the digital fun they could have! Calculator games suddenly became a 'thing' , often combining a calculator with a deck of cards to create new games to play. Another popular pastime was finding numbers that spelt rude words if the calculator was turned upside down; the Samsung Secal even gave you a clue to one!
The calculator was quickly evolving into a lifestyle accessory . Hewlett Packard launched the first calculator watch in 1977... Casio launched the first credit card sized calculator in 1978 , and by 1980 the pocket calculator and pocket computer were starting to merge. Peak calculator probably came in 1981, with Kraftwerk's Pocket Calculator released as a cassingle in a calculator-shaped box . Although the heyday of the pocket calculator may be over they are still quite collectable. Older models in good condition with the original packaging can command high prices online. So let's hear it for the pocket calculator: the future in the palm of your hand!
Anonymous Coward , Monday September 03, 2018 @10:39PM ( #57248568 )mmogilvi ( 685746 ) writes:HP were real engineers ( Score: 3 , Informative)
I have a HP-15C purchased in 1985 and it is still running on the original batteries - 32 years!
That is phenomenal low power design for the technology and knowledge at the time.Re: ( Score: 3 , Interesting)cyn1c77 ( 928549 ) , Monday September 03, 2018 @11:58PM ( #57248754 )
I replaced the batteries in my 15c for the first time a couple of years ago. And just to be clear, it has three small non-rechargable button batteries, like you would find in a watch.Re:HP were real engineers ( Score: 2 )I have a HP-15C purchased in 1985 and it is still running on the original batteries - 32 years!
That is phenomenal low power design for the technology and knowledge at the time.
That's phenomenal even by today's design standards!JBMcB ( 73720 ) , Monday September 03, 2018 @11:21PM ( #57248666 )Olivetti Divisumma 18 ( Score: 3 )
My dad's friend was a gadget hound, and had one of these in the 80's. Not a great machine. The keys were weird and mushy. It had no electronic display. It only had a thermal printer that printed shiny dark gray numbers on shiny light gray paper. In other words, visibility was poor. It looked amazing, though, and you could spill a coke on it and the keys would still work.
Much more impressive but more utilitarian - he had a completely electro-mechanical rotary auto-dial telephone. It took small, hard plastic punch cards you'd put the number on. You'd push the card into a slot on the telephone, and it would feed the card in and out, generating pulses until it got to the number you punched out. Then it would pull the card back in and do it again for the next number until the whole number was dialed. No digital anything, just relays and motors.fermion ( 181285 ) , Tuesday September 04, 2018 @01:53AM ( #57248998 ) Homepage Journalchicken or the egg ( Score: 5 , Insightful)
In some ways, the electronic calculator market was created by TI and it's need to sell the new IC. There were not many applications, and one marketable application was the electronic calculator. In some ways it was like live Apple leveraging the microwave for the iPod.
Like the iPod, the TI calculators were not great, but they were very easy to use. The HP calculators were and are beatiful. But ease of use won out.
Another thing that won out was until about a decade ago all TI calculators were very limited. This made them ideal machines for tests. HP calculators could do unit analsys, and since 1990 they had algebra systems, and could even do calculus. This made them the ideal machine for technical students and professionals, but no high school would waste time teaching it because all they care about is filling out bubbles on an answer sheet.
The interesting contemporary issue that I see is that schools are still teaching calculators when really smart phones can do everything and more, especially with apps like Wolfram Alpha. Unless you are a legacy HP user, asking kids to buy a calculator just to boosts TI profits seems very wasteful to me. This is going to change as more tests move to online format, and online resources such as Desmos take over the physical clacultor, but in the meantime the taxpayer is on the hook for millions of dollars a year per large school district just for legacy technology.Dhericean ( 158757 ) , Tuesday September 04, 2018 @05:01AM ( #57249428 )Japan and Calculators ( Score: 3 )
An interesting NHK World documentary about Japanese calculator culture and the history of calculators in Japan. I generally watch these at speed = 1.5.
Begin Japanology (13 June 2013) - Calculators [youtube.com]weilawei ( 897823 ) , Tuesday September 04, 2018 @05:17AM ( #57249468 ) HomepageNo TI-89 Fans Yet? ( Score: 2 )
I love my TI-89. I still use it daily. There's a lot to be said for multiple decades of practice on a calculator. Even the emulator of it on my phone, for when I don't have it handy, isn't the same.
It doesn't need to be particularly fast or do huge calculations--that's what programming something else is for. But nothing beats a good calculator for immediate results. ›mknewman ( 557587 ) , Tuesday September 04, 2018 @09:31AM ( #57250228 )Ken Hall ( 40554 ) , Tuesday September 04, 2018 @09:50AM ( #57250316 )TI started in 1972 not 1975 ( Score: 2 )
I had a Datamath in 1973, and a SR-57 programmable (100 steps, 10 memories) in 1975. Those were the days.TI Programmer ( Score: 2 )
First calculator that did octal and hex math (also binary). Got one when they came out, cost $50 in 1977. Still have it, still works, although the nicad battery died long ago. In a remarkable show of foresight, TI made the battery pack with a standard 9V battery connector, and provided a special battery door that let you replace the rechargeable battery with a normal 9V. I replaced it with a solar powered Casio that did a bunch more stuff, but the TI still works.
Sep 01, 2018 | www.nakedcapitalism.com
Posted on September 1, 2018 by Lambert Strether
Lambert: This is an important post, especially as it pertains to our implicit and unacknowledged industrial policy, militarization.
By Marshall Auerback, a market analyst and Research Associate at the Levy Institute. Cross-posted from Alternet .
President Trump and his Mexican counterpart, Enrique Peña Nieto, recently announced resolution of major sticking points that have held up the overall renegotiation of the NAFTA Treaty (or whatever new name Trump confers on the expected trilateral agreement). At first glance, there are some marginal improvements on the existing treaty, especially in terms of higher local content sourcing, and the theoretic redirection of more "high wage" jobs back to the U.S.
These benefits are more apparent than real. The new and improved NAFTA deal won't mean much, even if Canada ultimately signs on. The deal represents reshuffling a few deck chairs on the Titanic , which constitutes American manufacturing in the 21st century: a sector that has been decimated by policies of globalization and offshoring.
Additionally, what has remained onshore is now affected adversely to an increasing degree by the Pentagon. The experience of companies that have become largely reliant on military-based demand is that they gradually lose the ability to compete in global markets.
As early as the 1980s, this insight was presciently confirmed by the late scholar Seymour Melman . Melman was one of the first to state the perhaps not-so-obvious fact that the huge amount of Department of Defense (DoD) Research and Development (R&D) pumped into the economy has actually stifled American civilian industry innovation and competitiveness, most notably in the very manufacturing sector that Trump is seeking to revitalize with these "reformed" trade deals.
The three biggest reasons are:
1. The huge diversion of national R&D investment into grossly overpriced and mostly unjustifiable DoD R&D programs has tremendously misallocated a large proportion America's finest engineering talent toward unproductive pursuits (e.g., the tactical fighter fiascos , such as the F-35 Joint Strike Fighter that, among myriad other deficiencies, cannot fly within 25 miles of a thunderstorm; producing legacy systems that reflect outdated Cold War defense programs to deal with a massive national power, as opposed to combatting 21st-century terrorist counterinsurgencies). Indicative of this waste, former congressional aide Mike Lofgren quotes a University of Massachusetts study , illustrating that comparable civilian expenditures "would produce anywhere from 35 percent to 138 percent more jobs than spending the same amount on DoD [projects]." The NAFTA reforms won't change any of that.
2. By extension, the wasteful, cost-is-irrelevant habits of mind inculcated into otherwise competent engineers by lavish DoD cost-plus contracting have ruined these engineers for innovation in competitive, cost-is-crucial civilian industries.
3. The ludicrously bureaucratized management systems (systems analysis, systems engineering, five-year planning and on and on through a forest of acronyms) that DoD has so heavily propagandized and forced on contractors has, in symbiosis with the Harvard Business School/Wall Street mega-corporate managerial mindset, thoroughly wrecked efficient management of most sectors of American industry.
Let's drill down to the details of the pact, notably automobiles, which have comprised a big part of NAFTA. Under the new deal, 25 percent of auto content can be produced elsewhere than North America, a reduction from 37.5 percent that could be produced outside before, because of the multinational nature of every major automobile manufacturer . Twenty-five percent is still a very large percentage of the high-end auto content, much of which is already manufactured in Europe -- especially expensive parts like engines and transmissions, especially for non-U.S. manufacturers, that won't be much affected by this deal.
Additionally, much of the non–North American auto content that can be or is being manufactured in Europe is the high end of the value-added chain . Certainly the workers producing the engines and transmissions have higher-than-$16-per-hour wage rates, which are trumpeted in the new agreement as a proof that more "good jobs for working people" are being re-established by virtue of this deal. Since when is $16 per hour a Trumpian boon for U.S. auto workers? Objectively, $16 is only 27 percent above the 2018 Federal Poverty Threshold for a family with two kids ; even worse, $16 is only 54 percent of today's actual average hourly pay ($29.60) in U.S. automobile manufacturing, according to 2018 BLS numbers .
But beyond cars, here's the real problem: Although the ostensible goal of all of Trump's trade negotiations is to revitalize American manufacturing, the truth is that U.S. manufacturing basically suffered a catastrophic setback when China entered the World Trade Organization (WTO) back in 2001. Along with liberalized capital flows, the extensive resort to "offshoring" of manufacturing to China has sapped the American manufacturing capabilities, as well as engendering a skills shortage. This includes (to quote a recent Harvard Business Review study co-authored by Professors Gary Pisano and Willy Shih ):
"[the] tool and die makers, maintenance technicians, operators capable of working with highly sophisticated computer-controlled equipment, skilled welders, and even production engineers [all of whom] are in short supply.
"The reasons for such shortages are easy to understand. As manufacturing plants closed or scaled back, many people in those occupations moved on to other things or retired. Seeing fewer job prospects down the road, young people opted for other careers. And many community and vocational schools, starved of students, scaled back their technical programs."
The one ready source of demand for U.S.-manufactured goods is the military. High-tech enthusiasts like to claim that the U.S. Defense Department had a crucial role in creating Silicon Valley . The truth is far more nuanced. Silicon Valley grew like a weed with essentially no Department of Defense investment; in fact, until quite recently, most successful Silicon Valley enterprises avoided DoD contracts like the plague.
A bit of history: the transistor was invented by entirely private-funded research at Bell Labs in 1947. Next, the first integrated circuit patent was filed by Werner Jacobi, a Siemens commercial engineer in 1949 for application to hearing aids . The next advance, the idea of a silicon substrate, was patented in 1952 as a cheaper way of using transistors by Geoffrey Dummer , a reliability engineer working at a British government radar lab; for all of the talk of the defense establishment's role in developing high tech, ironically the British military showed no interest and Dummer couldn't secure the funding support to produce a working prototype. In 1958, Jack Kilby, a newbie at Texas Instruments (which had developed the first transistor radio as a commercial product in 1954) came up with the idea of multiple transistors on a germanium substrate. Almost simultaneously, in 1960, Robert Noyce at Fairchild Electronics patented a cheaper solution, a new approach to the silicon substrate, and implemented working prototypes. Both men envisioned mainly civilian applications (Kilby soon designed the first integrated circuit pocket calculator, a commercial success).
It is true that the first customers for both the Noyce and Kilby chips were the U.S. Air Force's B-70 and Minuteman I projects, which gave rise to the idea that the Pentagon played the key role in developing U.S. high-tech manufacturing, although it is worth noting that the electronics on both projects proved to be failures. Both companies soon developed major commercial applications for their integrated circuit innovations, Texas Instruments with considerably more success than Fairchild.
The Defense Advanced Research Projects Agency (aka "DARPA") is generally credited with inventing the internet. That's overblown. In fact, civilian computer science labs in the U.S., UK and France developed the idea of wide area networks in the 1950s. In the early '60s, DARPA started funding ARPANET design concepts to connect DoD laboratories and research facilities, initially without the idea of packet switching. Donald Davies at the UK's National Physics Lab first demonstrated practical packet switching in 1967 and had a full inter-lab network going by 1969. The first two nodes of the ARPANET were demonstrated in 1969 using a primitive centralized architecture and the Davies packet switching approach. In 1973, DARPA's Cerf and Kahn borrowed the idea of decentralized nodes from the French CYCLADES networking system, but this wasn't fully implemented as the TCP/IP protocol on the ARPANET until 1983. In 1985, the civilian National Science Foundation started funding the NSFNET, based on the ARPANET's TCP/IP protocol, for a much larger network of universities, supercomputer labs and research facilities. NSFNET started operations with a much larger backbone than ARPANET in 1986 (ARPANET itself was decommissioned in 1990) and started accepting limited commercial service providers in 1988, and, with further expansion and much-needed protocol upgrades, NSFNET morphed into the internet in 1995, at which time the NSFNET backbone was decommissioned.
Today, of course, the DoD is showering the largest Silicon Valley companies with multi-billions and begging them to help U.S. military out of the hopeless mess it has made of its metastasizing computer, communications and software systems. Needless to say, if this DoD money becomes a significant portion of the income stream of Google, Microsoft, Apple, etc., it is safe to predict their decay and destruction at the hands of new innovators unencumbered by DoD funding, much as occurred with aviation companies such as Lockheed. NAFTA's reforms won't change that reality.
As a result of the militarization of what's left of U.S. manufacturing, along with the enlargement of the trans-Pacific supply chains with China (brought about through decades of offshoring), a mere tweak of the "new NAFTA" is unlikely to achieve Trump's objective of revitalizing America's industrial commons. With China's entry into the WTO, it is possible that the U.S. manufacturing has hit a "point of no return," which mitigates the utility of regional trade deals, as a means of reorienting the multinational production networks in a way that produces high-quality, high-paying jobs for American workers.
Offshoring and the increasing militarization of the American economy, then, have rendered reforms of the kind introduced by NAFTA almost moot. When it becomes more profitable to move factories overseas, or when it becomes more profitable, more quickly, to focus on finance instead of manufacturing, then your average red-blooded capitalist is going to happily engage in the deconstruction of the manufacturing sector (most, if not all, outsourced factories are profitable, just not as profitable as they might be in China or, for that matter, Mexico). The spoils in a market go to the fastest and strongest, and profits from finance, measured in nanoseconds, are gained more quickly than profits from factories, whose time frame is measured in years. Add to that the desire to weaken unions and the championing of an overvalued dollar by the financial industry, and you have a perfect storm of national decline and growing economic inequality.
Seen in this broader context, the new NAFTA-that's-not-called-NAFTA is a nothing-burger. The much-trumpeted reforms give crumbs to U.S. labor, in contrast to the clear-cut bonanza granted to corporate America under the GOP's new tax "reform" legislation. Hardly a great source of celebration as we approach the Labor Day weekend. In fact, by the time the big bucks corporate lawyer-lobbyists for other mega corporations have slipped in their little wording refinements exempting hundreds of billions of special interest dollars, the new NAFTA-that's-not-called-NAFTA will most likely include an equal screwing for textile, steel, energy sector, chemical, and other U.S. industry workers, and anything else that is left of the civilian economy.
This article was produced by the Independent Media Institute .
Mark Pontin , September 1, 2018 at 3:08 amAnthony K Wikrent , September 1, 2018 at 8:09 am
From Auerback's article: "Silicon Valley grew like a weed with essentially no Department of Defense investment."
In 1960, 100 percent of all microprocessor chips produced by Silicon Valley -- therefore, IIRC, at that time 100 percent of all microprocessor chips produced in the world -- were bought by the U.S. Department of Defense. This was primarily driven by their use in the guidance systems of the gen-1 ICBMs then being developed under USAF General Bernard Schriever (which also supplied the rockets used for NASA's Redstone and Mercury programs), and by their use in NORAD and descendant early-warning radar networks.
As late as 1967, 75 percent of all microprocessor chips from Silicon Valley were still bought by the Pentagon.
By then, Japanese companies like Matsushita, Sharp, etc. had licensed the technology so Silicon Valley was no longer producing all the world's chip output. But still .
That aside, I think Auerback makes some very good points.Scott , September 1, 2018 at 8:40 am
While I think Auerback's Melman's point that the best engineering talent was diverted by military spending, it does not mean that military spending had an entirely negative effect on the ability to compete in other markets. What no one addresses is: Why did USA computer and electronics industries become so successful, while those of Britain did not?
The key, I think, is the conscious policy to deliberately seed new technologies developed under military auspices into the civilian economy. The best recent example was the Moore School Lectures in July – August 1946, which can be identified as the precise point in time when the USA government, following Hamiltonian principles of nation building, acted to create an entire new industry, and an entirely new phase shift in the technological bases of the economy.
This followed historical examples such as the spread of modern metal working machine tools out of the national armories after the War of 1812; the role of the Army in surveying, planning, and constructing railroads in the first half of the 19th century; the role of the Navy in establishing scientific principles of steam engine design during and after the Civil War; and the role of the Navy in creating the profession of mechanical engineering after the Civil War.
The left, unfortunately, in its inexplicable hatred of Alexander Hamilton (such as the left's false argument that Hamilton wanted to create a political economy in which the rich stayed rich and in control -- easily disproven by comparing the descendants of USA wealthy elites of the early 1800s with the descendants of British wealthy elites of the early 1800s) cannot understand Hamiltonian principles of nation building because the left does not want to understand the difference between wealth and the creation of wealth. The left sees Hamilton's focus on creating new wealth (and, be it noted, Hamilton was explicit in arguing that wealth is created by improving the productive powers of labor) and misunderstands it as coddling of wealth.Marshall Auerback , September 1, 2018 at 9:04 am
I agree, please see this presentation titled The Secret History of Silicon Valley, which details the relationship in fair greater detail. It is not from a professional historian, but the depth of research and citations show a story that runs counter to the common myths. https://steveblank.com/secret-history/Carolinian , September 1, 2018 at 9:19 am
But there had already been substantial private investment EARLIER than 1960. The DoD investment came later and initially was unsuccessful. I do later acknowledge that the Pentagon played A role, but not THE role, and that by and large the military's role has been unhelpful to American manufacturing (as opposed to the common myths to the contrary). Multiple events, multiple players, and multiple points of origin need to be mentioned in any sensible understanding of the emergence of Silicon Valley, starting with Bell Laboratories in 1947.4corners , September 1, 2018 at 3:23 am
Thank you for this bit of pushback against anti-SV paranoia. And the above comment is only referring to one aspect of Silicon Valley whereas the industry as we now think about it is as much about personal computing and software as about hardware.
That doesn't make them good guys necessarily but the notion that the USG is running the whole show is surely wrong.anon48 , September 1, 2018 at 12:24 pm
With China's entry into the WTO, it is possible that the U.S. manufacturing has hit a "point of no return," which mitigates the utility of regional trade deals.
So, what then does Mr Auerback propose? Give up on trade deals all together? Leave in place the unbalanced tariff structures that Trump claims to be addressing?
Re: autos, 25% imported content (by weight or what?!) seems like a significant move from 37.5%. But the author just dismisses that with a vague suggestion that the higher value-added products might constitute the 25%, and that it probably doesn't matter anyway.
The other half of the double feature – about inefficiency from DOD investments -- is interesting, but what is the main criticism about DoD? Is it that contracting with the private sector is inherently inefficient or should it be more about how those programs have been managed? For example, the F-35 seems ill-conceived and poorly managed but does that suggest DoD-private sector projects are inherently counterproductive?Mark Pontin , September 1, 2018 at 3:30 am
"So, what then does Mr Auerback propose? Give up on trade deals all together?"
That was my takeaway too Mr Auerback should we wait until you drop the other shoe?The Rev Kev , September 1, 2018 at 3:42 am
I guess I should cite a source. An interesting one is Donald Mackenzie's Inventing Accuracy: A Historical Sociology of Nuclear Missile Guidance MIT Press, 1992-93.
MacKenzie -- a professor of sociology at the University of Edinburgh, specializing in science and technology studies -- is also a good deep dive on financial engineering, the algorithms and the actual hardware of HFT, etc. A book of his from 2008, An Engine, Not a Camera: How Financial Models Shape Markets is absolutely worth reading.DF , September 1, 2018 at 10:35 am
Even working in the private sector can let engineers get into bad habits. Electronic engineers were used to just selecting whatever material they needed to finish an engineering design in at least one major corporation. That is, until the EU but a strict ban on the import of electronic equipment that contained certain metals and chemicals due to the fact that they were such bad pollutants. But the EU is far too big a market to ignore so it looked like adjustments had to be made.
A talk was given by a consultant of how the new rules would work in practice. Straight away the engineers asked if a deferral was possible. No. Was it possible to get a waiver for the use of those materials. No. The consultant stated that these were the rules and then went on to point out that he was now on his way to China to give the same identical talk to Chinese engineers. He also said that these rules would probably become de facto world standards. Wish that I had saved that article.The Rev Kev , September 1, 2018 at 10:39 am
Was this RoHS?John Wright , September 1, 2018 at 11:54 am
Don't know, but I only saw the original article talking about this about a year or two ago.David , September 1, 2018 at 1:10 pm
This appears to be the original ROHS (Removal Of Hazardous Substances) EU directive.
This involved a lot of different chemicals, but of interest to me was the replacement of tin-lead solder in electronic equipment.
In the early 2000's my job involved migrating a number of shipping tin-lead (sn-pb) printed circuit assemblies to pb free designs to meet ROHS standards.
A lot of changes were necessary as the new pb-free (tin-silver-copper) solder melted at around 223c while the previous tin-lead solder melted at 183c.
Components had to all take the higher temperature and this caused a slew of problems. Usually the bare board had to be changed to a different material that could take the higher temp.
The EU ended up being somewhat flexible in the ROHS implementation, as I know that they allowed a number of exemptions for some high pb content (>= 85% pb) solder where there was no good substitute. (example, high temperature solders for devices that run hot such as transducers and loudspeakers and internal power IC connections)
As I remember, medical equipment and US military equipment were not required to adhere to ROHS.
It was not a simple task to meet the new ROHS standards, so I can understand that some engineers wanted a deferral.
But it provided employment for me.AbateMagicThinking But Not Money , September 1, 2018 at 5:22 am
When a system is designed to last 20+ years with high reliability and availability requirements, techniques and methods that are used to design and build this years I-phone aren't always applicable.
The lead in the solder helps prevent the growth of "tin whiskers", which can cause electronic systems to fail over time. One usually gets a RoHS waiver for the part(s) for longer life systems.
But what happens in five or ten years when the part(s) need to be replaced? Will one be able to find that leaded-part? Try and buy a new 5 year old I-phone.
Will that part be a genuinely new part or one that was salvaged, and possibly damaged, from another piece of equipment? How would one know if the part is damaged? It looks okay. It functions in the lab, but will it function, as expected, in the real world? For how long?
What's the risk of putting a similar but different part in the system? Could people be harmed if the part fails or doesn't function as expected?
This is systems engineering. Some wave it off as a "ludicrously bureaucratized management systems", but it is important. They may prefer the commercial approach of letting the public find faults in designs, but that's how people get run over by autonomous vehicles.
Unfortunately, systems engineering doesn't directly contribute to the quarterly bottom line, so it is usually underfunded or neglected. It only becomes important when, after all the designers have moved on, the system can't be used because it can't be repaired or something dangerous happens because the system was maintained with parts that were "good enough", but weren't.
What this has to do with NAFTA, I don't know.Disturbed Voter , September 1, 2018 at 5:41 am
Perhaps covert regime change may be the only way (instead of tariffs):
The medicine required will probably involve hard-faced interviews with all the top CEO's (involving rubber gloves at the private airports as they come from their jaunts abroad). Who better than special ops for carrying our such persuasion. It will have to be done on the QT under stricter than usual national security secrecy so that the 'persuaded' won't lose face.
Look out for an appropriate and revolutionary "refocusing initiative" announced by all the top people in the private sector as an indication that the threat of the the rubber glove has worked.
Pip-Pip!jo6pac , September 1, 2018 at 8:30 am
Utopians will make any society into a no-place. You can't run a society solely on consumerism, it has to also run on MIC expenditures, because of excess productive capacity, as was shown in WW II and the Cold War. The other trend is we don't want to pay anyone with a college degree, more than the minimum wage. Per management, engineers make too much salary.Felix_47 , September 1, 2018 at 8:48 am
The CIA money is everywhere in the silly valley.
The article is a good read.ambrit , September 1, 2018 at 10:24 am
I work in this area with the government. This is exactly what I see. It is a deep seated cancer on our nation. What can be done to change this. I always thought cut the military budget but then the only jobs American can get (if vets with security clearances) would vanish? Does anyone have any solutions?Jeff , September 1, 2018 at 10:48 am
Declare the Infrastructure Renovation Program to be "In the Interests of National Security," cut the Military Industrial Complex on for a piece of the action, and start hiring. After all, General Dynamics got some serious contracts to run the call centres for Obamacare. The template is there.Newton Finn , September 1, 2018 at 10:43 am
That's disgusting. Giving call center contracts to defense firms And likely for a much bigger mark-up than might have been given to call center management companies.Wukchumni , September 1, 2018 at 10:55 am
As Edward Bellamy envisioned in the late 19th Century, one possible "solution" would be to transition the military model into serving benevolent civilian uses. Imagine if our now-monstrous MIC was tasked not with protecting elite wealth and destroying other nations, but rather with repairing environmental damage and restoring environmental health, along with addressing other essential needs of people and planet. Change the purpose pursued, and a great evil can become a great good.blennylips , September 1, 2018 at 1:38 pm
We largely did that in the early 1970's, as angst against the Vietnam War was at a fever pitch and the ecological movement was ascendant.
It took awhile for the effects to be felt, but smog in L.A. went from horrendous to manageable within a decade of auto emissions being regulated. Lakes & waterways across the land were cleaned up as well, to the benefit of everybody.
Bellamy was quite the visionary, so much of what he described in Looking Backward, actually happened.John Zelnicker , September 1, 2018 at 9:37 am
Second Hanford radioactive tunnel collapse expected. And it could be more severe
By Annette Cary
August 28, 2018 07:14 PM
https://www.tri-cityherald.com/news/local/hanford/article217470425.htmlMichaeLeroy , September 1, 2018 at 9:48 am
Lambert – Did you intend to post only about a third of Auerbach's article? That's all I see.DF , September 1, 2018 at 10:33 am
One of my gigs was working as a scientist/engineer for a fledgling Minnesota based medical device company. The company's R&D team originally consisted of experienced medical device development professionals and we made progress on the product. Management secured a round of funding from Silicon Valley investors. One of the strings attached to that investment was that Silicon Valley expertise be brought in to the R&D efforts. There was a huge culture clash between the Minnesota and the California teams, as the Silicon Valley engineers tried to apply their military systems perspective to development of a device meant for use in humans. From our perspective, the solutions proposed by the weapons guys were dangerous and impractical. However management considered the Silicon Valley expertise golden and consistently ruled in their favor. This was the early 2000s, so none of the Minnesota R&D team had difficulty moving on to other projects, which is what we did. The result of the Silicon Valley turn was a several-fold increase in cash burn, loss of medical device engineering knowledge and ultimately no product.John Wright , September 1, 2018 at 12:09 pm
Another view is that defense procurement is one of the few things that's keeping a lot of US manufacturing and technical expertise alive at all. I went to one of the only electronic parts stores (i.e., a place that sells stuff like IC's capacitors, resistors, etc.) in Albuquerque, NM a few months ago. The person at the cash register told me that nearly all of their business comes from Sandia National Laboratories, which is the big nuclear weapons laboratory in ABQ.John , September 1, 2018 at 10:40 am
I suspect there is a lot more USA technical expertise out there than indicated by the small quantity of retail electronics parts stores surviving. On-line companies such as Digi-key and Mouser have very large and diverse component selections and quick delivery to retail customers.
Go to https://www.digikey.com/products/en
The blank search shows 8,380,317 items.Mel , September 1, 2018 at 11:31 am
The Aug 21, 2015 NC has a piece "How Complex Systems Fail" that seems appropriate to this. Death is an unavoidable part of the great cycle. Get used to it.
How Complex Systems Fail PDF here .
Mar 27, 2018 | developers.slashdot.org
(tnmoc.org) the National Museum of Computing published a blog post in which it tried to find the person who has been programming the longest . At the time, it declared Bill Williams, a 70-year old to be one of the world's most durable programmers, who claimed to have started coding for a living in 1969 and was still doing so at the time of publication. The post has been updated several times over the years, and over the weekend, the TNMC updated it once again. The newest contender is Terry Froggatt of Hampshire, who writes: I can beat claim of your 71-year-old by a couple of years, (although I can't compete with the likes of David Hartley). I wrote my first program for the Elliott 903 in September 1966. Now at the age of 73 I am still writing programs for the Elliott 903! I've just written a 903 program to calculate the Fibonacci numbers. And I've written quite a lot of programs in the years in between, some for the 903 but also a good many in Ada.
Dec 11, 2017 | www.huffingtonpost.com
In his ground-breaking 1995 book Jihad vs. McWorld , political scientist Benjamin Barber posits that the global conflicts of the early 21st century would be driven by two opposing but equally undemocratic forces: neoliberal corporate globalization (which he dubbed "McWorld") and reactionary tribal nationalisms (which he dubbed "Jihad"). Although distinct in many ways, both of these forces, Barber persuasively argues, succeed by denying the possibilities for democratic consensus and action, and so both must be opposed by civic engagement and activism on a broad scale.
In the two decades since Barber's book, this conflict has seemed to play out along overtly cultural lines: with Islamic extremism representing jihad, in opposition to Western neoliberalism representing McWorld. Case in pitch-perfect point: the Al Qaeda terrorist attacks on the World Trade Center. Yet despite his use of the Arabic word Jihad, Barber is clear that reactionary tribalism is a worldwide phenomenon -- and in 2016 we're seeing particularly striking examples of that tribalism in Western nations such as Great Britain and the United States.
Britain's vote this week in favor of leaving the European Union was driven entirely by such reactionary tribal nationalism. The far-right United Kingdom Independence Party (UKIP) and its leader Nigel Farage led the charge in favor of Leave , as exemplified by a recent UKIP poster featuring a photo of Syrian refugees with the caption " Breaking point: the EU has failed us ." Farage and his allies like to point to demographic statistics about how much the UK has changed in the last few decades , and more exactly how the nation's white majority has been somewhat shifted over that time by the arrival of sizeable African and Asian immigrant communities.
It's impossible not to link the UKIP's emphases on such issues of immigration and demography to the presidential campaign of the one prominent U.S. politician who is cheering for the Brexit vote : presumptive GOP nominee Donald Trump. From his campaign-launching speech about Mexican immigrant "criminals and rapists" to his proposal to ban Muslim immigration and his "Make American Great Again" slogan, Trump has relied on reactionary tribal nationalism at every stage of his campaign, and has received the enthusiastic endorsement of white supremacist and far-right organizations as a result. For such American tribal nationalists, the 1965 Immigration Act is the chief bogeyman, the origin point of continuing demographic shifts that have placed white America in a precarious position.
The only problem with that narrative is that it's entirely inaccurate. What the 1965 Act did was reverse a recent, exclusionary trend in American immigration law and policy, returning the nation to the more inclusive and welcoming stance it had taken throughout the rest of its history. Moreover, while the numbers of Americans from Latin American, Asian, and Muslim cultures have increased in recent decades, all of those communities have been part of o ur national community from its origin points . Which is to say, this right-wing tribal nationalism isn't just opposed to fundamental realities of 21st century American identity -- it also depends on historical and national narratives that are as mythic as they are exclusionary.
Linking Brexit and Trump to global right-wing tribal nationalisms doesn't mean conflating them all, of course. Although Trump rallies have featured troubling instances of violence, and although the murderer of British politican Jo Cox was an avowed white supremacist and Leave supporter, the right-wing Islamic extremism of groups such as Al Qaeda, ISIS, and Boko Haram rely far more consistently and centrally on violence and terrorism in support of their worldview and goals. Such specific contexts and nuances are important and shouldn't be elided.
Yet at the same time, we can't understand our 21st century world without a recognition of this widespread phenomenon of global, tribal nationalism. From ISIS to UKIP, Trump to France's Jean-Marie Le Pen, such reactionary forces have become and remain dominant players across the world, influencing local and international politics, economics, and culture. Benjamin Barber called this trend two decades ago, and we would do well to read and remember his analyses -- as well as his call for civic engagement and activism to resist these forces and fight for democracy.
Ben Railton Professor & public scholar of American Studies, Follow Ben Railton on Twitter: www.twitter.com/AmericanStudier
Dec 13, 2017 | www.unz.com
The American welfare state was created in 1935 and continued to develop through 1973. Since then, over a prolonged period, the capitalist class has been steadily dismantling the entire welfare state.
Between the mid 1970's to the present (2017) labor laws, welfare rights and benefits and the construction of and subsidies for affordable housing have been gutted. ' Workfare' (under President 'Bill' Clinton) ended welfare for the poor and displaced workers. Meanwhile the shift to regressive taxation and the steadily declining real wages have increased corporate profits to an astronomical degree.
What started as incremental reversals during the 1990's under Clinton has snowballed over the last two decades decimating welfare legislation and institutions.
The earlier welfare 'reforms' and the current anti-welfare legislation and austerity practices have been accompanied by a series of endless imperial wars, especially in the Middle East.
In the 1940's through the 1960's, world and regional wars (Korea and Indo-China) were combined with significant welfare program – a form of ' social imperialism' , which 'buy off' the working class while expanding the empire. However, recent decades are characterized by multiple regional wars and the reduction or elimination of welfare programs – and a massive growth in poverty, domestic insecurity and poor health.
New Deals and Big Wars
The 1930's witnessed the advent of social legislation and action, which laid the foundations of what is called the ' modern welfare state' .
Labor unions were organized as working class strikes and progressive legislation facilitated trade union organization, elections, collective bargaining rights and a steady increase in union membership. Improved work conditions, rising wages, pension plans and benefits, employer or union-provided health care and protective legislation improved the standard of living for the working class and provided for 2 generations of upward mobility.
Social Security legislation was approved along with workers' compensation and the forty-hour workweek. Jobs were created through federal programs (WPA, CCC, etc.). Protectionist legislation facilitated the growth of domestic markets for US manufacturers. Workplace shop steward councils organized 'on the spot' job action to protect safe working conditions.
World War II led to full employment and increases in union membership, as well as legislation restricting workers' collective bargaining rights and enforcing wage freezes. Hundreds of thousands of Americans found jobs in the war economy but a huge number were also killed or wounded in the war.
The post-war period witnessed a contradictory process: wages and salaries increased while legislation curtailed union rights via the Taft Hartley Act and the McCarthyist purge of leftwing trade union activists. So-called ' right to work' laws effectively outlawed unionization mostly in southern states, which drove industries to relocate to the anti-union states.
Welfare reforms, in the form of the GI bill, provided educational opportunities for working class and rural veterans, while federal-subsidized low interest mortgages encourage home-ownership, especially for veterans.
The New Deal created concrete improvements but did not consolidate labor influence at any level. Capitalists and management still retained control over capital, the workplace and plant location of production.
Trade union officials signed pacts with capital: higher pay for the workers and greater control of the workplace for the bosses. Trade union officials joined management in repressing rank and file movements seeking to control technological changes by reducing hours (" thirty hours work for forty hours pay "). Dissident local unions were seized and gutted by the trade union bosses – sometimes through violence.
Trade union activists, community organizers for rent control and other grassroots movements lost both the capacity and the will to advance toward large-scale structural changes of US capitalism. Living standards improved for a few decades but the capitalist class consolidated strategic control over labor relations. While unionized workers' incomes, increased, inequalities, especially in the non-union sectors began to grow. With the end of the GI bill, veterans' access to high-quality subsidized education declined.
While a new wave of social welfare legislation and programs began in the 1960's and early 1970's it was no longer a result of a mass trade union or workers' "class struggle". Moreover, trade union collaboration with the capitalist regional war policies led to the killing and maiming of hundreds of thousands of workers in two wars – the Korean and Vietnamese wars.
Much of social legislation resulted from the civil and welfare rights movements. While specific programs were helpful, none of them addressed structural racism and poverty.
The Last Wave of Social Welfarism
The 1960'a witnessed the greatest racial war in modern US history: Mass movements in the South and North rocked state and federal governments, while advancing the cause of civil, social and political rights. Millions of black citizens, joined by white activists and, in many cases, led by African American Viet Nam War veterans, confronted the state. At the same time, millions of students and young workers, threatened by military conscription, challenged the military and social order.
Energized by mass movements, a new wave of social welfare legislation was launched by the federal government to pacify mass opposition among blacks, students, community organizers and middle class Americans. Despite this mass popular movement, the union bosses at the AFL-CIO openly supported the war, police repression and the military, or at best, were passive impotent spectators of the drama unfolding in the nation's streets. Dissident union members and activists were the exception, as many had multiple identities to represent: African American, Hispanic, draft resisters, etc.
Under Presidents Lyndon Johnson and Richard Nixon, Medicare, Medicaid, OSHA, the EPA and multiple poverty programs were implemented. A national health program, expanding Medicare for all Americans, was introduced by President Nixon and sabotaged by the Kennedy Democrats and the AFL-CIO. Overall, social and economic inequalities diminished during this period.
The Vietnam War ended in defeat for the American militarist empire. This coincided with the beginning of the end of social welfare as we knew it – as the bill for militarism placed even greater demands on the public treasury.
With the election of President Carter, social welfare in the US began its long decline. The next series of regional wars were accompanied by even greater attacks on welfare via the " Volker Plan " – freezing workers' wages as a means to combat inflation.
Guns without butter' became the legislative policy of the Carter and Reagan Administrations. The welfare programs were based on politically fragile foundations.
The Debacle of Welfarism
Private sector trade union membership declined from a post-world war peak of 30% falling to 12% in the 1990's. Today it has sunk to 7%. Capitalists embarked on a massive program of closing thousands of factories in the unionized North which were then relocated to the non-unionized low wage southern states and then overseas to Mexico and Asia. Millions of stable jobs disappeared.
Following the election of 'Jimmy Carter', neither Democratic nor Republican Presidents felt any need to support labor organizations. On the contrary, they facilitated contracts dictated by management, which reduced wages, job security, benefits and social welfare.
The anti-labor offensive from the ' Oval Office' intensified under President Reagan with his direct intervention firing tens of thousands of striking air controllers and arresting union leaders. Under Presidents Carter, Reagan, George H.W. Bush and William Clinton cost of living adjustments failed to keep up with prices of vital goods and services. Health care inflation was astronomical. Financial deregulation led to the subordination of American industry to finance and the Wall Street banks. De-industrialization, capital flight and massive tax evasion reduced labor's share of national income.
The capitalist class followed a trajectory of decline, recovery and ascendance. Moreover, during the earlier world depression, at the height of labor mobilization and organization, the capitalist class never faced any significant political threat over its control of the commanding heights of the economy.
The ' New Deal' was, at best, a de facto ' historical compromise' between the capitalist class and the labor unions, mediated by the Democratic Party elite. It was a temporary pact in which the unions secured legal recognition while the capitalists retained their executive prerogatives.
The Second World War secured the economic recovery for capital and subordinated labor through a federally mandated no strike production agreement. There were a few notable exceptions: The coal miners' union organized strikes in strategic sectors and some leftist leaders and organizers encouraged slow-downs, work to rule and other in-plant actions when employers ran roughshod with special brutality over the workers. The recovery of capital was the prelude to a post-war offensive against independent labor-based political organizations. The quality of labor organization declined even as the quantity of trade union membership increased.
Labor union officials consolidated internal control in collaboration with the capitalist elite. Capitalist class-labor official collaboration was extended overseas with strategic consequences.
The post-war corporate alliance between the state and capital led to a global offensive – the replacement of European-Japanese colonial control and exploitation by US business and bankers. Imperialism was later 're-branded' as ' globalization' . It pried open markets, secured cheap docile labor and pillaged resources for US manufacturers and importers.
US labor unions played a major role by sabotaging militant unions abroad in cooperation with the US security apparatus: They worked to coopt and bribe nationalist and leftist labor leaders and supported police-state regime repression and assassination of recalcitrant militants.
' Hand in bloody glove' with the US Empire, the American trade unions planted the seeds of their own destruction at home. The local capitalists in newly emerging independent nations established industries and supply chains in cooperation with US manufacturers. Attracted to these sources of low-wage, violently repressed workers, US capitalists subsequently relocated their factories overseas and turned their backs on labor at home.
Labor union officials had laid the groundwork for the demise of stable jobs and social benefits for American workers. Their collaboration increased the rate of capitalist profit and overall power in the political system. Their complicity in the brutal purges of militants, activists and leftist union members and leaders at home and abroad put an end to labor's capacity to sustain and expand the welfare state.
Trade unions in the US did not use their collaboration with empire in its bloody regional wars to win social benefits for the rank and file workers. The time of social-imperialism, where workers within the empire benefited from imperialism's pillage, was over. Gains in social welfare henceforth could result only from mass struggles led by the urban poor, especially Afro-Americans, community-based working poor and militant youth organizers.
The last significant social welfare reforms were implemented in the early 1970's – coinciding with the end of the Vietnam War (and victory for the Vietnamese people) and ended with the absorption of the urban and anti-war movements into the Democratic Party.
Henceforward the US corporate state advanced through the overseas expansion of the multi-national corporations and via large-scale, non-unionized production at home.
The technological changes of this period did not benefit labor. The belief, common in the 1950's, that science and technology would increase leisure, decrease work and improve living standards for the working class, was shattered. Instead technological changes displaced well-paid industrial labor while increasing the number of mind-numbing, poorly paid, and politically impotent jobs in the so-called 'service sector' – a rapidly growing section of unorganized and vulnerable workers – especially including women and minorities.
Labor union membership declined precipitously. The demise of the USSR and China's turn to capitalism had a dual effect: It eliminated collectivist (socialist) pressure for social welfare and opened their labor markets with cheap, disciplined workers for foreign manufacturers. Labor as a political force disappeared on every count. The US Federal Reserve and President 'Bill' Clinton deregulated financial capital leading to a frenzy of speculation. Congress wrote laws, which permitted overseas tax evasion – especially in Caribbean tax havens. Regional free-trade agreements, like NAFTA, spurred the relocation of jobs abroad. De-industrialization accompanied the decline of wages, living standards and social benefits for millions of American workers.
The New Abolitionists: Trillionaires
The New Deal, the Great Society, trade unions, and the anti-war and urban movements were in retreat and primed for abolition.
Wars without welfare (or guns without butter) replaced earlier 'social imperialism' with a huge growth of poverty and homelessness. Domestic labor was now exploited to finance overseas wars not vice versa. The fruits of imperial plunder were not shared.
As the working and middle classes drifted downward, they were used up, abandoned and deceived on all sides – especially by the Democratic Party. They elected militarists and demagogues as their new presidents.
President 'Bill' Clinton ravaged Russia, Yugoslavia, Iraq and Somalia and liberated Wall Street. His regime gave birth to the prototype billionaire swindlers: Michael Milken and Bernard 'Bernie' Madoff.
Clinton converted welfare into cheap labor 'workfare', exploiting the poorest and most vulnerable and condemning the next generations to grinding poverty. Under Clinton the prison population of mostly African Americans expanded and the breakup of families ravaged the urban communities.
Provoked by an act of terrorism (9/11) President G.W. Bush Jr. launched the 'endless' wars in Afghanistan and Iraq and deepened the police state (Patriot Act). Wages for American workers and profits for American capitalist moved in opposite directions.
The Great Financial Crash of 2008-2011 shook the paper economy to its roots and led to the greatest shakedown of any national treasury in history directed by the First Black American President. Trillions of public wealth were funneled into the criminal banks on Wall Street – which were ' just too big to fail .' Millions of American workers and homeowners, however, were ' just too small to matter' .
The Age of Demagogues
President Obama transferred 2 trillion dollars to the ten biggest bankers and swindlers on Wall Street, and another trillion to the Pentagon to pursue the Democrats version of foreign policy: from Bush's two overseas wars to Obama's seven.
Obama's electoral 'donor-owners' stashed away two trillion dollars in overseas tax havens and looked forward to global free trade pacts – pushed by the eloquent African American President.
Obama was elected to two terms. His liberal Democratic Party supporters swooned over his peace and justice rhetoric while swallowing his militarist escalation into seven overseas wars as well as the foreclosure of two million American householders. Obama completely failed to honor his campaign promise to reduce wage inequality between black and white wage earners while he continued to moralize to black families about ' values' .
Obama's war against Libya led to the killing and displacement of millions of black Libyans and workers from Sub-Saharan Africa. The smiling Nobel Peace Prize President created more desperate refugees than any previous US head of state – including millions of Africans flooding Europe.
'Obamacare' , his imitation of an earlier Republican governor's health plan, was formulated by the private corporate health industry (private insurance, Big Pharma and the for-profit hospitals), to mandate enrollment and ensure triple digit profits with double digit increases in premiums. By the 2016 Presidential elections, ' Obama-care' was opposed by a 45%-43% margin of the American people. Obama's propagandists could not show any improvement of life expectancy or decrease in infant and maternal mortality as a result of his 'health care reform'. Indeed the opposite occurred among the marginalized working class in the old 'rust belt' and in the rural areas. This failure to show any significant health improvement for the masses of Americans is in stark contrast to LBJ's Medicare program of the 1960's, which continues to receive massive popular support.
Forty-years of anti welfare legislation and pro-business regimes paved the golden road for the election of Donald Trump
Trump and the Republicans are focusing on the tattered remnants of the social welfare system: Medicare, Medicaid, Social Security. The remains of FDR's New Deal and LBJ's Great Society -- are on the chopping block.
The moribund (but well-paid) labor leadership has been notable by its absence in the ensuing collapse of the social welfare state. The liberal left Democrats embraced the platitudinous Obama/Clinton team as the 'Great Society's' gravediggers, while wailing at Trump's allies for shoving the corpse of welfare state into its grave.
Over the past forty years the working class and the rump of what was once referred to as the ' labor movement' has contributed to the dismantling of the social welfare state, voting for ' strike-breaker' Reagan, ' workfare' Clinton, ' Wall Street crash' Bush, ' Wall Street savior' Obama and ' Trickle-down' Trump.
Gone are the days when social welfare and profitable wars raised US living standards and transformed American trade unions into an appendage of the Democratic Party and a handmaiden of Empire. The Democratic Party rescued capitalism from its collapse in the Great Depression, incorporated labor into the war economy and the post- colonial global empire, and resurrected Wall Street from the 'Great Financial Meltdown' of the 21 st century.
The war economy no longer fuels social welfare. The military-industrial complex has found new partners on Wall Street and among the globalized multi-national corporations. Profits rise while wages fall. Low paying compulsive labor (workfare) lopped off state transfers to the poor. Technology – IT, robotics, artificial intelligence and electronic gadgets – has created the most class polarized social system in history. The first trillionaire and multi-billionaire tax evaders rose on the backs of a miserable standing army of tens of millions of low-wage workers, stripped of rights and representation. State subsidies eliminate virtually all risk to capital. The end of social welfare coerced labor (including young mother with children) to seek insecure low-income employment while slashing education and health – cementing the feet of generations into poverty. Regional wars abroad have depleted the Treasury and robbed the country of productive investment. Economic imperialism exports profits, reversing the historic relation of the past.
Labor is left without compass or direction; it flails in all directions and falls deeper in the web of deception and demagogy. To escape from Reagan and the strike breakers, labor embraced the cheap-labor predator Clinton; black and white workers united to elect Obama who expelled millions of immigrant workers, pursued 7 wars, abandoned black workers and enriched the already filthy rich. Deception and demagogy of the labor-
Issac , December 11, 2017 at 11:01 pm GMT"The military-industrial complex has found new partners on Wall Street and among the globalized multi-national corporations."whyamihere , December 12, 2017 at 4:24 am GMT
"The collaboration of liberals and unions in promoting endless wars opened the door to Trump's mirage of a stateless, tax-less, ruling class."
A mirage so real, it even has you convinced.If the welfare state in America was abolished, major American cities would burn to the ground. Anarchy would ensue, it would be magnitudes bigger than anything that happened in Ferguson or Baltimore. It would likely be simultaneous.Disordered , December 13, 2017 at 8:41 am GMT
I think that's one of the only situations where preppers would actually live out what they've been prepping for (except for a natural disaster).
I've been thinking about this a little over the past few years after seeing the race riots. What exactly is the line between our society being civilized and breaking out into chaos. It's probably a lot thinner than most people think.
I don't know who said it but someone long ago said something along the lines of, "Democracy can only work until the people figure out they can vote for themselves generous benefits from the public treasury." We are definitely in this situation today. I wonder how long it can last.While I agree with Petras's intent (notwithstanding several exaggerations and unnecessary conflations with, for example, racism), I don't agree so much with the method he proposes. I don't mind welfare and unions to a certain extent, but they are not going to save us unless there is full employment and large corporations that can afford to pay an all-union workforce. That happened during WW2, as only wartime demand and those pesky wage freezes solved the Depression, regardless of all the public works programs; while the postwar era benefited from the US becoming the world's creditor, meaning that capital could expand while labor participation did as well.Wally , Website December 13, 2017 at 8:57 am GMT
From then on, it is quite hard to achieve the same success after outsourcing and mechanization have happened all over the world. Both of these phenomena not only create displaced workers, but also displaced industries, meaning that it makes more sense to develop individual workfare (and even then, do it well, not the shoddy way it is done now) rather than giving away checks that probably will not be cashed for entrepreneurial purposes, and rather than giving away money to corrupt unions who depend on trusts to be able to pay for their benefits, while raising the cost of hiring that only encourages more outsourcing.
The amount of welfare given is not necessarily the main problem, the problem is doing it right for the people who truly need it, and efficiently – that is, with the least amount of waste lost between the chain of distribution, which should reach intended targets and not moochers.
Which inevitably means a sound tax system that targets unearned wealth and (to a lesser degree) foreign competition instead of national production, coupled with strict, yet devolved and simple government processes that benefit both business and individuals tired of bureaucracy, while keeping budgets balanced. Best of both worlds, and no military-industrial complex needed to drive up demand."President Obama transferred 2 trillion dollars to the ten biggest bankers and swindlers on Wall Street " That's twice the amount that Bush gave them.jacques sheete , December 13, 2017 at 10:52 am GMTDen Lille Abe , December 13, 2017 at 11:09 am GMT
The American welfare state was created in 1935 and continued to develop through 1973. Since then, over a prolonged period, the capitalist class has been steadily dismantling the entire welfare state.
Wrong wrong wrong.
Corporations [now] are welfare recipients and the bigger they are, the more handouts they suck up, and welfare for them started before 1935. In fact, it started in America before there was a USA. I do not have time to elaborate, but what were the various companies such as the British East India Company and the Dutch West India Companies but state pampered, welfare based entities? ~200 years ago, Herbert Spencer, if memory serves, pointed out that the British East India Company couldn't make a profit even with all the special, government granted favors showered upon it.
Corporations not only continuously seek monopolies (with the aid and sanction of the state) but they steadily fine tune the welfare state for their benefit. In fact, in reality, welfare for prols and peasants wouldn't exist if it didn't act as a money conduit and ultimate profit center for the big money grubbers.Well, the author kind of nails it. I remember from my childhood in the 50-60 ties in Scandinavia that the US was the ultimate goal in welfare. The country where you could make a good living with your two hands, get you kids to UNI, have a house, a telly ECT. It was not consumerism, it was the American dream, a chicken in every pot; we chewed imported American gum and dreamed.wayfarer , December 13, 2017 at 1:01 pm GMT
In the 70-80 ties Scandinavia had a tremendous social and economic growth, EQUALLY distributed, an immense leap forward. In the middle of the 80 ties we were equal to the US in standards of living.
Since we have not looked at the US, unless in pity, as we have seen the decline of the general income, social wealth fall way behind our own.
The average US workers income has not increased since 90 figures adjusted for inflation. The Scandinavian workers income in the same period has almost quadrupled. And so has our societies.
The article is dismal reading, and evidence of the failings of the "unregulated" society, where the anything goes as long as you are wealthy.Anonymous , Disclaimer December 13, 2017 at 1:40 pm GMT
Between the mid 1970's to the present (2017) labor laws, welfare rights and benefits and the construction of and subsidies for affordable housing have been gutted. 'Workfare' (under President 'Bill' Clinton) ended welfare for the poor and displaced workers. Meanwhile the shift to regressive taxation and the steadily declining real wages have increased corporate profits to an astronomical degree.
What does Hollywood "elite" JAP and wannabe hack-stand-up-comic Sarah Silverman think about the class struggle and problems facing destitute Americans? "Qu'ils mangent de la bagels!", source: https://en.wikipedia.org/wiki/Let_them_eat_cake
... ... ...@Greg FraserAnonymous , Disclaimer December 13, 2017 at 2:43 pm GMT
Like the Pentagon. Americans still don't readily call this welfare, but they will eventually. Defense profiteers are unions in a sense, you're either in their club Or you're in the service industry that surrounds it.As other commenters have pointed out, it's Petras curious choice of words that sometimes don't make too much sense. We can probably blame the maleable English language for that, but here it's too obvious. If you don't define a union, people might assume you're only talking about a bunch of meat cutters at Safeway.animalogic , December 13, 2017 at 2:57 pm GMT
The welfare state is alive and well for corporate America. Unions are still here – but they are defined by access and secrecy, you're either in the club or not.
The war on unions was successful first by co-option but mostly by the media. But what kind of analysis leaves out the role of the media in the American transformation? The success is mind blowing.
America has barely literate (white) middle aged males trained to spout incoherent Calvinistic weirdness: unabased hatred for the poor (or whoever they're told to hate) and a glorification of hedge fund managers as they get laid off, fired and foreclosed on, with a side of opiates.
There is hardly anything more tragic then seeing a web filled with progressives (management consultants) dedicated to disempowering, disabling and deligitimizing victims by claiming they are victims of biology, disease or a lack of an education rather than a system that issues violence while portending (with the best media money can buy) that they claim the higher ground.@WallyReg Cæsar , December 13, 2017 at 3:08 pm GMT
""Democracy can only work until the people figure out they can vote for themselves generous benefits from the public treasury." We are definitely in this situation today."
Quite right: the 0.01% have worked it out & US democracy is a Theatre for the masses.Reg Cæsar , December 13, 2017 at 3:20 pm GMT
They elected militarists and demagogues as their new presidents.
Wilson and FDR were much more militarist and demagogic than those that followed.@whyamiherephil , December 13, 2017 at 4:48 pm GMT
I don't know who said it but someone long ago said something along the lines of, "Democracy can only work until the people figure out they can vote for themselves generous benefits from the public treasury."
Some French aristocrat put it as, once the gates to the treasury have been breached, they can only be closed again with gunpowder. Anyone recognize the author?The author doesn't get it. What we have now IS the welfare state in an intensely diverse society. We have more transfer spending than ever before and Obamacare represents another huge entitlement.HallParvey , December 13, 2017 at 4:57 pm GMT
Intellectuals continue to fantasize about the US becoming a Big Sweden, but Sweden has only been successful insofar as it has been a modest nation-state populated by ethnic Swedes. Intense diversity in a huge country with only the remnants of federalism results in massive non-consensual decision-making, fragmentation, increased inequality, and corruption.@AnonymousAnonymous , Disclaimer December 13, 2017 at 4:57 pm GMT
The welfare state is alive and well for corporate America. Unions are still here – but they are defined by access and secrecy, you're either in the club or not.
They are largely defined as Doctors, Lawyers, and University Professors who teach the first two. Of course they are not called unions. Access is via credentialing and licensing. Good Day@Linda GreenAnonymous , Disclaimer December 13, 2017 at 5:54 pm GMT
Bernie Sanders, speaking on behalf of the MIC's welfare bird: "It is the airplane of the United States Air Force, Navy, and of NATO."
Elizabeth Warren, referring to Mossad's Estes Rockets: "The Israeli military has the right to attack Palestinian hospitals and schools in self defense"
Barack Obama, yukking it up with pop stars: "Two words for you: predator drones. You will never see it coming."
It's not the agitprop that confuses the sheep, it's whose blowhole it's coming out of (labled D or R for convenience) that gets them to bare their teeth and speak of poo.@HallParveyLogan , December 13, 2017 at 9:10 pm GMT
What came first, the credentialing or the idea that it is a necessary part of education? It certainly isn't an accurate indication of what people know or their general intelligence – although that myth has flourished. Good afternoon.@RealistLogan , December 13, 2017 at 9:19 pm GMT
For an interesting projection of what might happen in total civilizational collapse, I recommend the Dies the Fire series of novels by SM Stirling.
It has a science-fictiony setup in that all high-energy system (gunpowder, electricity, explosives, internal combustion, even high-energy steam engines) suddenly stop working. But I think it does a good job of extrapolating what would happen if suddenly the cities did not have food, water, power, etc.
Spoiler alert: It ain't pretty. Those who dream of a world without guns have not really thought it through.@phil
It has been pointed out repeatedly that Sweden does very well relative to the USA. It has also been noted that people of Swedish ancestry in the USA do pretty well also. In fact considerably better than Swedes in Sweden
Dec 14, 2017 | www.unz.com
BigAl , December 13, 2017 at 1:17 pm GMTThe 1970's was in many ways the watershed decade for the radical transformation of the American economy and society, even more than the 1960's (I lived through both as a young man). I have yet to read the definitive social-critical analysis of these years to explain the changes that, looking back, seem to have taken the country of my childhood right out from under me, gone forever, increasingly difficult to remember through the fog of nostalgia that tends to distort as much as to reveal.
Some of the things I do remember about this time include the PATCO (air traffic controllers) strike, very well. What is often not mentioned is that PATCO was attempting to do something that had not been permitted under federal civil service law, that is, bargain for wages as well as working conditions. Wage bargaining, PATCO correctly assessed, was the issue that made or broke unions and had enabled state and local public employees to finally begin to earn a decent, living wage beginning in the 1960's (think the iconic Mike Quill and the NYC TWU).
Reagan correctly (from his point of view) saw that to fail to break PATCO on this issue was to open the floodgates and turn the U.S. civil services into something akin to its European counterpart, with the possibility of general strikes and the rest. And of course to encourage private sector unions in their drive to organize and to change federal and state labor laws to strengthen the right to picket strike and organize.
What I also remember well however, is how little support PATCO was able to garnish from other unionized workers (and in many cases from union leadership as well). It seemed to me at the time that some of the strongest hostility came from rank and file of trade and utilities unions. Of course Reagan, following the Nixon playbook, shrewdly played the patriot-nationalist card, painting PATCO as a threat to national security as well as composed of a bunch of ingrates who should have been happy to have jobs. But by then the segmentation of the American workforce, a tactic that played right into the hands of the corporate-capitalist class was in full swing. The American worker lucky enough to possess a decent paying skilled or semi-skilled union job was being taught to see their situation as morally "deserved" and to see newer aspirants to similar positions, whether recently arrived immigrants or members of racial-ethnic groups previously suppressed by law, custom and prejudice as threats/dangers/enemies of their own recently won status.
I recall too that it was in the 1970's that the threat of "relocation", at that time mainly from the more heavily unionized north and northeastern states to the union-hostile south began to play a major role in the destruction of the power of labor. This was the beginning of the "globalization" factor and of the off-shoring of manufacturing jobs that has been commented on extensively and that took off a decade or so later. What is often not recalled is that unions and other pro-labor groups attempted to lobby Congress to amend the NLRA (National Labor Relations Act) and to appoint labor-friendly members to the NLRB to ensure that plant relocation would be a mandatory subject of bargaining and thus prevent unilateral (by capital ownership) relocation or the threat of relocation as a means to destroy the power of labor. They were, of course, not successful, and factories and business continued to move away from traditional centers of labor power and worker-protections, first to so-called "right-to-work" states and eventually to Asia.
And I remember the beginning of the financialization of the American corporation that I experienced on a "micro" scale, a kid lucky enough to have a summer job while in university at a large resource-extraction corporation's HQ in NYC. I recall white-collar conversations about compensation and about how salaries had steadily risen over the past decade (the company was said to be doing "really well"). And I remember how towards the end of my summer stints more and more conversation was about stock prices and Wall Street favor and about the new executive managerial style brought in by "those young MBA"s", and about (for the first time) worries of a "take-over" by "outsiders" (the company, although public, had had family leadership for many years).
And most of all I remember how gradually the material-economic components to the identity of the blue-collar and middle class worker were written out of existence. The great narrative, the myth that explains to us what it means to be "an American," no longer included any hint of class solidarity, of the kind of work we did, the pay we earned, the common living conditions in the small towns and urban neighborhoods and "cookie-cutter" suburbs of America.
Formerly the struggle of economic and material improvement was seen by most ordinary Americas as a struggle for certain necessary conditions to maintain, strengthen, and perpetuate a way-of-life in which the common core assumptions about the "good life" remained basically stable and unchallenged: family, stable job, residential security, public schools, public places -- neighborhood bars, coffee shops, civic clubs, parks and playgrounds -- where people could meet and interact as social equals.
The financialization of the economy, indeed of social life itself to a great extent, meant the drive for the maximization of private profit and the pursuit of interests and 'efficiencies" conceived entirely apart from any impact of the common good of society as a whole, and should have been seen as a grave threat to the very conditions of material and economic security, only recently achieved, that were the foundation of these other civic and social institutions.
Instead, through a grand and diabolical deceit cynically promulgated by a mostly Republican capitalist class of privilege, but also aided and abetted by a "new Left" that increasingly postured itself as the enemy of this older and more traditional way of life, the enemy was reconceived as the new "elites", the young, urban, hipster "Leftist" who despised the old ways and represented a singular assault on everything good about America.
Meanwhile, steadily, relentlessly, the material conditions and hard-won economic improvements that had gradually made small town, urban-neighborhood, and inner-suburban life decent and livable were being destroyed by a class that paid lip-service to Capra's Bedford Falls while at the same time endlessly working to transform it into Pottersville.
Jan 30, 2012 | www.wsws.org
... ... ...
This analysis has been vindicated by scholarly investigations into the causes of the Soviet economic collapse that facilitated the bureaucracy's dissolution of the USSR. In Russia Since 1980, published in 2008 by Cambridge University Press, Professors Steven Rosefielde and Stefan Hedlund present evidence that Gorbachev introduced measures that appear, in retrospect, to have been aimed at sabotaging the Soviet economy. "Gorbachev and his entourage," they write, "seem to have had a venal hidden agenda that caused things to get out of hand quickly." [p. 38] In a devastating appraisal of Gorbachev's policies, Rosefielde and Hedlund state:
History reveals that the grandsons of the Bolshevik coup d'état didn't destroy the Soviet Union in a valiant effort to advance the cause of communist prosperity or even to return to their common European home; instead, it transformed Soviet managers and ministers into roving bandits (asset-grabbing privateers) with a tacit presidential charter to privatize the people's assets and revenues to themselves under the new Muscovite rule of men. [p. 40]
Instead of displaying due diligence over personal use of state revenues, materials and property, inculcated in every Bolshevik since 1917, Gorbachev winked at a counterrevolution from below opening Pandora's Box. He allowed enterprises and others not only to profit maximize for the state in various ways, which was beneficial, but also to misappropriate state assets, and export the proceeds abroad. In the process, red directors disregarded state contracts and obligations, disorganizing inter-industrial intermediate input flows, and triggering a depression from which the Soviet Union never recovered and Russia has barely emerged. [p. 47]
Given all the heated debates that would later ensue about how Yeltsin and his shock therapy engendered mass plunder, it should be noted that the looting began under Gorbachev's watch. It was his malign neglect that transformed the rhetoric of Market Communism into the pillage of the nation's assets.
The scale of this plunder was astounding. It not only bankrupted the Soviet Union, forcing Russian President Boris Yeltsin to appeal to the G-7 for $6 billion of assistance on December 6, 1991, but triggered a free fall in aggregate production commencing in 1990, aptly known as catastroika.
In retrospect, the Soviet economy didn't collapse because the liberalized command economy devised after 1953 was marked for death. The system was inefficient, corrupt and reprehensible in a myriad of ways, but sustainable, as the CIA and most Sovietologists maintained. It was destroyed by Gorbachev's tolerance and complicity in allowing privateers to misappropriate state revenues, pilfer materials, spontaneously privatize, and hotwire their ill-gotten gains abroad, all of which disorganized production. [p. 49]
The analysis of Rosefielde and Hedlund, while accurate in its assessment of Gorbachev's actions, is simplistic. Gorbachev's policies can be understood only within the framework of more fundamental political and socioeconomic factors. First, and most important, the real objective crisis of the Soviet economy (which existed and preceded by many decades the accession of Gorbachev to power) developed out of the contradictions of the autarkic nationalist policies pursued by the Soviet regime since Stalin and Bukharin introduced the program of "socialism in one country" in 1924. The rapid growth and increasing complexity of the Soviet economy required access to the resources of the world economy. This access could be achieved only in one of two ways: either through the spread of socialist revolution into the advanced capitalist countries, or through the counterrevolutionary integration of the USSR into the economic structures of world capitalism.
For the Soviet bureaucracy, a parasitic social caste committed to the defense of its privileges and terrified of the working class, the revolutionary solution to the contradictions of the Soviet economy was absolutely unthinkable. The only course that it could contemplate was the second-capitulation to imperialism. This second course, moreover, opened for the leading sections of the bureaucracy the possibility of permanently securing their privileges and vastly expanding their wealth. The privileged caste would become a ruling class. The corruption of Gorbachev, Yeltsin and their associates was merely the necessary means employed by the bureaucracy to achieve this utterly reactionary and immensely destructive outcome.
On October 3, 1991, less than three months before the dissolution of the USSR, I delivered a lecture in Kiev in which I challenged the argument-which was widely propagated by the Stalinist regime-that the restoration of capitalism would bring immense benefits to the people. I stated:
In this country, capitalist restoration can only take place on the basis of the widespread destruction of the already existing productive forces and the social- cultural institutions that depended upon them. In other words, the integration of the USSR into the structure of the world capitalist economy on a capitalist basis means not the slow development of a backward national economy, but the rapid destruction of one which has sustained living conditions which are, at least for the working class, far closer to those that exist in the advanced countries than in the third world. When one examines the various schemes hatched by proponents of capitalist restoration, one cannot but conclude that they are no less ignorant than Stalin of the real workings of the world capitalist economy. And they are preparing the ground for a social tragedy that will eclipse that produced by the pragmatic and nationalistic policies of Stalin. ["Soviet Union at the Crossroads," published in The Fourth International (Fall- Winter 1992, Volume 19, No. 1, p. 109), Emphasis in the original.]
Almost exactly 20 years ago, on January 4, 1992, the Workers League held a party membership meeting in Detroit to consider the historical, political and social implications of the dissolution of the USSR. Rereading this report so many years later, I believe that it has stood the test of time. It stated that the dissolution of the USSR "represents the juridical liquidation of the workers' state and its replacement with regimes that are openly and unequivocally devoted to the destruction of the remnants of the national economy and the planning system that issued from the October Revolution. To define the CIS [Confederation of Independent States] or its independent republics as workers states would be to completely separate the definition from the concrete content which it expressed during the previous period." [David North, The End of the USSR, Labor Publications, 1992, p. 6]
The report continued:
"A revolutionary party must face reality and state what is. The Soviet working class has suffered a serious defeat. The bureaucracy has devoured the workers state before the working class was able to clean out the bureaucracy. This fact, however unpleasant, does not refute the perspective of the Fourth International. Since it was founded in 1938, our movement has repeatedly said that if the working class was not able to destroy this bureaucracy, then the Soviet Union would suffer a shipwreck. Trotsky did not call for political revolution as some sort of exaggerated response to this or that act of bureaucratic malfeasance. He said that a political revolution was necessary because only in that way could the Soviet Union, as a workers state, be defended against imperialism." [p. 6]
I sought to explain why the Soviet working class had failed to rise up in opposition to the bureaucracy's liquidation of the Soviet Union. How was it possible that the destruction of the Soviet Union-having survived the horrors of the Nazi invasion-could be carried out "by a miserable group of petty gangsters, acting in the interests of the scum of Soviet society?" I offered the following answer:
We must reply to these questions by stressing the implications of the massive destruction of revolutionary cadre carried out within the Soviet Union by the Stalinist regime. Virtually all the human representatives of the revolutionary tradition who consciously prepared and led that revolution were wiped out. And along with the political leaders of the revolution, the most creative representatives of the intelligentsia who had flourished in the early years of the Soviet state were also annihilated or terrorized into silence.
Furthermore, we must point to the deep-going alienation of the working class itself from state property. Property belonged to the state, but the state "belonged" to the bureaucracy, as Trotsky noted. The fundamental distinction between state property and bourgeois property-however important from a theoretical standpoint-became less and less relevant from a practical standpoint. It is true that capitalist exploitation did not exist in the scientific sense of the term, but that did not alter the fact that the day-to-day conditions of life in factories and mines and other workplaces were as miserable as are to be found in any of the advanced capitalist countries, and, in many cases, far worse.
Finally, we must consider the consequences of the protracted decay of the international socialist movement...
Especially during the past decade, the collapse of effective working class resistance in any part of the world to the bourgeois offensive had a demoralizing effect on Soviet workers. Capitalism assumed an aura of "invincibility," although this aura was merely the illusory reflection of the spinelessness of the labor bureaucracies all over the world, which have on every occasion betrayed the workers and capitulated to the bourgeoisie. What the Soviet workers saw was not the bitter resistance of sections of workers to the international offensive of capital, but defeats and their consequences. [p. 13-14]
The report related the destruction of the USSR by the ruling bureaucracy to a broader international phenomenon. The smashing up of the USSR was mirrored in the United States by the destruction of the trade unions as even partial instruments of working-class defense.
In every part of the world, including the advanced countries, the workers are discovering that their own parties and their own trade union organizations are engaged in the related task of systematically lowering and impoverishing the working class. [p. 22]
Finally, the report dismissed any notion that the dissolution of the USSR signified a new era of progressive capitalist development.
Millions of people are going to see imperialism for what it really is. The democratic mask is going to be torn off. The idea that imperialism is compatible with peace is going to be exposed. The very elements which drove masses into revolutionary struggle in the past are once again present. The workers of Russia and the Ukraine are going to be reminded why they made a revolution in the first place. The American workers are going to be reminded why they themselves in an earlier period engaged in the most massive struggles against the corporations. The workers of Europe are going to be reminded why their continent was the birthplace of socialism and Karl Marx. [p. 25]
The aftermath of the dissolution of the USSR: 20 years of economic crisis, social decay, and political reaction
According to liberal theory, the dissolution of the Soviet Union ought to have produced a new flowering of democracy. Of course, nothing of the sort occurred-not in the former USSR or, for that matter, in the United States. Moreover, the breakup of the Soviet Union-the so-called defeat of communism-was not followed by a triumphant resurgence of its irreconcilable enemies in the international workers' movement, the social democratic and reformist trade unions and political parties. The opposite occurred. All these organizations experienced, in the aftermath of the breakup of the USSR, a devastating and even terminal crisis. In the United States, the trade union movement-whose principal preoccupation during the entire Cold War had been the defeat of Communism-has all but collapsed. During the two decades that followed the collapse of the Soviet Union, the AFL-CIO lost a substantial portion of its membership, was reduced to a state of utter impotence, and ceased to exist as a workers' organization in any socially significant sense of the term. At the same time, everywhere in the world, the social position of the working class-from the standpoint of its influence on the direction of state policy and its ability to increase its share of the surplus value produced by its own labor-deteriorated dramatically.
Certain important conclusions flow from this fact. First, the breakup of the Soviet Union did not flow from the supposed failure of Marxism and socialism. If that had been the case, the anti-Marxist and antisocialist labor organizations should have thrived in the post-Soviet era. The fact that these organizations experienced ignominious failure compels one to uncover the common feature in the program and orientation of all the so-called labor organizations, "communist" and anticommunist alike. What was the common element in the political DNA of all these organization? The answer is that regardless of their names, conflicting political alignments and superficial ideological differences, the large labor organizations of the post-World War II period pursued essentially nationalist policies. They tied the fate of the working class to one or another nation-state. This left them incapable of responding to the increasing integration of the world economy. The emergence of transnational corporations and the associated phenomena of capitalist globalization shattered all labor organizations that based themselves on a nationalist program.
The second conclusion is that the improvement of conditions of the international working class was linked, to one degree or another, to the existence of the Soviet Union. Despite the treachery and crimes of the Stalinist bureaucracy, the existence of the USSR, a state that arose on the basis of a socialist revolution, imposed upon American and European imperialism certain political and social restraints that would otherwise have been unacceptable. The political environment of the past two decades-characterized by unrestrained imperialist militarism, the violations of international law, and the repudiation of essential principles of bourgeois democracy-is the direct outcome of the dissolution of the Soviet Union.
The breakup of the USSR was, for the great masses of its former citizens, an unmitigated disaster. Twenty years after the October Revolution, despite all the political crimes of the Stalinist regime, the new property relations established in the aftermath of the October Revolution made possible an extraordinary social transformation of backward Russia. And even after suffering horrifying losses during the four years of war with Nazi Germany, the Soviet Union experienced in the 20 years that followed the war a stupendous growth of its economy, which was accompanied by advances in science and culture that astonished the entire world.
But what is the verdict on the post-Soviet experience of the Russian people? First and foremost, the dissolution of the USSR set into motion a demographic catastrophe. Ten years after the breakup of the Soviet Union, the Russian population was shrinking at an annual rate of 750,000. Between 1983 and 2001, the number of annual births dropped by one half. 75 percent of pregnant women in Russia suffered some form of illness that endangered their unborn child. Only one quarter of infants were born healthy.
The overall health of the Russian people deteriorated dramatically after the restoration of capitalism. There was a staggering rise in alcoholism, heart disease, cancer and sexually transmitted diseases. All this occurred against the backdrop of a catastrophic breakdown of the economy of the former USSR and a dramatic rise in mass poverty.
As for democracy, the post-Soviet system was consolidated on the basis of mass murder. For more than 70 years, the Bolshevik regime's dissolution of the Constituent Assembly in January 1918-an event that did not entail the loss of a single life-was trumpeted as an unforgettable and unforgivable violation of democratic principles. But in October 1993, having lost a majority in the popularly elected parliament, the Yeltsin regime ordered the bombardment of the White House-the seat of the Russian parliament-located in the middle of Moscow. Estimates of the number of people who were killed in the military assault run as high as 2,000. On the basis of this carnage, the Yeltsin regime was effectively transformed into a dictatorship, based on the military and security forces. The regime of Putin-Medvedev continues along the same dictatorial lines. The assault on the White House was supported by the Clinton administration. Unlike the dissolution of the Constituent Assembly, the bombardment of the Russian parliament is an event that has been all but forgotten.
What is there to be said of post-Soviet Russian culture? As always, there are talented people who do their best to produce serious work. But the general picture is one of desolation. The words that have emerged from the breakup of the USSR and that define modern Russian culture, or what is left of it, are "mafia," "biznessman" and "oligarch."
What has occurred in Russia is only an extreme expression of a social and cultural breakdown that is to be observed in all capitalist countries. Can it even be said with certainty that the economic system devised in Russia is more corrupt that that which exists in Britain or the United States? The Russian oligarchs are probably cruder and more vulgar in the methods they employ. However, the argument could be plausibly made that their methods of plunder are less efficient than those employed by their counterparts in the summits of American finance. After all, the American financial oligarchs, whose speculative operations brought about the near-collapse of the US and global economy in the autumn of 2008, were able to orchestrate, within a matter of days, the transfer of the full burden of their losses to the public.
It is undoubtedly true that the dissolution of the USSR at the end of 1991 opened up endless opportunities for the use of American power-in the Balkans, the Middle East and Central Asia. But the eruption of American militarism was, in the final analysis, the expression of a more profound and historically significant tendency-the long-term decline of the economic position of American capitalism. This tendency was not reversed by the breakup of the USSR. The history of American capitalism during the past two decades has been one of decay. The brief episodes of economic growth have been based on reckless and unsustainable speculation. The Clinton boom of the 1990s was fueled by the "irrational exuberance" of Wall Street speculation, the so-called dot.com bubble. The great corporate icons of the decade-of which Enron was the shining symbol-were assigned staggering valuations on the basis of thoroughly criminal operations. It all collapsed in 2000-2001. The subsequent revival was fueled by frenzied speculation in housing. And, finally, the collapse in 2008, from which there has been no recovery.
When historians begin to recover from their intellectual stupor, they will see the collapse of the USSR and the protracted decline of American capitalism as interrelated episodes of a global crisis, arising from the inability to develop the massive productive forces developed by mankind on the basis of private ownership of the means of production and within the framework of the nation-state system.
February 12, 2009 | Blog Is Dead
Review of David Harvey's A Brief History of NeoliberalismDavid Harvey's 2005 book A Brief History of Neoliberalism
traces the origins of neoliberalism as a form of political economy through its recent history in an attempt to explain what the overarching goal of neoliberalism actually is. Although Harvey can be vague as to what the actual economic policies of neoliberalism entail, his argument as to what this new form of political economy sought to accomplish is definitely on the mark. For Harvey neoliberalism is essentially about the reconstitution of class power by the global economic elite. Thus neoliberalism in its practice has not been a "utopian project to realize a theoretical design for the reorganization of international capitalism" (Harvey, 2005, p. 19) but a practical political project meant to restore the power of economic elites. Harvey goes on to state that any time the theoretical economic principles of neoliberalism came into conflict with elite power, elite power took precedence. This is borne out by the willingness of governments who are certainly committed to theoretical neoliberalism, such as the Bush administration, to throw out free market neoliberal principles when they seriously threatened elite power. The obvious examples are the various bailouts of companies or entire industries, whom according to neoliberal theory, should be allowed to fail as a kind of punishment for market inefficiency.
On this notion of class power Harvey is at his best, since a recurrent theme promoted by neoliberals has been the idea of allowing the free market to take its course and for the government to back off. Yet these demands for the rollback of government intervention in the economy have always been one sided. The government is called on to lesson regulations and intervention in the economy only when it will benefit the economic elites. Thus labour and environmental regulations were attacked by neoliberals as distorting the price mechanisms of the free market and were seen as examples of how government intervention in the economy always leads to inefficiency. Yet the same neoliberals were surprisingly quiet in 2001 when President Bush approved a massive bailout for the airline industry. Surely if government intervention in the economy distorts prices and subverts the more efficient market mechanisms then they would oppose such "government overreach" as a gross violation of neoliberal theory? Here is where we can apply Harvey's insight about neoliberalism as more of a practical attempt to restore elite class power than as a theoretical project driven by the works of Hayek or Friedman. Thus we end up in practice with a kind of one sided neoliberalism, where government intervention is bad if it would protect labour or the environment, but government intervention is good if it will help economic elites.
The second major point that Harvey makes which is well taken, is his argument that neoliberalism has not so much been about increasing wealth, but about redistributing it. Here we have an explanation of why, despite neoliberal theory which states that market mechanisms are more efficient and therefore better at generating wealth than forms of state intervention, GDP growth rates during the neoliberal era actually declined as shown by Harvey's statistics. Again this relates to the practical aspect of neoliberalism as a reconstitution of the power of economic elites, rather than adhering to any strict form of economic theory. So despite the poor growth rates, we have seen a dramatic increase in the wealth of the economic elite, borne out by the massive increase in CEO salaries, accompanied by a decline in real wages for the poorer sectors of the population. Thus the more unequal distribution of wealth that Harvey talks about, which also reinforces the class division between the economic elite and everyone else.
Harvey terms these techniques of upward redistribution of wealth accumulation by dispossession. Harvey argues that accumulation by dispossession is the main mechanism whereby neoliberalism achieved this redistribution of wealth. He sees accumulation by dispossession as a kind of continuation or extension of the Marxian concept of primitive accumulation whereby during the onset of capitalism, common lands were privatized, labour was commodified, and exchange was monetized and financialized. Harvey lists the main aspects of accumulation by dispossession in the modern neoliberal sense as privatization and commodification, financialization, the management and manipulation of crises, and state redistributions. This defining of the precise mechanisms of accumulation by dispossession is as close as Harvey comes to giving a definition of neoliberalism itself, but he sees accumulation by dispossession as a kind of technique of neoliberalism, not as what neoliberalism itself consists of.
By sketching out the brief history of neoliberalism, Harvey explains why the techniques of accumulation by dispossession were required as a means to reconstitute class power. Prior to neoliberalism the global political economy was dominated by the form of capitalism called embedded liberalism, whereby liberal market economies were embedded inside the regulatory framework of the state. These regulations included strong union rights, unemployment insurance, strict regulation of the financial system, and other such limits to the scope of market activities. Harvey explains that neoliberalism essentially sought to disembed the liberal economies from the state's regulatory framework, and thus went about essentially privatizing the commons a second time. This contrast of neoliberalism to embedded liberalism in a historical context is useful in explaining why economic elites gravitated towards neoliberalism as a way to restoring their class power and provides an example in the form of embedded liberalism of what neoliberalism is not.
In giving his brief history of neoliberalism, Harvey touches on a couple of intriguing points which would have been interesting to pursue further. The first is the way in which neoliberals were able to find an electoral base by aligning themselves with conservative religious groups, in particular the evangelical Christian Right in the United States. He also mentions the Hindu Nationalist Party in India which used religious and nationalist sentiment to win election, after which it preceded to undertake neoliberal economic reforms. In terms of the neoliberal harnessing of the Christian Right for an electoral base, Harvey shows the interesting symmetry between the anti-state economic approach of neoliberals, and the anti-state social approach of conservative Christians who saw the liberal state as providing special privileges or affirmative action to groups such as gays and lesbians (same sex marriage), and women (abortion), which they morally disagreed with. The interesting aspect here is of course that much of the American Bible belt which provides the core of the Christian Right is also the poorest part of the United States and stood the most to lose from an adoption of neoliberal economic reforms.
Harvey alludes to a kind of false consciousness going on where people are blinded to their material economic interests by their religious beliefs, which could certainly be the case to some extent, but in many cases neoliberal ethics have become part of the sermons of various megachurches themselves. Thus if we have neoliberalism involving a return to the primitive accumulation during the rise of capitalism, it seems we also have a re-emergence of Weber's protestant ascetics espousing a neoliberal economic ethic. This means that neoliberalism is not all a top down imposition which uses religion to trick people out of their true interests as Harvey alludes to in his standard Marxist reading of the situation, but as being spurred on by religion itself from below. Thus the Christian Right electoral base was not simply concerned about conservative moral values which the neoliberals in the Reagan Republicans hooked their wagon to in order to be elected, but they were in many ways already in favour of neoliberal economics as a result of their religious beliefs. A study of the symmetry between neoliberal economic elites pushing from above, and evangelical Christians pushing for neoliberalism from below would be interesting to pursue, but it is doubtful this would interest Harvey.
Sticking with the issue of religion, the second interesting albeit underdeveloped issue that Harvey raises is the depoliticization of society. Harvey talks about how neoliberalism entails a preference for technocratic rule over democracy, and how this has stripped political institutions of their democratic and inclusive character. Harvey explains that the result of this depoliticization and creation of a disposable workforce is that people seek out social solidarity in other non-political institutions. The biggest one of these institutions of course being religion, but people have also sought to find new means of social solidarity in everything from gangs to NGOs. This concept is much better developed by Rose (1999) in his concept of the Third Sector, which is neither social nor political, but takes on a community aspect. Thus neoliberalism has the effect of privatizing politics itself, as social welfare is off loaded to religious charity, trade unions are replaced with criminal gangs, and in less developed countries the role of the developmental state is replaced by international development NGOs. As Rose focuses more on the social and political aspects of neoliberalism whereas Harvey focuses on the economic aspects, Rose can be read as a supplement to Harvey in this manner.
Where Harvey starts to run into trouble is when his vague definition of neoliberalism starts to cause confusion, especially in his chapter on China where neoliberalism is used as a synonym for capitalism. To find an entire chapter dedicated to China in a book on neoliberalism seems extremely strange, as China is one of the few states that managed to resist the global trend of neoliberalism. As Nonini (2008) points out, China has certainly been undertaking a process of capitalist reform, but in an explicitly non-neoliberal form in which the state plays an extremely strong part in intervening and directing the economy. There certainly is a process of accumulation by dispossession as Harvey points out, but the newly created capitalist class is still subservient (in the cases where they are actually different people) to the direction of the political elites in the Communist Party.
If we are to talk about neoliberalism, then we need to realize that there are different forms of capitalism, with neoliberalism being one of them. At the same time, we must realize that all transitions to capitalism are not the same, and thus can adopt different forms. As Pollin (2005) points out, China's approach to the transition to capitalism was radically different from that of Russia, who legitimately did take a neoliberal path under Yeltsin where the economy was turned over to the market wholesale with disastrous results. The cautious state-directed approach towards capitalist transition taken by China is clearly a very different method from the turn everything over to the market approach taken by Russia. Calling both of these approaches neoliberalism is messy and confusing as clearly they are substantially different.
On this point I believe Harvey is making a common mistake that opponents of not just neoliberalism, but of capitalism in general make. Harvey no doubt does not like much of the economic changes happening in China and most likely would prefer them to take another path that was less explicitly capitalist, but since the term neoliberalism conjures up much more negative connotations than the word capitalism, Harvey lumps China in with neoliberalism in an attempt to paint its transition to capitalism in a negative light. This lumping of all types of capitalism under the neoliberal umbrella is also often employed by anti-capitalist critics of the recently elected left-wing South American governments who have for the most part rejected neoliberalism, but not capitalism. Thus in an attempt to paint Presidents Chavez or Morales in a negative light for not dismantling all aspects of capitalism overnight, they are mislabelled as neoliberal as a kind of slur rather than a descriptive category. Harvey is guilty of this with regards to China, and would have been better off including a chapter on Russia under Yeltsin instead, which would have shown a dramatic example of both turning a state-managed economy over to the market, and a much more extreme form of accumulation by dispossession than is found in his Chinese examples. In Harvey's defense it may have seemed like neoliberalization was inevitable for China back in 2005, with the US constantly pressuring China to undergo reforms, but in light of the recent financial crisis, any movement towards neoliberalism by China is now completely out of the picture.
In addition to the chapter on China which is out of place, the last chapter entitled Freedom's Prospect is problematic as well. Here Harvey gives an optimistic account of how neoliberalism can be overcome from below and places his hope in a kind of reconstituted class consciousness where class struggle can resume and replace neoliberalism from below. However this seems hopelessly optimistic, as while neoliberalism certainly restored class power to the economic elites, it at the same time worked to undermine any sense of class cohesion for those below. How can class struggle be reconstituted in an era of de-unionization, of labour flexibilization, of outsourcing? Not to mention the depoliticizing effects which have led people to find social cohesion in religion or identity and cultural groups, rather than any kind of economic or political groups like class or party. Harvey, like Hardt and Negri in Multitude (2004) thinks the lack of democracy inherent in neoliberalism will be enough to form an oppositional movement which can displace neoliberalism from below.
Although Harvey's point about a lack of democracy under neoliberalism is certainly valid, this is not a concern for most people, on account of precisely the depoliticizing factors inherent in neoliberalism. People in our post-political neoliberal world find their identities in religion or culture, and are increasingly hostile to other religious or cultural groups, thus placing stark divisions between those who are supposed to resurrect the class struggle. Do evangelical Christians and Islamists want democracy, let alone oppose neoliberalism as Harvey claims they do? Not at all, and even if they did favour democracy, there is no way they would ever work together to bring it about. Furthermore most of these religious movements Harvey cites as possible sources of opposition are thoroughly neoliberal in their outlook, or at least profit greatly from it, and in no way offer any resistance. As we are witnessing now in the aftermath of the global financial crisis which has demonstrated the failure of neoliberalism--even to many of the elites who benefitted from it--any new form of capitalism is going to come from the top down, it will be a technocratic solution which will aim to abate the economic problems that are hurting everyone in the world right now, while doing as little as possible to reign in the power of economic elites. The biggest advocates of an alternative to the global neoliberal economy seem to be political leaders like Gordon Brown of the UK and newly elected Australian Prime Minister Kevin Rudd, while grassroots activists in places like the United States are inexplicably aligning with die hard neoliberals to oppose bailouts, nationalizations, and the new found lust for government intervention in the economy.
David Harvey's A Brief History of Neoliberalism could work as an excellent introduction to the concept of neoliberalism for those unfamiliar with the term if it was just a little more brief. The chapter on China is completely out of place and the overly optimistic final chapter can be either viewed as an annoying statement of false hope or as somewhat irrelevant now that neoliberalism seems bound to be replaced or at least dramatically restructured in a technocratic manner. The book is useful in explaining why neoliberal practice has not always followed neoliberal theory, and the concept of accumulation by dispossession is certainly useful analytically. Harvey's focus on neoliberalism as political economy could be supplemented by Nikolas Rose's Powers of Freedom which focuses on neoliberalism in the social and political realm.
Hardt, M. & Negri. A. (2004). Multitude: War and Democracy in the Age of Empire. New York: Penguin Books.
Harvey, D. (2005). A Brief History of Neoliberalism. Oxford: Oxford University Press.
Nonini, D. M. (2008). Is China Becoming Neoliberal? Critique of Anthropology 28(2). 145-176.
Pollin, R. (2005). Contours of Descent: U.S. Economic Fractures and the Landscape of Global Austerity (2nd ed.). London: Verso.
Rose, N. (1999). Powers of Freedom: Reframing Political Thought. Cambridge: Cambridge University Press.Posted by T at 7:47 PM
Labels: books, politics
by Anup Shah This Page Last Updated Sunday, August 22, 2010
This page: http://www.globalissues.org/article/39/a-primer-on-neoliberalism
Neoliberalism is promoted as the mechanism for global trade and investment supposedly for all nations to prosper and develop fairly and equitably. Margaret Thatcher's TINA acronym suggested that There Is No Alternative to this. But what is neoliberalism, anyway?
This section attempts to provide an overview. First, a distinction is made between political and economic liberalism. Then, neoliberalism as an ideology for how to best structure economies is explained. Lastly, for important context, there is a quick historical overview as to how this ideology developed.
This web page has the following sub-sections:
- Political versus Economic Liberalism
- Neoliberalism is...
- Brief overview of Neoliberalism's History: How did it develop?
- Free Markets Were Not Natural. They Were Enforced
- Rooted in Mercantilism
- Colonialism and Imperialism Needed To Succeed
- Going Global
- Going bust? The Global Financial Crisis Shakes Confidence
- More Information
Political versus Economic Liberalism
There is an important difference between liberal politics and liberal economics. But this distinction is usually not articulated in the mainstream.
As summarized here by Elizabeth Martinez and Arnoldo Garcia:
"Liberalism" can refer to political, economic, or even religious ideas. In the U.S. political liberalism has been a strategy to prevent social conflict. It is presented to poor and working people as progressive compared to conservative or Right wing. Economic liberalism is different. Conservative politicians who say they hate "liberals" - meaning the political type - have no real problem with economic liberalism, including neoliberalism.
- Elizabeth Martinez and Arnoldo Garcia, What is "Neo-Liberalism"?, National Network for Immigrant and Refugee Rights, January 1, 1997 (posted at CorpWatch.org)
The web site, Political Compass, also highlights these differences very well.
They show Left and Right as an economic scale, with Authoritarian and Libertarian making up the political scale, crossing the economic scale resulting in quadrants:
© Political Compass
In addition, they note that, "despite popular perceptions, the opposite of fascism is not communism but anarchism (ie liberal socialism), and that the opposite of communism (i.e. an entirely state-planned economy) is neo-liberalism (i.e. extreme deregulated economy)." This is made clear by another chart they have:
A few other charts of theirs are of interest:
1) The positions of some well-known political figures in the world
(In the above, it is interesting to note how most of the world's influential leaders, from the wealthiest and most poweful countries all fall into the area of authoritarian-right.)
2) A look at English political parties and how they fair (even the "left" ones.)
3) It is also interesting to see how the three main British political parties have changed over time, as Political Compass shows:
4) The last US elections (2004) show the political spectrum between John Kerry and George W. Bush was note that wide:
They also make a distinction about neo-conservatives and neoliberals:
U.S. neo-conservatives, with their commitment to high military spending and the global assertion of national values, tend to be more authoritarian than hard right. By contrast, neo-liberals, opposed to such moral leadership and, more especially, the ensuing demands on the tax payer, belong to a further right but less authoritarian region. Paradoxically, the "free market", in neo-con parlance, also allows for the large-scale subsidy of the military-industrial complex, a considerable degree of corporate welfare, and protectionism when deemed in the national interest. These are viewed by neo-libs as impediments to the unfettered market forces that they champion.
- About the Political Compass, January 6, 2004
What the above highlights then, is that in some countries, discourse on these topics may appear to fit into left-right balance, but when looked at a more global scale, the range of discourse may be narrow. Economic issues such as globalization, especially as it affects third world countries as well as those in the first world, require a broader range of discussion.
Back to top
Neoliberalism, in theory, is essentially about making trade between nations easier. It is about freer movement of goods, resources and enterprises in a bid to always find cheaper resources, to maximize profits and efficiency.
To help accomplish this, neoliberalism requires the removal of various controls deemed as barriers to free trade, such as:
- Certain standards, laws, legislation and regulatory measures
- Restrictions on capital flows and investment
The goal is to be able to to allow the free market to naturally balance itself via the pressures of market demands; a key to successful market-based economies.
As summarized from What is "Neo-Liberalism"? A brief definition for activists by Elizabeth Martinez and Arnoldo Garcia from Corporate Watch, the main points of neoliberalism includes:
- The rule of the market - freedom for capital, goods and services, where the market is self-regulating allowing the "trickle down" notion of wealth distribution. It also includes the deunionizing of labor forces and removals of any impediments to capital mobility, such as regulations. The freedom is from the state, or government.
- Reducing public expenditure for social services, such as health and education, by the government
- Deregulation, to allow market forces to act as a self-regulating mechanism
- Privatization of public enterprise (things from water to even the internet)
- Changing perceptions of public and community good to individualism and individual responsibility.
Overlapping the above is also what Richard Robbins, in his book, Global Problems and the Culture of Capitalism (Allyn and Bacon, 1999), summarizes (p.100) about some of the guiding principles behind this ideology of neoliberalism:
- Sustained economic growth is the way to human progress
- Free markets without government "interference" would be the most efficient and socially optimal allocation of resources
- Economic globalization would be beneficial to everyone
- Privatization removes inefficiencies of public sector
- Governments should mainly function to provide the infrastructure to advance the rule of law with respect to property rights and contracts.
At the international level then we see that this additionally translates to:
- Freedom of trade in goods and services
- Freer circulation of capital
- Freer ability to invest
The underlying assumption then is that the free markets are a good thing. They may well be, but unfortunately, reality seems different from theory. For many economists who believe in it strongly the ideology almost takes on the form of a theology. However, less discussed is the the issue of power and how that can seriously affect, influence and manipulate trade for certain interests. One would then need to ask if free trade is really possible.
From a power perspective, "free" trade in reality is seen by many around the world as a continuation of those old policies of plunder, whether it is intended to be or not. However, we do not usually hear such discussions in the mainstream media, even though thousands have protested around the world for decades.
Today then, neoliberal policies are seeing positives and negatives. Under free enterprise, there have been many innovative products. Growth and development for some have been immense. Unfortunately, for most people in the world there has been an increase in poverty and the innovation and growth has not been designed to meet immediate needs for many of the world's people. Global inequalities on various indicators are sharp. For example,
- Some 3 billion people - or half of humanity - live on under 2 dollars a day
- 86 percent of the world's resources are consumed by the world's wealthiest 20 percent
- (See this site's page on poverty facts for many more examples.)
Joseph Stiglitz, former World Bank Chief Economist (1997 to 2000), Nobel Laureate in Economics and now strong opponent of the ideology pushed by the IMF and of the current forms of globalization, notes that economic globalization in its current form risks exacerbating poverty and increasing violence if not checked, because it is impossible to separate economic issues from social and political issues.
And as J.W. Smith has argued:
One cannot separate economics, political science, and history. Politics is the control of the economy. History, when accurately and fully recorded, is that story. In most textbooks and classrooms, not only are these three fields of study separated, but they are further compartmentalized into separate subfields, obscuring the close interconnections between them.
- J.W. Smith, The World's Wasted Wealth 2, (Institute for Economic Democracy, 1994), p. 22.
Issues such as the criticisms of "free" trade, of protests around the world, and many others angles are discussed on this section's subsequent pages.
The history of neoliberalism and how it has come about is worth looking at first, however, to get some crucial context, and to understand why so many people around the world criticize it.
Back to top
Brief overview of Neoliberalism's History: How did it develop?
Free Markets Were Not Natural. They Were Enforced
The modern system of free trade, free enterprise and market-based economies, actually emerged around 200 years ago, as one of the main engines of development for the Industrial Revolution.
In 1776, British economist Adam Smith published his book, The Wealth of Nations. Adam Smith, who some regard as the father of modern free market capitalism and this very influential book, suggested that for maximum efficiency, all forms of government interventions in economic issues should be removed and that there should be no restrictions or tariffs on manufacturing and commerce within a nation for it to develop.
For this to work, social traditions had to be transformed. Free markets were not inevitable, naturally occurring processes. They had to be forced upon people. John Gray, professor of European thought at the London School of Economics, a prominent conservative political thinker and an influence on Margaret Thatcher and the New Right in Britain in the 1980s, notes:
Mid-nineteenth century England was the subject of a far-reaching experiment in social engineering. Its objective was to free economic life from social and political control and it did so by constructing a new institution, the free market, and by breaking up the more socially rooted markets that had existed in England for centuries. The free market created a new type of economy in which prices of all goods, including labour, changed without regard to their effects on society. In the past economic life had been constrained by the need to maintain social cohesion. It was conducted in social markets - markets that were embedded in society and subject to many kinds of regulation and restraint. The goal of the experiment that was attempted in mid-Victorian England was to demolish these social markets, and replace them by deregulated markets that operated independently of social needs. The rupture in England's economic life produced by the creation of the free market has been called the Great Transformation.
- John Gray, False Dawn: The Delusions of Global Capitalism, (The New Press, 1998), p.1
A detailed insight into this process of transformation is revealed by Michael Perelman, Professor of Economics at California State University. In his book The Invention of Capitalism (Duke University Press, 2000), he details how peasants did not willingly abandon their self-sufficient lifestyle to go work in factories.
- Instead they had to be forced with the active support of thinkers and economists of the time, including the famous originators of classical political economy, such as Adam Smith, David Ricardo, James Steuart and others.
- Contradicting themselves, as if it were, they argued for government policies that deprived the peasants their way of life of self-provision, to coerce them into waged labor.
- Separating the rural peasantry from their land was successful because of "ideological vigor" from people like Adam Smith, and because of a "revision of history" that created an impression of a humanitarian heritage of political economy; an inevitability to be celebrated.
- This revision, he also noted has evidently "succeeded mightily."
Rooted in Mercantilism
Adam Smith's work did, however, expose the previous fraud that was the mercantilist system, which enriched the imperial powers at the expense of others. This mercantilism had its roots in the Middle and Dark Ages of Europe, many hundreds of years earlier and also parallels various methods used by empires throughout history (including today) to control their peripheries and appropriate wealth accordingly. Furthermore, as J.W. Smith argues, even though it is claimed to be Adam Smith free trade, neoliberalism was and is mercantilism dressed up with more friendly rhetoric, while the reality remains the same as the mercantilist processes over the last several hundred years:
The powerful throughout the past centuries not only claimed an excessive share of the wealth of nature which was properly shared by all within the community, through the unequal trades of mercantilism they claimed an excessive share of the wealth on the periphery of their trading empires. Adam Smith describes mercantilism for us:
[Mercantilism's] ultimate object… is always the same, to enrich the country [city or state] by an advantageous balance of trade. It discourages the exportation of the materials of manufacture [tools and raw material], and the instruments of trade, in order to give our own workmen an advantage, and to enable them to undersell those of other nations [cities] in all foreign markets: and by restraining, in this manner, the exportation of a few commodities of no great price, it proposes to occasion a much greater and more valuable exportation of others. It encourages the importation of the materials of manufacture, in order that our own people may be enabled to work them up more cheaply, and thereby prevent a greater and more valuable importation of the manufactured commodities.
William Appleman Williams describes mercantilism at its zenith: "The world was defined as known and finite, a principle agreed upon by science and theology. Hence the chief way for a nation to promote or achieve its own wealth and happiness was to take them away from some other country."
When the injustice of mercantilism was understood, it became too embarrassing and was replaced by the supposedly just Adam Smith free trade. But free trade as practiced by Adam Smith neo-mercantilists was far from fair trade. Adam Smith unequal free trade is little more than a philosophy for the continued subtle monopolization of the wealth-producing-process, largely through continued privatization of the commons of both an internal economy and the economies of weak nations on the periphery of trading empires. So long as weak nations could be forced to accept the unequal trades of Adam Smith free trade, they would be handing their wealth to the imperial-centers-of-capital of their own free will. In short, Adam Smith free trade, as established by neo-mercantilists, was only mercantilism hiding under the cover of free trade.
- J.W. Smith, Cooperative Capitalism; A Blueprint for Global Peace and Prosperity, (Quality Books, Inc, 2003), pp.4-5
Colonialism and Imperialism Needed To Succeed
Free trade formed the basis of free enterprise for capitalists and up until the Great Depression of the 1930s was the primary economic theory followed in the United States and Britain. But from a global perspective, this free trade was accompanied by geopolitics making it look more like mercantilism. For both these nations (as well as others) to succeeded and remain competitive in the international arena, they had a strong foundation of imperialism, colonialism and subjugation of others in order to have access to the resources required to produce such vast wealth. As J.W. Smith notes above, this was hardly the free trade that Adam Smith suggested and it seemed like a continuation of mercantilist policies.
However, even during its prevalent times before the Second World War, neoliberalism had already started to show signs of increasing disparities between rich and poor.
Because of the Great Depression in the 1930s, an economist, John Maynard Keynes, suggested that regulation and government intervention was actually needed in order to provide more equity in development. This led to the "Keynesian" model of development and after World War II formed the foundation for the rebuilding of the U.S-European-centered international economic system. The Marshall Plan for Europe helped reconstruct it and the European nations saw the benefits of social provisions such as health, education and so on, as did the U.S. under President Roosevelt's New Deal.
In fact, the Bretton Woods Institutions (the International Monetary Fund (IMF) and World Bank) were actually designed with Keynesian policies in mind; to help provide international regulation and control of capital. As Susan George notes, "when these institutions were created at Bretton Woods in 1944, their mandate was to help prevent future conflicts by lending for reconstruction and development and by smoothing out temporary balance of payments problems. They had no control over individual government's economic decisions nor did their mandate include a license to intervene in national policy." This is very different from what they are doing today.
In 1945 or 1950, if you had seriously proposed any of the ideas and policies in today's standard neo-liberal toolkit, you would have been laughed off the stage at or sent off to the insane asylum. At least in the Western countries, at that time, everyone was a Keynesian, a social democrat or a social-Christian democrat or some shade of Marxist. The idea that the market should be allowed to make major social and political decisions; the idea that the State should voluntarily reduce its role in the economy, or that corporations should be given total freedom, that trade unions should be curbed and citizens given much less rather than more social protection - such ideas were utterly foreign to the spirit of the time. Even if someone actually agreed with these ideas, he or she would have hesitated to take such a position in public and would have had a hard time finding an audience.
- Susan George, A Short History of Neoliberalism: Twenty Years of Elite Economics and Emerging Opportunities for Structural Change, Conference on Economic Sovereignty in a Globalising World, Bangkok, 24-26 March 1999
However, as elites and corporations saw their profits diminish with this equalizing effect, economic liberalism was revived, hence the term "neoliberalism". Except, that this new form was not just limited to national boundaries, but instead was to apply to international economics as well. Starting from the University of Chicago with the philosopher-economist Friedrich von Hayek and his students such as Milton Friedman, the ideology of neoliberalism was pushed very thoroughly around the world.
Even before this though, there were indications that the world economic order was headed this way: the majority of wars throughout history have had economics, trade and resources at their core. The want for access to cheap resources to continue creating vast wealth and power allowed the imperial empires to justify military action, imperialism and colonialism in the name of "national interests", "national security", "humanitarian" intervention and so on. In fact, as J.W. Smith notes:
The wealth of the ancient city-states of Venice and Genoa was based on their powerful navies, and treaties with other great powers to control trade. This evolved into nations designing their trade policies to intercept the wealth of others (mercantilism). Occasionally one powerful country would overwhelm another through interception of its wealth though a trade war, covert war, or hot war; but the weaker, less developed countries usually lose in these exchanges. It is the military power of the more developed countries that permits them to dictate the terms of trade and maintain unequal relationships.
- J.W. Smith, The World's Wasted Wealth 2, (Institute for Economic Democracy, 1994), p. 120.
As European and American economies grew, they needed to continue expansion to maintain the high standards of living that some elites were attaining in those days. This required holding on to, and expanding colonial territories in order to gain further access to the raw materials and resources, as well exploiting cheap labor. Those who resisted were often met with brutal repression or military interventions. This is not a controversial perception. Even U.S. President Woodrow Wilson recognized this in the early part of the 20th century:
Since trade ignores national boundaries and the manufacturer insists on having the world as a market, the flag of his nation must follow him, and the doors of the nations which are closed against him must be battered down. Concessions obtained by financiers must be safeguarded by ministers of state, even if the sovereignty of unwilling nations be outraged in the process. Colonies must be obtained or planted, in order that no useful corner of the world may be overlooked or left unused.
- Woodrow Wilson, President of the United States, 1919, Quoted by Noam Chomsky, On Power and Ideology, (South End Press, 1990), p.14.
Richard Robbins, Professor of Anthropology and author of Global Problems and the Culture of Capitalism is also worth quoting at length:
The Great Global Depression of 1873 that lasted essentially until 1895 was the first great manifestation of the capitalist business crisis. The depression was not the first economic crisis [as there had been many for thousands of years] but the financial collapse of 1873 revealed the degree of global economic integration, and how economic events in one part of the globe could reverberate in others.…
The Depression of 1873 revealed another big problem with capitalist expansion and perpetual growth: it can continue only as long as there is a ready supply of raw materials and an increasing demand for goods, along with ways to invest profits and capital. Given this situation, if you were an American or European investor in 1873, where would you look for economic expansion?
The obvious answer was to expand European and American power overseas, particularly into areas that remained relatively untouched by capitalist expansion - Africa, Asia, and the Pacific. Colonialism had become, in fact, a recognized solution to the need to expand markets, increase opportunities for investors, and ensure the supply of raw material. Cecil Rhodes, one of the great figures of England's colonization of Africa, recognized the importance of overseas expansion for maintaining peace at home. In 1895 Rhodes said:
I was in the East End of London yesterday and attended a meeting of the unemployed. I listened to the wild speeches, which were just a cry for "bread", "bread," and on my way home I pondered over the scene and I became more than ever convinced of the importance of imperialism.… My cherished idea is a solution for the social problem, i.e., in order to save the 40,000,000 inhabitants of the United Kingdom from a bloody civil war, we colonial statesmen must acquire new lands for settling the surplus population, to provide new markets for the goods produced in the factories and mines. The Empire, as I have always said, is a bread and butter question. If you want to avoid civil war, you must become imperialist.
As a result of this cry for imperialist expansion, people all over the world were converted into producers of export crops as millions of subsistence farmers were forced to become wage laborers producing for the market and required to purchase from European and American merchants and industrialists, rather than supply for themselves, their basic needs.
- Richard H. Robbins, Global Problems and the Culture of Capitalism, (Allyn and Bacon), pp. 93-94
World War I was, in effect, a resource war as Imperial centers battled over themselves for control of the rest of the world. World War II was another such battle, perhaps the ultimate one. However, the former imperial nations realized that to fight like this is not the way, and became more cooperative instead.
Unfortunately, that cooperation was not for all the world's interests primarily, but their own. The Soviet attempt of an independent path to development (flawed that it was, because of its centralized, paranoid and totalitarian perspectives), was a threat to these centers of capital because their own colonies might "get the wrong idea" and also try for an independent path to their development.
Because World War II left the empires weak, the colonized countries started to break free. In some places, where countries had the potential to bring more democratic processes into place and maybe even provide an example for their neighbors to follow it threatened multinational corporations and their imperial (or former imperial) states (for example, by reducing access to cheap resources). As a result, their influence, power and control was also threatened. Often then, military actions were sanctioned. To the home populations, the fear of communism was touted, even if it was not the case, in order to gain support.
… you have to sell [intervention or other military actions] in such a way as to create the misimpression that it is the Soviet Union the you are fighting…
- Professor Samuel Huntingdon, Harvard University, Quoted by Noam Chomsky in Latin America: From Colonization to Globalization, (Ocean Press, 1999), p.18)
The net effect was that everyone fell into line, as if it were, allowing a form of globalization that suited the big businesses and elite classes mainly of the former imperial powers. (Hence, there is no surprise that some of the main World War II rivals, USA, Germany and Japan as well as other European nations are so prosperous, while the former colonial countries are still so poor; the economic booms of those wealthy nations have been at the expense of most people around the world.) Thus, to ensure this unequal success, power, and advantage globalization was backed up with military might (and still is).
Hence, even with what seemed like the end of imperialism and colonialism at the end of World War II, and the promotion of Adam Smith free trade and free markets, mercantilist policies still continued. (Adam Smith exposed the previous system as mercantilist and unjust. He then proposed free market capitalism as the alternative. Yet, a reading of Adam Smith's Wealth of Nations would reveal that today is a far cry from the free market capitalism he suggested, and instead could still be considered monopoly capitalism, or the age-old mercantilism that he had exposed! More about this in the next section on this site.) And so, a belief system had to accompany the political objectives:
When the blatant injustices of mercantilist imperialism became too embarrassing, a belief system was imposed that mercantilism had been abandoned and true free trade was in place. In reality the same wealth confiscation went on, deeply buried within complex systems of monopolies and unequal trade hiding under the cover of free trade. Many explanations were given for wars between the imperial nations when there was really one common thread: "Who will control resources and trade and the wealth produced through inequalities in trade?" All this is proven by the inequalities of trade siphoning the world's wealth to imperial centers of capital today just as they did when the secret of plunder by trade was learned centuries ago. The battles over the world's wealth have only kept hiding behind different belief systems each time the secrets of laying claim to the wealth of others' have been exposed.
- J.W. Smith, Economic Democracy; The Political Struggle for the 21st Century, (M.E. Sharpe, 2000) p.126
The Reagan and Thatcher era in particular, saw neoliberalism pushed to most parts of the globe, almost demonizing anything that was publicly owned, encouraging the privatization of anything it could, using military interventions if needed. Structural Adjustment policies were used to open up economies of poorer countries so that big businesses from the rich countries could own or access many resources cheaply.
Lori Wallach, Director of Global Trade Watch, also describes in a video clip (4:30 minutes, transcript) how even the term free "trade" is misleading, for the free trade agenda pushed through the World Trade Organization includes many non-trade issues, such that trade is just one small part:
Lori Wallach, Free Trade-The Price Paid (Part One), April 13, 2005, © Big Picture TV
The belief in free markets (or the version being promoted) was very ideological:
So, from a small, unpopular sect with virtually no influence, neo-liberalism has become the major world religion with its dogmatic doctrine, its priesthood, its law-giving institutions and perhaps most important of all, its hell for heathen and sinners who dare to contest the revealed truth. Oskar Lafontaine, the ex-German Finance Minister who the Financial Times called an "unreconstructed Keynesian" has just been consigned to that hell because he dared to propose higher taxes on corporations and tax cuts for ordinary and less well-off families.
1979, the year Margaret Thatcher came to power and undertook the neo-liberal revolution in Britain. The Iron Lady was herself a disciple of Friedrich von Hayek, she was a social Darwinist and had no qualms about expressing her convictions. She was well known for justifying her program with the single word TINA, short for There Is No Alternative. The central value of Thatcher's doctrine and of neo-liberalism itself is the notion of competition - competition between nations, regions, firms and of course between individuals. Competition is central because it separates the sheep from the goats, the men from the boys, the fit from the unfit. It is supposed to allocate all resources, whether physical, natural, human or financial with the greatest possible efficiency.
In sharp contrast, the great Chinese philosopher Lao Tzu ended his Tao-te Ching with these words: "Above all, do not compete". The only actors in the neo-liberal world who seem to have taken his advice are the largest actors of all, the Transnational Corporations. The principle of competition scarcely applies to them; they prefer to practice what we could call Alliance Capitalism.
- Susan George, A Short History of Neoliberalism: Twenty Years of Elite Economics and Emerging Opportunities for Structural Change, Conference on Economic Sovereignty in a Globalising World, Bangkok, 24-26 March 1999
As former World Bank Chief Economist Josepth Stiglitz notes, it is a simplistic ideology which most developed nations have resisted themselves:
The Washington Consensus policies, however, were based on a simplistic model of the market economy, the competitive equilibrium model, in which Adam Smith's invisible hand works, and works perfectly. Because in this model there is no need for government - that is, free, unfettered, "liberal" markets work perfectly - the Washington Consensus policies are sometimes referred to as "neo-liberal," based on "market fundamentalism," a resuscitation of the laissez-faire policies that were popular in some circles in the nineteenth century. In the aftermath of the Great Depression and the recognition of other failings of the market system, from massive inequality to unlivable cities marred by pollution and decay, these free market policies have been widely rejected in the more advanced industrial countries, though within these countries there remains an active debate about the appropriate balance between government and markets.
- Joseph Stiglitz, Globalization and Its Discontents, (Allen Lane/Penguin Books, 2002), p.74
Activist and academic Raj Patel explains that prices do not accurately reflect the value of commodities due to so many externalities (a $4 hamburger should cost $200 for example if some environmental aspects are factored in, for example), and also notes that various leading proponents of neoliberalism are now admitting it too, in the wake of the financial crash in 2008. Furthermore, markets aren't separate from social and political contexts in which they function, yet, business leaders and governments were all too willing to go for the simpler soundbites:
The problem with the Efficient Markets Hypothesis is that it doesn't work. If it were true, then there'd be no incentive to invest in research because the market would, by magic, have beaten you to it. Economists Sanford Grossman and Joseph Stiglitz demonstrated this in 1980, and hundreds of subsequent studies have pointed out quite how unrealistic the hypothesis is, some of the most influential of which were written by Eugene Fama himself [who first formulated the idea as a a Ph.D. student in the University of Chicago Business School in the 1960s]. Markets can behave irrationally-investors can herd behind a stock, pushing its value up in ways entirely unrelated to the stock being traded.
Despite ample economic evidence to suggest it was false, the idea of efficient markets ran riot through governments.
- Raj Patel, Flaw , The Value of Nothing, (Picador, 2010), pp.10-11, 12-13
Since the Cold War has ended, it is almost no surprise that today's globalization has come in the form we see it - that is where it would have been had the Cold War not got "in the way". The World Wars were about rival powers fighting amongst themselves to the spoils of the rest of the world; maintaining their empires and influence over the terms of world trade, commerce and, ultimately, power.
Throughout the Cold War, we contained a global threat to market democracies: now we should seek to enlarge their reach.
- Anthony Lake, National Security adviser, 1990, quoted from Noam Chomsky, World Orders Old and New, (Columbia University Press, 1996), p.71.
John Gray, mentioned above, notes that the same processes to force the peasantry off their lands and into waged labor, and to socially engineer a transformation to free markets is also taking place today in the third world:
The achievement of a similar transformation [as in mid-nineteenth century England] is the overriding objective today of transnational organizations such as the World Trade Organisation, the International Monetary Fund and the Organisation for Economic Cooperation and Development. In advancing this revolutionary project they are following the lead of the world's last great Enlightenment regime, the United States. The thinkers of the Enlightenment, such as Thomas Jefferson, Tom Paine, John Stuart Mill and Karl Marx never doubted that the future for every nation in the world was to accept some version of western institutions and values. A diversity of cultures was not a permanent condition of human life. It was a stage on the way to a universal civilization, in which the varied traditions and culture of the past were superseded by a new, universal community founded on reason.
- John Gray, False Dawn: The Delusions of Global Capitalism, (The New Press, 1998), pp.1-2
Gray also notes how this western view of the world is not necessarily compatible with the views of other cultures and this imposition for a western view of civilization may not be accepted by everyone. Ironically then, using terms like "Enlightenment", "freedom", "liberty", etc, which is common in such discourse, as Gray notes, results in conformity, almost totalitarian in nature.
Back to top
Going bust? The Global Financial Crisis Shakes Confidence
Around mid-2008 a financial crisis, starting in the US, spread around the world into a global financial crisis, and then into a more general economic crisis, which, as of writing this, the world has still not recovered from.
The crisis has been so severe, criticisms of market fundamentalism and neoliberalism are more widespread than before.
The Value of Nothing, Raj Patel, July 28, 2010
Raj Patel argues that the markets in their current shape have created a convoluted idea of value; "value meals" are cheap but unhealthy whereas fruit and veg are often more expensive; rainforests are hardly valued whereas felling trees adds to the economy.
Flawed assumptions about the underlying economic systems contributed to this problem and had been building up for a long time, the current financial crisis being one of its eventualities.
This problem could have been averted (in theory) as people had been pointing to these issues for decades. Yet, of course, during periods of boom no-one (let alone the financial institutions and their supporting ideologues and politicians largely believed to be responsible for the bulk of the problems) would want to hear of caution and even thoughts of the kind of regulation that many are now advocating. To suggest anything would be anti-capitalism or socialism or some other label that could effectively shut up even the most prominent of economists raising concerns.
Of course, the irony that those same institutions would now themselves agree that those "anti-capitalist" regulations are required is of course barely noted. Such options now being considered are not anti-capitalist. However, they could be described as more regulatory or managed rather than completely free or laissez faire capitalism, which critics of regulation have often preferred. But a regulatory capitalist economy is very different to a state-based command economy, the style of which the Soviet Union was known for. The points is that there are various forms of capitalism, not just the black-and-white capitalism and communism. And at the same time, the most extreme forms of capitalism can also lead to the bigger bubbles and the bigger busts.
In that context, the financial crisis, as severe as it was, led to key architects of the system admitting to flaws in key aspects of the ideology.
At the end of 2008, Alan Greenspan was summoned to the U.S. Congress to testify about the financial crisis. His tenure at the Federal Reserve had been long and lauded, and Congress wanted to know what had gone wrong. Henry Waxman questioned him:
I found a flaw in the model that I perceived is the critical functioning structure that defines how the world works, so to speak.
In other words, you found that your view of the world, your ideology, was not right, it was not working.
Precisely. That is precisely the reason I was shocked, because I had been going for 40 years or more with very considerable evidence that it was working exceptionally well.
[Greenspan's flaw] warped his view about how the world was organized, about the sociology of the market. And Greenspan is not alone. Larry Summers, the president's senior economic advisor, has had to come to terms with a similar error-his view that the market was inherently self-stabilizing has been "dealt a fatal blow." Hank Paulson, Bush's treasury secretary, has shrugged his shoulders with similar resignation. Even Jim Cramer from CNBC's Mad Money admitted defeat: "The only guy who really called this right was Karl Marx." One after the other, the celebrants of the free market are finding themselves, to use the language of the market, corrected.
- Raj Patel, Flaw , The Value of Nothing, (Picador, 2010), pp.4, 6-7
Quoting Stiglitz again, he captures the sentiments of a number of people:
We had become accustomed to the hypocrisy. The banks reject any suggestion they should face regulation, rebuff any move towards anti-trust measures - yet when trouble strikes, all of a sudden they demand state intervention: they must be bailed out; they are too big, too important to be allowed to fail.
America's financial system failed in its two crucial responsibilities: managing risk and allocating capital. The industry as a whole has not been doing what it should be doing … and it must now face change in its regulatory structures. Regrettably, many of the worst elements of the US financial system … were exported to the rest of the world.
- Joseph Stiglitz, The fruit of hypocrisy; Dishonesty in the finance sector dragged us here, and Washington looks ill-equipped to guide us out, The Guardian, September 16, 2008
Some of these regulatory measures have been easy to get around for various reasons. Some reasons for weak regulation that entrepreneur Mark Shuttleworth describes include that regulators
- Are poorly paid or are not the best talent
- Often lack true independence (or are corrupted by industries lobbying for favors)
- May lack teeth or courage in face of hostile industries and a politically hostile climate to regulation.
Given its crucial role, it is extremely important to invest in it too, Shuttleworth stresses.
However, this crisis wasted almost a generation of talent:
It was all done in the name of innovation, and any regulatory initiative was fought away with claims that it would suppress that innovation. They were innovating, all right, but not in ways that made the economy stronger. Some of America's best and brightest were devoting their talents to getting around standards and regulations designed to ensure the efficiency of the economy and the safety of the banking system. Unfortunately, they were far too successful, and we are all - homeowners, workers, investors, taxpayers - paying the price.
- Joseph Stiglitz, The fruit of hypocrisy; Dishonesty in the finance sector dragged us here, and Washington looks ill-equipped to guide us out, The Guardian, September 16, 2008
Paul Krugman also notes the wasted talent, at the expense of other areas in much need:
How much has our nation's future been damaged by the magnetic pull of quick personal wealth, which for years has drawn many of our best and brightest young people into investment banking, at the expense of science, public service and just about everything else?
- Paul Krugman, The Madoff Economy, New York Times, Opinion, December 19, 2008
The wasted capital, labor and resources all add up.
British economist John Maynard Keynes, is considered one of the most influential economists of the 20th century and one of the fathers of modern macroeconomics. He advocated an interventionist form of government policy believing markets left to their own measure (i.e. completely "freed") could be destructive leading to cycles of recessions, depressions and booms. To mitigate against the worst effects of these cycles, he supported the idea that governments could use various fiscal and monetary measures. His ideas helped rebuild after World War II, until the 1970s when his ideas were abandoned for freer market systems.
Keynes' biographer, professor Robert Skidelsky, argues that free markets have undermined democracy and led to this crisis in the first place:
What creates a crisis of the kind that now engulfs us is not economics but politics. The triumph of the global "free" market, which has dominated the world over the last three decades has been a political triumph.
It has reflected the dominance of those who believe that governments (for which read the views and interests of ordinary people) should be kept away from the levers of power, and that the tiny minority who control and benefit most from the economic process are the only people competent to direct it.
This band of greedy oligarchs have used their economic power to persuade themselves and most others that we will all be better off if they are in no way restrained-and if they cannot persuade, they have used that same economic power to override any opposition. The economic arguments in favor of free markets are no more than a fig leaf for this self-serving doctrine of self-aggrandizement.
- Bryan Gould, Who voted for the markets? The economic crisis makes it plain: we surrendered power to wealthy elites and fatally undermined democracy, The Guardian, November 26, 2008
Furthermore, he argues that the democratic process has been abused and manipulated to allow a concentration of power that is actually against the idea of free markets and real capitalism:
The uncomfortable truth is that democracy and free markets are incompatible. The whole point of democratic government is that it uses the legitimacy of the democratic mandate to diffuse power throughout society rather than allow it to accumulate-as any player of Monopoly understands-in just a few hands. It deliberately uses the political power of the majority to offset what would otherwise be the overwhelming economic power of the dominant market players.
If governments accept, as they have done, that the "free" market cannot be challenged, they abandon, in effect, their whole raison d'etre. Democracy is then merely a sham. … No amount of cosmetic tinkering at the margins will conceal the fact that power has passed to that handful of people who control the global economy.
- Bryan Gould, Who voted for the markets? The economic crisis makes it plain: we surrendered power to wealthy elites and fatally undermined democracy, The Guardian, November 26, 2008
Despite Keynesian economics getting a bad press from free market advocates for many years, many are now turning to his policies and ideas to help weather the economic crisis.
We are all Keynesians now. Even the right in the United States has joined the Keynesian camp with unbridled enthusiasm and on a scale that at one time would have been truly unimaginable.
… after having been left in the wilderness, almost shunned, for more than three decades … what is happening now is a triumph of reason and evidence over ideology and interests.
Economic theory has long explained why unfettered markets were not self-correcting, why regulation was needed, why there was an important role for government to play in the economy. But many, especially people working in the financial markets, pushed a type of "market fundamentalism." The misguided policies that resulted - pushed by, among others, some members of President-elect Barack Obama's economic team - had earlier inflicted enormous costs on developing countries. The moment of enlightenment came only when those policies also began inflicting costs on the US and other advanced industrial countries.
The neo-liberal push for deregulation served some interests well. Financial markets did well through capital market liberalization. Enabling America to sell its risky financial products and engage in speculation all over the world may have served its firms well, even if they imposed large costs on others.
Today, the risk is that the new Keynesian doctrines will be used and abused to serve some of the same interests.
- Joseph Stiglitz, Getting bang for your buck, The Guardian, December 5, 2008
Some of the world's top financiers and officials are reluctantly accepting that the version of capitalism that has long favored them may not be good for everyone.
Stiglitz observed this remarkable resignation at the annual Davos forum, usually a meeting place of rich world leaders and the corporate elite, who usually together reassert ways to go full steam ahead with a form of corporate globalization that has benefited those at the top. This time, however, Stiglitz noted that
[There was a] striking … loss of faith in markets. In a widely attended brainstorming session at which participants were asked what single failure accounted for the crisis, there was a resounding answer: the belief that markets were self-correcting.
The so-called "efficient markets" model, which holds that prices fully and efficiently reflect all available information, also came in for a trashing. So did inflation targeting: the excessive focus on inflation had diverted attention from the more fundamental question of financial stability. Central bankers' belief that controlling inflation was necessary and almost sufficient for growth and prosperity had never been based on sound economic theory.
… no one from either the Bush or Obama administrations attempted to defend American-style free-wheeling capitalism.… Most American financial leaders seemed too embarrassed to make an appearance. Perhaps their absence made it easier for those who did attend to vent their anger. Labor leaders working for the … business community were particularly angry at the financial community's lack of remorse. A call for the repayment of past bonuses was received with applause.
- Joseph Stiglitz, Fear and loathing in Davos, The Guardian, February 6, 2009
Some at the top, however, have tried to play the role of victim:
Indeed, some American financiers were especially harshly criticized for seeming to take the position that they, too, were victims … and it seemed particularly galling that they were continuing to hold a gun to the heads of governments, demanding massive bailouts and threatening economic collapse otherwise. Money was flowing to those who had caused the problem, rather than to the victims.
Worse still, much of the money flowing into the banks to recapitalize them so that they could resume lending has been flowing out in the form of bonus payments and dividends.
- Joseph Stiglitz, Fear and loathing in Davos, The Guardian, February 6, 2009
And as much as this crisis affects wealthier nations, the poorest will suffer most in the long run:
… This crisis raises fundamental questions about globalization, which was supposed to help diffuse risk. Instead, it has enabled America's failures to spread around the world, like a contagious disease. Still, the worry at Davos was that there would be a retreat from even our flawed globalization, and that poor countries would suffer the most.
But the playing field has always been uneven. If developing countries can't compete with America's subsidies and guarantees, how could any developing country defend to its citizens the idea of opening itself even more to America's highly subsidized banks? At least for the moment, financial market liberalization seems to be dead.
- Joseph Stiglitz, Fear and loathing in Davos, The Guardian, February 6, 2009
In effect, the globalization project, an ideal that sounded appealing for many around the world, was flawed by politics and greed; the inter-connectedness it created meant that as any flaws revealed themselves, the unraveling of such a system would have far greater reach and consequences, especially upon people who had nothing to do with its creation in the first place.
Back to top
The above may seem long, but many volumes could be written to expand on the above themes. Until I can get to do something like that, the following are links to some useful resources to help understand neoliberalism and its historical and current context:
- A Short History of Neo-Liberalism: Twenty Years of Elite Economics and Emerging Opportunities for Structural Change by Susan George, from a conference on Economic Sovereignty in a Globalising World, Bangkok, 24-26 March 1999
- What is "Neo-Liberalism"? A brief definition for activists by Elizabeth Martinez and Arnoldo Garcia, National Network for Immigrant and Refugee Rights, January 1, 1997 (posted at CorpWatch.org)
- Has Globalisation Really Made Nations Redundant? The States We are Still In, by Noelle Burgi and Philip S. Golub, Le Monde Diplomatique, April 2000.
- The Essence of Neoliberalism by Pierre Bordieu, Le Monde Diplomatique, December 1998
- The Institute for Economic Democracy has a wealth of information.
- Program on Corporations Law & Democracy looks at the creation and development of English commercial corporations and the abolition of democratic control over their behavior. From UK-based Corporate Watch (not related to the above-mentioned US-based organization of the same name!)
- This web site's look at projecting power introduces the link between geopolitics and economics; of the use of military to back up trade objectives.
- The Citizens' Guide to Trade, Environment and Sustainability from Friends of the Earth gives an overview of the world trade system, the ideology, the impact on society, environment, etc.
- Neoliberalism: origins, theory, definition is a detailed look by Paul Treanor, a political thinker and writer.
- The Luckiest Nut In The World is an 8 minute video (sorry, no transcript available, as far as I know), produced by Emily James. It is a useful and light way of explaining some of the issues around free trade (in its current form) and its impact on poorer countries. Under their license, it has been reposted here. (Please note the license of this video is not covered by this site's own license).
Back to top
- Global Financial Crisis
- A Primer on Neoliberalism
- Criticisms of Current Forms of Free Trade
- The WTO and Free Trade
- WTO Doha "Development" Trade Round Collapse, 2006
- Deregulation or Protectionism?
- Some Regional Free Trade Agreements
- The Mainstream Media and Free Trade
- Public Protests Around The World
- WTO Protests in Seattle, 1999
See more related articles
Anup Shah, A Primer on Neoliberalism, Global Issues, Updated: August 22, 2010
Alternatively, copy/paste the following MLA citation format for this page:
Shah, Anup. "A Primer on Neoliberalism." Global Issues. 22 Aug. 2010. Web. 29 Aug. 2015. <http://www.globalissues.org/article/39/a-primer-on-neoliberalism>.
Google matched content
Groupthink : Two Party System as Polyarchy : Corruption of Regulators : Bureaucracies : Understanding Micromanagers and Control Freaks : Toxic Managers : Harvard Mafia : Diplomatic Communication : Surviving a Bad Performance Review : Insufficient Retirement Funds as Immanent Problem of Neoliberal Regime : PseudoScience : Who Rules America : Neoliberalism : The Iron Law of Oligarchy : Libertarian Philosophy
War and Peace : Skeptical Finance : John Kenneth Galbraith :Talleyrand : Oscar Wilde : Otto Von Bismarck : Keynes : George Carlin : Skeptics : Propaganda : SE quotes : Language Design and Programming Quotes : Random IT-related quotes : Somerset Maugham : Marcus Aurelius : Kurt Vonnegut : Eric Hoffer : Winston Churchill : Napoleon Bonaparte : Ambrose Bierce : Bernard Shaw : Mark Twain Quotes
Vol 25, No.12 (December, 2013) Rational Fools vs. Efficient Crooks The efficient markets hypothesis : Political Skeptic Bulletin, 2013 : Unemployment Bulletin, 2010 : Vol 23, No.10 (October, 2011) An observation about corporate security departments : Slightly Skeptical Euromaydan Chronicles, June 2014 : Greenspan legacy bulletin, 2008 : Vol 25, No.10 (October, 2013) Cryptolocker Trojan (Win32/Crilock.A) : Vol 25, No.08 (August, 2013) Cloud providers as intelligence collection hubs : Financial Humor Bulletin, 2010 : Inequality Bulletin, 2009 : Financial Humor Bulletin, 2008 : Copyleft Problems Bulletin, 2004 : Financial Humor Bulletin, 2011 : Energy Bulletin, 2010 : Malware Protection Bulletin, 2010 : Vol 26, No.1 (January, 2013) Object-Oriented Cult : Political Skeptic Bulletin, 2011 : Vol 23, No.11 (November, 2011) Softpanorama classification of sysadmin horror stories : Vol 25, No.05 (May, 2013) Corporate bullshit as a communication method : Vol 25, No.06 (June, 2013) A Note on the Relationship of Brooks Law and Conway Law
Fifty glorious years (1950-2000): the triumph of the US computer engineering : Donald Knuth : TAoCP and its Influence of Computer Science : Richard Stallman : Linus Torvalds : Larry Wall : John K. Ousterhout : CTSS : Multix OS Unix History : Unix shell history : VI editor : History of pipes concept : Solaris : MS DOS : Programming Languages History : PL/1 : Simula 67 : C : History of GCC development : Scripting Languages : Perl history : OS History : Mail : DNS : SSH : CPU Instruction Sets : SPARC systems 1987-2006 : Norton Commander : Norton Utilities : Norton Ghost : Frontpage history : Malware Defense History : GNU Screen : OSS early history
The Peter Principle : Parkinson Law : 1984 : The Mythical Man-Month : How to Solve It by George Polya : The Art of Computer Programming : The Elements of Programming Style : The Unix Hater’s Handbook : The Jargon file : The True Believer : Programming Pearls : The Good Soldier Svejk : The Power Elite
Most popular humor pages:
Manifest of the Softpanorama IT Slacker Society : Ten Commandments of the IT Slackers Society : Computer Humor Collection : BSD Logo Story : The Cuckoo's Egg : IT Slang : C++ Humor : ARE YOU A BBS ADDICT? : The Perl Purity Test : Object oriented programmers of all nations : Financial Humor : Financial Humor Bulletin, 2008 : Financial Humor Bulletin, 2010 : The Most Comprehensive Collection of Editor-related Humor : Programming Language Humor : Goldman Sachs related humor : Greenspan humor : C Humor : Scripting Humor : Real Programmers Humor : Web Humor : GPL-related Humor : OFM Humor : Politically Incorrect Humor : IDS Humor : "Linux Sucks" Humor : Russian Musical Humor : Best Russian Programmer Humor : Microsoft plans to buy Catholic Church : Richard Stallman Related Humor : Admin Humor : Perl-related Humor : Linus Torvalds Related humor : PseudoScience Related Humor : Networking Humor : Shell Humor : Financial Humor Bulletin, 2011 : Financial Humor Bulletin, 2012 : Financial Humor Bulletin, 2013 : Java Humor : Software Engineering Humor : Sun Solaris Related Humor : Education Humor : IBM Humor : Assembler-related Humor : VIM Humor : Computer Viruses Humor : Bright tomorrow is rescheduled to a day after tomorrow : Classic Computer Humor
The Last but not Least Technology is dominated by two types of people: those who understand what they do not manage and those who manage what they do not understand ~Archibald Putt. Ph.D
Copyright © 1996-2018 by Dr. Nikolai Bezroukov. www.softpanorama.org was initially created as a service to the (now defunct) UN Sustainable Development Networking Programme (SDNP) in the author free time and without any remuneration. This document is an industrial compilation designed and created exclusively for educational use and is distributed under the Softpanorama Content License. Original materials copyright belong to respective owners. Quotes are made for educational purposes only in compliance with the fair use doctrine.
FAIR USE NOTICE This site contains copyrighted material the use of which has not always been specifically authorized by the copyright owner. We are making such material available to advance understanding of computer science, IT technology, economic, scientific, and social issues. We believe this constitutes a 'fair use' of any such copyrighted material as provided by section 107 of the US Copyright Law according to which such material can be distributed without profit exclusively for research and educational purposes.
This is a Spartan WHYFF (We Help You For Free) site written by people for whom English is not a native language. Grammar and spelling errors should be expected. The site contain some broken links as it develops like a living tree...
|You can use PayPal to make a contribution, supporting development of this site and speed up access. In case softpanorama.org is down you can use the at softpanorama.info|
The statements, views and opinions presented on this web page are those of the author (or referenced source) and are not endorsed by, nor do they necessarily reflect, the opinions of the author present and former employers, SDNP or any other organization the author may be associated with. We do not warrant the correctness of the information provided or its fitness for any purpose.
Last modified: March, 19, 2019