Take a look at this........
- From: harry <haroldhrmtg@xxxxxxx>
- Date: Mon, 5 Apr 2010 11:10:42 -0700 (PDT)
I know it's a bit lomg and refers to the USA. (An American friend sent
it). However it seems to apply here as well.
I thought this was a very interesting piece and makes a excellent
summary of what happened to our economy (comparing the great
depression of the 30s) and how there is now way the "Powers That Be"
at the top didn't know how to manipulate the masses into the
predicament we are in today. Even though this author makes excuses for
our the governments miscalculations and the feds shortsightedness and
sorta gives excuses for their "COLLECTIVE" behavior it doesn't take a
rocket scientists to understand how "we" have been duped by the powers
that be.
Charles Lindbergh was right!
"From now on, depressions will be scientifically created." --
Congressman Charles A. Lindbergh Sr. , 1913
April 4, 2010
Back to Market Fundamentalism
By Ismael Hossein-zadeh
The "golden" years of the U.S. economy in the immediate post-WW II
period, along with the recovery and expansion of the economies of
other industrialized countries, afforded the working class of these
countries a decent, even middle-class, standard of living. Combined
with extensive social safety-net programs such as the New Deal reforms
in the U.S. and Social-Democratic reforms in Europe, the economic
recovery and high employment rates of that period paved the way for a
relatively cooperative relationship between the working and capitalist
classes in these countries.
This led many pundits of historical developments to argue that perhaps
Karl Marx had underestimated capitalism's ability to carry out reform
and share the fruits of economic progress with the poor and working
class, thereby obviating revolution. They pointed to guaranteed
employment and labor-management cooperation in a number of
industrialized countries such as Germany and Japan as indications of
"erroneous" Marxian judgment of the antagonistic capital-labor
relationship.
These pundits failed, however, to point out the fact that the New Deal
and Social-Democratic reforms that evolved out of the Great Depression
and World War II were not courtesy of "benevolent" capitalism,
voluntarily bestowed upon the poor and working people. They did not
bother to explain that those reforms were, rather, the product of
years of struggle by the working class and their allies against the
brutalities of the capitalist system -- a struggle that often entailed
great sacrifices, including occasional loss of life. The anti-
Depression and anti-war struggles of the 1930s and 1940s compelled the
capitalist class to "carry out reform in order to prevent revolution,"
to paraphrase President Franklin D. Roosevelt.
The laissez-faire doctrine, which firmly believed in the self-
correcting ability of unbridled market mechanism, was the dominant
economic principle before the Great Depression. The financial crash of
1929 and the consequent long Depression shattered this long-held,
religious-like belief. The Depression, precipitated largely by
predatory loan-pushing and the resulting unsustainable bubble of asset
(stock) prices, made living conditions for the overwhelming majority
of people extremely difficult. The ensuing economic distress, in turn,
precipitated popular unrest.
Large numbers of the discontented frequently took to the streets in
the early 1930s. Their desire for change swelled the ranks of
socialist, communist, and other opposition parties and groups. Left
activists gained certain influence among labor ranks, and workers'
movement for unionization -- illegal in many industries until 1935 --
spread rapidly.
Labor and other grassroots support for third-party candidates in the
1932 presidential election resulted in unprecedented number of votes
for those candidates. Third-party votes were even more impressive in
congressional and local elections. "The union literature was like the
labor literature of a century ago -- looking toward a successor to
capitalism," wrote the late Studs Terkel in his Hard Times: An Oral
History of the Great Depression (Pantheon Books, p. 309).
Business and government leaders clearly understood the gravity of the
situation and the need for action. The pressure from "below" created
consensus and coalitions at the "top" as the need for reform to fend
off revolution became evident. Terkel writes, "...F.D.R. was very
significant in understanding how best to lead this sort of
situation....The industrialists who had some understanding recognized
this right away. He could not have done what he did without the
support of important elements of the wealthy class. They did not
sabotage the programs. Just the opposite" (Ibid.,pp. 268-69).
Two principles lay at the core of the ensuing big business-government
consensus reforms, which came to be known as the New Deal reforms. The
first was that Adam Smith's "invisible hand" was not capable of
resuscitating the badly depressed economy; it needed government's
visible hand. The second principle was that government intervention
must be limited to stimulative and distributive measures, and that the
management of industries and businesses should be left to the private
sector. Facilitating and maintaining a certain level of purchasing
power in the market was considered crucial to the New Deal package.
While this would provide relief to the economically hard pressed, and
thus reduce social tension, it would also stimulate the economy and
promise stable growth and rising profitability.
Regardless of the degree of the effectiveness of the New Deal reform
package, the fact remains that it rescued U.S. capitalism -- just as
Social-Democratic reforms rescued the economies of West European
countries. Combined with what the late Ernest Mandel called "extra-
economic" factors (such as pliant labor leadership and peaceful trade
unionism, establishment of the Bretton Woods international monetary
system, Cold War ideology and the suppression or pacification of any
possible dissent, and relative decline in the price of oil and other
raw materials in the immediate post-WW II period), the New Deal and
other government-sponsored reforms ushered in a period of rapid
economic expansion that came to be known as the "golden years of US
capitalism," which lasted until around 1970.
While the pressure from below played a key role in compelling the
ruling establishment to carry out the New Deal and other welfare state
programs, a number of other factors also contributed to the
realization of those programs. One such factor was the emergence of an
alternative economic model to capitalism from the ruins of the two
world wars and Great Depression -- the centrally-planned economies of
the Soviet Union and its allies. The emergence of the rival economic
system, despite its bureaucratic and dictatorial character, further
exposed the unjust character of market mechanism because while in the
1930s the capitalist West was suffering from economic depression,
unemployment, and poverty, the Soviet and other centrally-planned
economies were enjoying impressive rates of growth -- with no
unemployment, homelessness, or hunger.
The popularity of the Soviet-type economic system at the time also
meant that many of the colonial and other less-developed areas of the
world combined their anti-colonial and anti-imperial national
liberation struggles with demands for government-sponsored models of
socialist-oriented or "non-capitalist" development. In the core
capitalist countries of the West, too, demands for reform and voices
of revolution were frequently heard during the widespread protest
demonstrations of the 1930s. Anti-capitalist sentiments and demands to
harness or to do away with the skittish, unreliable and, at times,
brutal forces of market mechanism in favor of regulating and/or
managing national economies were heard not only among the Left and
working classes but also in the ranks of the middle and lower-middle
classes.
Although the fear of total economic collapse in the face of the
Depression and the "threat of revolution" compelled government and
business leaders to embark on reform in order to fend off revolution,
proponents of unbridled market mechanism never really accepted or
reconciled with those reforms as permanent features of capitalism. Not
surprisingly, soon after the Depression turned to expansion in the
immediate postwar period, and Western capitalism regained its lost
confidence, the financial oligarchy and government leaders began to
introduce "restructuring" measures that would undermine the New Deal
reforms and revive the pre-Depression model of market fundamentalism.
Just as the rival economic system of the Soviet Union and its allies
-- which guaranteed basic needs and job security for their citizens --
indirectly contributed to the implementation of the New Deal and
Social-Democratic reforms in the industrialized West, the collapse of
that rival system is now contributing to the retrogressive process of
reviving pre-Depression market orthodoxy. Not only has the collapse of
the Soviet-type economies opened up vast markets and huge reservoirs
of cheap labor in places such as the former Soviet Union, China, and
India, it has also served as grounds for capitalist triumphalism --
and its self-assured or self-righteous promotion of trickledown
economics.
Many people believe that efforts to reverse the New Deal reforms began
with the arrival of Ronald Reagan in the White House in 1980. Evidence
shows, however, that such efforts, pursued by both Republican and
Democratic administrations, began long before the election of Ronald
Reagan to presidency. As Alan Nasser, professor emeritus of Political
Economy and Philosophy at The Evergreen State College in Olympia
(Washington), points out, "The foundations of neoliberalism were
established in economic theory by liberal Democrats at the Brookings
Institution, and in political practice by the Carter administration."
Reagan picked the Democrat's timid agenda of gradual return to
economic liberalism and ran with it, replacing the rhetoric of
capitalism-with-a-human-face with the imperious, self-righteous
rhetoric of rugged individualism that greed and self-interest are
virtues to be nurtured. President Clinton did not change the course of
neoliberal corporate welfare policies of Reaganomics, nor is President
Obama hesitating to carry out those policies. This is clearly
reflected in his administration's supply-side restructuring policies
whose core principle consists of redistributing national resources in
favor of the rich and powerful -- cutting the critically-needed social
spending on basic needs to pay Wall Street gamblers and Pentagon
contractors.
Perhaps a most sinister neoliberal strategy to roll back the New Deal
and other poverty-reducing reforms has been deliberate creation of
budget deficits in order to force cuts in social spending. This has
often been accomplished by a combination of drastic tax cuts for the
wealthy along with drastic hikes in military spending. As this
combination creates big budget deficits, it then forces cuts in non-
military public spending as a way to fill the budget gaps that are
thus created.
The Obama administration has, indeed, escalated this creepy strategy
by bailing out the Wall Street gamblers, financing multiple wars of
choice and more than 800 military bases around the world, and then
cutting social spending in an effort to reduce the national debt and
budget deficits thus generated.
Another strategy of reviving the pre-New Deal laissez faire economics
has been the increasing use of various schemes of outsourcing and
privatization. The outsourcing of public services to private hands
pervades all areas of state responsibility. Perhaps a most notorious
example of this policy is the case of the Pentagon/security
contracting. The services outsourced by the Pentagon are no longer
limited to the relatively simple or routine tasks and responsibilities
such as food and sanitation services. More importantly, they include
contracts for services that are highly sophisticated and strategic in
nature, such as the contracting of security services to corporate
private armies, or modern-day mercenaries.
Reporting on the steadily rising trend of outsourcing, Scott Shane and
Ron Nixon of the New York Times reported, "Without a public debate or
formal policy decision, contractors have become a virtual fourth
branch of government. On the rise for decades, spending on federal
contracts has soared during the Bush administration, to about $400
billion last year from $207 billion in 2000, fueled by the war in
Iraq, domestic security and Hurricane Katrina, but also by a
philosophy that encourages outsourcing almost everything government
does."
The policy of privatization and outsourcing has led the U.S.
Department of Housing and Urban Development (HUD), tasked with
expanding the American dream of home ownership and affordable housing
free from discrimination to people of modest means, to surreptitiously
"move a chunk of that role to Wall Street since 2002," reports Pam
Martens, a freelance investigative reporter. Martens further writes:
"From 2002 to 2005, HUD transferred in excess of $2.4 billion of
defaulted mortgages insured by its sibling, the FHA, into the hands of
Citigroup, Lehman Brothers and Bear Stearns while providing the firms
with wide latitude to foreclose, restructure or sell off in bundles to
investors. HUD retained a minority interest of 30 to 40 percent in
each joint venture. Citigroup was awarded the 2002 and 2004 joint
ventures; Lehman Brothers the 2003; Bear Stearns the 2005.
"What the program effectively did was allow the biggest retail banks
in the country to get accelerated payment on their defaulted, FHA-
insured, single family mortgage loans while allowing another set of
the biggest investment banks to make huge profits in fees for bundling
and selling off the loans as securitizations. Once the loans were
securitized (sold off to investors) they were no longer the problem of
HUD or the Wall Street bankers. The loans conveniently disappeared
from the radar screen and the balance sheet. The family's fate had
been sold off by HUD to Wall Street in exchange for a small piece of
the action. Wall Street then sold off the family's fate to thousands
of investors around the world for a large piece of the action."
Outsourcing policies are bound to be further accelerated by the rising
budget deficits of many states and municipalities, and their need to
sell off public property or outsource their traditional services in
order to raise funds to finance their budgetary needs. These include
outsourcing the maintenance of parks, the management of toll roads,
the collection of waste, the operation of municipal neighborhood
centers, and more.
For example, according to a recent MSNBC report, in the two years
since Mitch Daniels was elected governor in Indiana, "the state has
leased the 157-mile Indiana Toll Road to an outside company for the
next 75 years for $3.8 billion, hired vendors for $1.16 billion over
10 years to process welfare applications, and brought in a company to
serve food at a mental hospital."
While cash-strapped states and other local governments can generate
quick cash by privatizing public property or outsourcing public
services, they forgo long-term opportunities of income generation from
such properties and services.
Another Wall Street plot to rob the people of their social safety net
programs is the recently renewed attack on the once-sacred entitled
programs such as Social Security, Medicare and Medicaid. Having piled
up huge sums of national debt and deficit (through bank bailouts,
military spending, and tax cuts for the affluent), Wall Street
champions, firmly ensconced in the Congress and the White House, are
now singing the "fiscal responsibility" song as a prelude to chip away
at Social Security and other entitlements.
This ominous scheme is clearly reflected in President Obama's recently
appointed "National Commission on Fiscal Responsibility and Reform," a
bi-partisan group that is tasked with reviewing the Social Security
and other entitlements in an effort to further "trim" social spending
in order to pay for the sins of major banks and military contractors.
The bipartisan nature of the attack on Social Security indicates that
the plan to undercut economic safety net programs cannot be blamed
solely on the blatently neoliberal Republicans. It shows that, with
few exceptions, Democrats are as much indebted and committed to the
powerful financial interests as are Republicans. The neoliberal
economic policies of the Obama administration, crafted by his economic
team of ex-bankers/Wall Street advisors, should dispel any illusions
that he is committed to "change" in favor of the people.
The New Deal and other basic needs programs were put in place not so
much because of FDR's or Keynes's genius, or the goodness of their
hearts, as they were because of the compelling pressure from the
people. Freed (or feeling free) from that pressure, the government, as
the executive body of the financial/economic oligarchy, is now trying
to undermine those social safety net programs, and revive the pre-New
Deal/pre-Keynesian economic orthodoxy; that is, the economic model of
the survival of the fittest.
This sinister, profit-driven effort at undermining the poor and
working people's hard-won basic needs programs can be stopped only
through a renewed and compelling pressure from the grassroots --
pressure that must be exerted not through the Democratic Party machine
but independent of the so-called two-party system.
Author's Bio: Ismael Hossein-zadeh is a professor of economics at
Drake University, Des Moines, Iowa. He is the author of the newly
published book, The Political Economy of U.S. Militarism His Web page
is http://www.cbpa.drake.edu/hossein-zadeh
.
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