Neoliberalism

Originally posted 7/6/12. As relevant today as it was then.

---------

Neoliberalism is a set of economic principles that explains US foreign policy since WWII and current trends in US politics. American corporations have used and continue to use the ideology in countries around the world by:

• Removing trade restrictions on the target country: eliminating quotas, import duties and export duties.
• Instituting a floating rate currency in the targeted country by removing controls, subjecting its currency to international markets and traders.
• Removing all rules and regulations that serve to protect the country and its people. (Goodbye labor and environmental regulations.)
• Reducing the country's income tax rates to bare minimums. And as a consequence:
• Gutting government spending including social programs (austerity measures). And as a consequence:
• Controlling, subverting, diverting or placating the citizens. Outside of the above, of course.

Obviously corporations that "invade" the "host" country are the prime beneficiaries of neoliberalism.

Debt Slavery

There is a corollary to neoliberalism that ends up as debt slavery and it works as follows:

1. Corrupt the government into undertaking expensive infrastructure projecting based on unsustainable growth.
2. When the country falls behind in its debt payments, creditors swoop in with their neoliberal demands.

Neoliberalism, which is known under a plethora of different monikers: globalization, austerity measures, neofeudalism, mercantilism— explains the crises in such countries as  Portugal, Italy, Ireland, Greece and Spain (PIIGS). If these neoliberal policies sound familiar, you're right. The chickens have come home to the good ol' USA to roost.

Which leads to the fact that American companies aren't really American companies in any meaningful  sense of the word. See:

• The Real Reason Apple Can't Make Your iPhone in America
• How American Corporations Transformed from Producers to Predators

Sustainability

US corporations have closed down their manufacturing plants in the US and moved them to a more favorable location sometimes disassembling plants piece by piece and reassembling them half way around the world. The US labor market suffers as a consequence as this creates unemployment and downward pressure on wages. With less capital in the US, Americans have less money in their pockets to buy the products that keep the economy churning. It's a completely unsustainable situation. If the US government had its citizens' best interests at heart, it would do something to correct the situation. As the transported manufacturing plant thrives and the host country's economy grows, manufacturing costs rise. It's not long before the corporations start to look for cheaper and more lucrative markets to exploit. The plant is closed down and moved to a new country. Of course, as a result, the previous host country's economy collapses, wrecking havoc on the people who have left farming to work at the plant and no longer have the ability to feed themselves. But, hey, there is no loyalty in business. After all, business is business and business must grow.

Sociopathic system

Such a system is unsustainable. It is sociopathic when CEOs sacrifice longevity for short term profits or sacrifice their company's viability for short-term bonuses. It doesn't matter if the people making the decisions are sociopaths if the system acts as if it's a sociopath. The end result is the same. Lacking empathy and the ability to love, sociopaths gravitate to to business and politics for something that they do understand: winning the game. It is no wonder that the frequency of sociopaths in CEOs is four times the frequency of sociopaths in the general population. (Source: Forbes)

CEOs' Club

The CEOs' club is the "Business Round Table." At best, it's an old boys' club and, at worst, it's a criminal, corrupt, colluding network. It is here they set their general strategy for maintaining their power and control. From here, they share that strategy with politicians, their pro-corporate media allies and not-for-profit NGOs. Although it all sounds like a big conspiracy, it's all done out in the open. It's perceived by the general population as acceptable and legal.

Membership has it's privileges

From CEOs and their friends sitting on each others' boards, to appointing their board members to vote shares of shareholders who didn't exercise their right to vote, the CEOs have a stranglehold on the corporation that have been entrusted to them. Average CEO pay for 2011 was $9.6 million while the median US worker garnered only $39,300. (Source.) That's 244 times the media worker for US CEOs. In 1965, CEOs earned 24 times the amount of an average worker. (Source.) US CEO compensation is also grossly higher than international CEO pay. Something is rotten in the state of Denmark! Or the US, as the case may be.

Bonuses and bailouts

For a well connected US company, profits are privatized (they keep them) and losses are socialized (bailouts are provided courtesy of the rest of the country). To make matters worse, when CEOs know that the government will bail out the company if it gets into trouble, it incentivizes CEO into risky behavior. And worse still, if CEOs know that they won't be prosecuted for criminal behavior, it incentivizes criminal behavior. 

Gaming the system

Ownership of the government is very rewarding! You can prevent anti-trust investigations, prevent breakups, and put smaller, more efficient companies out of business through dumping or by corporate takeover. You can make illegal activities legal, prevent criminal investigations, collude and continue to merge with other companies unabated. Members of the CEO club take turns filling high level government positions, often self-dealing for themselves and their companies. Again, it's a blatant disregard for their fiduciary duty and certainly not in the public interest. For anyone who paid his dues while in government, a lucrative position awaits in private industry. The revolving door is extremely profitable! The system is also cunningly manipulated in the way regulations are created. Regulatory agencies and the big corporations negotiate the proposed regulations. Often, the regulations are devised to be prohibitively expensive for small businesses and, thus, serve the big corporations. In addition, there are loopholes for the wealthy and well connected, especially when it comes to taxes.

The result of this paradigm shift in power is this:

(A clip from 'Moyers and Company', episode 'Winner Take-All-Politics'.)

Which begs the question, "'How could this have happened to us?"

Some point to the Powell memo  in 1971, some to Eisenhower's warning of the Military Industrial Complex in 1961. Some point to a shift in politics when the Democratic Party started soliciting corporate donations. Chris Hayes in his new book, Twilight of the Elite notes a shift in the 70s from economic equality to equality for minority groups in the areas of gender, race, sexual preferences. While Hayes argues that economic equality and demographic equality now have to be combined, I feel there was a deliberate attempt to concede non-economic concessions as opposed to economic concessions. There are other factors as well going back to the creation of semi-secret/semi-autonomous organizations such as the Federal Reserve, CIA, NSA and FBI. Even FDR, who has been often credited with saving capitalism in the US, led the way for corporatism in the future: big government working in conjunction with big business. See: Third Way or Third Reich?

At any rate, at some point, CEOs were no longer concerned for the "public good" and focused entirely on "profit."

From Why the Democratic Party Has Abandoned the Middle Class in Favor of the Rich:

How did we get here? In the past, after all, liberal politicians did make it their business to advocate for the working and middle classes, and they worked that advocacy through the Democratic Party. But they largely stopped doing this in the '70s, leaving the interests of corporations and the wealthy nearly unopposed. The story of how this happened is the key to understanding why the Obama era lasted less than two years.

From Green Party Candidate Jill Stein: 'Political Silence Has Not Been an Effective Strategy':

I’ve spoken to lawmakers who went in as a freshman and were told that they had to start dialing for dollars on their first day of office. They didn’t get to look around and get acquainted; they were already dialing for dollars.

 From 'Moyers and Company' episode 'Big Money, Big Media, Big Trouble' (also here):

BILL MOYERS: Do you think these ads make us stupid? 

MARTY KAPLAN: We start stupid. The brain is wired to be entertained. We don't pay attention to the words. We pay attention to the pictures and the drama and the story. If it's pretty, if it's exciting, if it's violent, if it's fast, that's where we are. So the fact that these mini dramas are being used to get us to vote for one person or another is just like what we all learned propaganda was used for and thought we learned our lessons from in World War II. They are propaganda. And propaganda is irresistible. If it were resistible, people wouldn't do it. (Watch the entire episode here.)

Dylan Ratigan has stated that "94% Of The Time The Candidate Raising The Most Money Wins! That's An Auction!"

Polifact rates that statement as mostly true:

...the percentage of big-money winners in U.S. House races was actually 85 percent, or nine points lower. And the percentages of U.S. Senate seats and state legislative seats won by the deeper-pocketed candidate have been consistently lower in recent election cycles. On balance, we rate the statement Mostly True.

There's a simple solution: get money out of politics. One solution is to have 100% publicly funded elections. Another solution is for the government to equalize campaign contributions. For example, candidate A raises five million and candidate B raises 10 million. The government then steps in to give candidate A five million to equalize the campaign contributions. To deal with this expenditure, the government can tax all political contributions to create the equalization fund. This was recently discussed on Up with Chris Hayes here.

Some orginizations whose mission is to get money out of politics:

• Get Money Out
• Money Out Pack
• Wolf PAC

Updates

1. Mitt Romney, as part of his five point plan, would like to dramatically increase trade and restore economic freedom. You can be sure that he plans to balance the budget through austerity measures and not higher taxes for corporations or the wealthy. Is this not the neoliberalist agenda? See: Mitt Romney Interview With Brian Williams 7/26/12 or watch this clip:

2. Fabolous article by Noam Chomsky detailing the history of the loss of civil liberties of which neoliberalism has its part: Destroying the Commons: How the Magna Carta Became a Minor Carta