Category Archives: Privatization

Of Course Billionaires Shouldn’t Exist

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By HipCrime Vocab

There’s apparently a row over whether billionaires should exist. That is, whether or not billionaires should be a thing in our society.

What a stupid question. Of course billionaires shouldn’t exist! But the reason has nothing to do with Socialism.

Rather, under a properly-functioning free-market capitalist system, billionaires shouldn’t exist. And that would have also been the opinion of the “Classical Liberals” so favored by the Right these days: Adam Smith, David Ricardo. Thomas Malthus, John Stuart Mill, and so on.

Billionaires are a sign of market failure.

Let me say that again: billionaires are a form of market failure! You cannot simultaneously be both pro-Market and pro-billionaire.

I’m amazed at how few people get this!

In a truly competitive market, excess profits would be competed away. Someone would come along and undercut outsize profits. That’s exactly how the Classical Liberals assumed free markets would work. In this, they saw markets as instruments of greater equality, not inequality, and certainly not as a way to construct a new and improved aristocracy even more powerful than the old one.

The Classical Liberals wrote in opposition to the main power centers of their day: aristocratic government and chartered monopolies like the East India Company. They didn’t see the purpose of their writings as defending privilege and power. One can dispute the end results, but that was not their goal. Quite the contrary. The idea that a single, solitary individuals would possess more wealth than the kings and pharaohs of old under a functioning free market system would have been unthinkable to them.

In their time, much of the national wealth was monopolized by a landed aristocracy who gained their wealth through disproportionate ownership of the country’s productive land. The other major source of wealth came from large joint-stock companies that were granted royal monopolies due to their political connections. Yet another source of unearned wealth came from the holders of bonds (gilts)—essentially loaning money to the state and getting the government’s tax revenues funneled to them via interest payments.

Classical English Liberals felt that competitive markets would do away with a good portion of the unearned and unproductive wealth common in Great Britain at the time. They believed that “free and open” markets would channel wealth and activity to more productive ends. That is, they would break up large pools of wealth and unproductive money. The kind of obscene fortunes that they saw in their day would no longer be possible thanks to competition, they assumed, and that British society would become more equal than it was under landed aristocracy, not less. We can dispute their logic (and I have issues with it), but I think we can safely say that this is what they believed, rightly or wrongly.

An inherent part of their conception of free markets is the possibility of failure. Unproductive or inefficient businesses would be competed away, they assumed, and the fortunes earned through such activities would disappear. But that is not the case today. Billionaires have so much money they can literally never lose it! That’s not capitalism, that’s aristocracy. I read recently that someone like Bill Gates literally cannot give away money to his pet causes fast enough to reduce his fortune even if he tried. In fact, he’s grown wealthier even while giving away billions.

The important point about [Adam] Smith’s system, on the other hand, is that it precluded steep inequalities not out of a normative concern with equality but by virtue of the design that aimed to maximize wealth. Once we put the building blocks of his system together, concentration of wealth simply cannot emerge.

In Smith, profits should be low and labor wages high, legislation in favor of the worker is “always just and equitable,” land should be distributed widely and evenly, inheritance laws should partition fortunes, taxation can be high if it is equitable, and the science of the legislator is necessary to thwart rentiers and manipulators.

Political theorists and economists have highlighted some of these points, but the counterfactual “what would the distribution of wealth be if all the building blocks were ever in place?” has not been posed. Doing so encourages us to question why steep inequality is accepted as a fact, instead of a pathology that the market economy was not supposed to generate in the first place.

Contrary to popular and academic belief, Adam Smith did not accept inequality as a necessary trade-off for a more prosperous economy (LSE Blogs)

Yet today the people who call themselves the heirs to “Classical English Liberals” emphatically defend the existence of billionaires and extreme inequality at every turn. Such people are not pro-market or pro-capitalism as they like to portray themselves; they are simply pro-wealth, or—to use a less complementary term—bootlickers. They are not defending capitalism or Markets; what they really are defending is oligarchy, power, privilege, and hierarchy. As Corey Robin opined, “The priority of conservative political argument has been the maintenance of private regimes of power,” with all the soaring rhetoric about markets and freedom being just a smokescreen and a cover for defending hierarchies and power imbalances. Their defense of billionaires is proof positive of this. This is true of presidential candidates as well.

The existence of obscene fortunes and extreme inequality are not a sign of capitalism’s success; they are a sign of capitalism’s failure.

This is pointed out by Chris Dillow:

“I don’t think anyone in this country should be a billionaire” said Labour’s Lloyd Russell-Moyle yesterday, at which the BBC’s Emma Barnett took umbrage. The exchange is curious, because from one perspective it should be conservative supporters of a free market who don’t want there to be billionaires.

I say so because in a healthy market economy there should be almost no extremely wealthy people simply because profits should be bid away by competition. In the textbook case of perfect competition there are no super-normal profits, and in the more realistic case of Schumpeterian creative destruction, high profits should be competed away quickly.

From this perspective, every billionaire is a market failure – a sign that competition has failed. The Duke of Westminster is rich because there’s a monopoly of prime land in central London. Would Ineos’ Jim Ratcliffe be so rich if pollution were properly priced, or if his firm faced more competition?

The Right’s Mega-Rich Problem (Stumbling and Mumbling)

How is this rectified? How do they square their supposed love of fair competition and free and open markets with the presence of outsize fortunes?

They don’t.

And the sad thing is how many people buy into their nonsense. Everyone seems to think that a defense of billionaires is a defense of capitalism.

It’s not. It’s the opposite.

What is a billionaire?

Billionaires are only made possible through monopolies and tollbooths. Period. And such monopolies are more possible than ever before thanks to technology.

This is argued by Matt Stoller, an expert on monopolies, in a post entitled, What Is A Billionaire?:

Most people think a billionaire is someone with a lot of money, a sort of Scrooge McDuck who goes swimming in a pool of gold coins. And why wouldn’t we? The name billionaire has the word billion contained within it, so clearly it means having a net worth of at least ten figures. And in a sense, that is technically true. But if you look at the top ranks of the Bloomberg billionaire index, you’ll notice that nearly all of the leaders are people who own a corporation with substantial amounts of market power in one or more markets.

Billionaires use market power to extract revenue the way that a tollbooth operator does. If you want to drive on a road, you have to pay for the privilege. It costs the tollbooth operator nothing, he/she just has a strategic chokepoint for extraction. Billionaire Warren Buffett, for instance, has such a ‘tollbooth’ strategy for investing, though he uses the term ‘moat’ because it sounds charming and quirky rather than rapacious.

Put another way, the Bloomberg billionaire index isn’t a list of the most important Scrooge McDuck’s, it’s a list of the biggest tollbooth operators in the world.

What he’s saying is that one becomes a billionaire only by short-circuiting the competitive market economy. Then their profits cannot be competed away. Only by gaming the system can one “earn” over a billion dollars. No one person is that valuable.

Stoller goes on to elucidate the operational tactics used by both Bill Gates and by his predecessor John D. Rockefeller, and finds that even though the industries are radically different, the techniques of short-circuiting and circumventing market competition are the same. Whether it’s horizontal and vertical integration, or using market influence to price out rivals, or exclusive contracts, the techniques are the same regardless of industry or time period:

In 1976 and 1980, Congress allowed the copyrighting of software. IBM had been under aggressive antitrust investigation and litigation since 1967, so when it built a personal computer, it outsourced the operating system – MS-DOS – to Gates’s company and allowed Gates to license it to other equipment makers. (Gates’s upbringing didn’t hurt; the CEO of IBM at the the time knew his mother.) Such a relationship with a vendor was a shocking change for IBM, which had traditionally made everything in-house or tightly controlled its suppliers. But IBM treated Microsoft differently, transferring large amounts of programming knowledge to the small corporation. IBM also did this with the microprocessor company Intel, which IBM protected from Japanese competition.

And yet, in 1982, the Department of Justice dropped the antitrust suit against IBM, signaling a new pro-concentration framework. Bill Baxter, Reagan’s antitrust chief, did not want to bring monopolization suits, and did not. The new fast-growing technology space of personal computers would be a monopolized industry. But it would not be monopolized by IBM, which had kept control of the computing industry since the 1950s, because IBM’s corporate structure was now skittish about the raw use of power. And it would not be monopolized by AT&T, which was kept out of the computing industry by a 1956 consent decree that lasted until 1984. Gates, in many ways, had a greenfield, an environment friendly to monopoly but one in which all the old monopolists had been cleared out by antitrust actions.

In the case of Amazon, even though it theoretically has competition, through vertical and horizontal integration it can effectively control online e-commerce to a large degree. The result is a fortune greater than that of entire nation-states controlled by a single individual. One hardly imagines that Adam Smith would approve.

I read an interesting concept, and I forget where it came from. It was that networks are natural monopolies. This explains things like Facebook, Apple, Amazon, etc. It’s entirely possible that the online world, due to features inherent in the technology, simply cannot be regulated by normal competition the way the market for goods and services can. Yet all our theories pretend that it can. It’s delusional.

Under these scenarios,’ profits’ are really a form of tribute (or perhaps plunder). In fact, we really shouldn’t even use the word ‘profits’ to describe them (just like we shouldn’t use ‘trade’ to describe global wage arbitrage).

And there are many more examples of competition being limited by deliberate legal policy. Much of Microsoft’s profits come from the fact that other people can’t copy their software—which they’ve arbitrarily labeled “piracy”—without facing legal repercussions enforced by the state and its legal system. In that sense, outsized fortunes are a consequence of laws, and not a feature inherent to technology:

…inequality is not in fact driven by technology, it is driven by our policy on technology, specifically patent and copyright monopolies. These forms of protection do not stem from the technology, they are policies created by a Congress which is disproportionately controlled by billionaires.

If the importance of these government granted monopolies is not clear, ask yourself how rich Bill Gates would be if any start-up computer manufacturer could produce millions of computers with Windows and other Microsoft software and not send the company a penny. The same story holds true with most other types of technology. The billionaires get rich from it, not because of the technology but because the government will arrest people who use it without the patent or copyright holder’s permission.

This point is central to the debate on the value of billionaires. If we could get the same or better technological progress without making some people ridiculously rich, then we certainly don’t need billionaires. But in any discussion of the merits of billionaires, it is important to understand that they got their wealth because we wrote rules that allowed it. Their immense wealth was not a natural result of the development of technology.

Farhad Manjoo promotes billionaire ideology in proposal to get rid of billionaires (Dean Baker, Real World Economic Review)

Baker has also pointed out that outsized salaries in many fields are determined by limiting competition though things like wildly expensive education and licensing requirements, which are ultimately determined by the government. Doctors and lawyers do not have compete against the wage rates in India or China thanks to the legal system, for example. Everyone else, however, is required to compete against the entire world for jobs.

On a global level, most billionaires are not the result of “hard work” or doing things beneficial for their society:

The vast majority of the world’s billionaires have not become rich through anything approaching ‘productive’ investment. Oxfam has showed that, approximately one third of global billionaire wealth comes from inheritance, whilst another third comes from ‘crony connections to government and monopoly’.

Why on Earth Shouldn’t People Be Able to Be Billionaires? (Novara Media)

And the monopolies that allow billionaires to exist are not good for the economy as a whole. In fact, they are highly detrimental, as Chris Dillow further points out:

What’s more, monopoly pricing is a form of tax – a tax which often falls upon other, smaller businesses…In this sense, not only are billionaires a symptom of an absence of a healthy competitive economy, but they are also a cause of it: their taxes on other firms restrict growth and entrepreneurship…

Tories are wrong, therefore, to portray attacks on the mega-rich as the politics of envy. It’s not. The existence of billionaires is a sign and cause of a dysfunctional economy…

In fact, logically, it is rightists who should be most concerned by the concentration of wealth. We lefties can point to it as evidence that the system is rigged. But Tories should worry that it undermines the legitimacy of the existing order not only because people don’t like inequality, but because it slows down economic growth and so encourages demands for change.

Furthermore, their existence is detrimental politically:

Controlling society’s wealth effectively gives the wealthy the right to plan economic activity. Billionaires – and the people who manage their money – determine which governments can access borrowing, which companies deserve to grow, and which ideas should be researched. This gives them an immense amount of political, as well as economic, power – allowing billionaires to provide favours to those politicians who helped them get rich in the first place.

Ultimately, the monopolisation of society’s resources by a tiny, closed-off elite means that most of society’s resources are used for dirty, unsustainable and unproductive speculation.

Why on Earth Shouldn’t People Be Able to Be Billionaires? (Novara Media)

In fact, the proliferation of billionaires in the developed world has accompanied a period of slow growth and stagnation, not rapid growth. As has been pointed out ad nauseum, yet still fails to sink in, America’s fastest period of growth came when there were fewer billionaires and tax rates ranged from 50 to 90 percent. There is no evidence that the proliferation of billionaires has benefited society as whole. And now, billionaires are attempting to buy political offices outright, making a joke of democracy.

People defending billionaires are only defending raw power, not capitalism, not democracy, and certainly not free markets.

Stoller concludes:

[Billionaires] are not people with a bunch of dollar bills stacked to the moon, they are (largely) men with a strategic position of power protected by public laws and rules. They aren’t better or smarter than anyone else, they are simply politically adept and in the right place at the right time. There’s no reason we have to enable such people to run our culture. At the end of the day, tollbooths are nothing but bottlenecks on a road on which we would otherwise travel faster and more freely.

What is a Billionaire? (Matt Stoller)

So, should there be billionaires? The answer is no. And you should believe that if you consider yourself a libertarian free marketeer or a democratic socialist. Anyone asserting anything else is just a bootlicker or a toady.

Addendum:

Here’s a good piece explaining how billionaires are basically mad kings:

…one of civilization’s great challenges stems from millionaire rhyming with billionaire. In holding them in the same linguistic corner of our minds, we conflate them, yet they’re so mathematically distinct as to be unrelated. A millionaire can, with some dedicated carelessness, lose those millions. Billionaires can be as profligate and eccentric as they wish, can acquire, without making a dent, all the homes and jets and islands and causes and thoroughbreds and Van Goghs and submarines and weird Beatles memorabilia they please. Unless they’re engaging in fraud or making extremely large and risky investments, they’re simply no match for the mathematical and economic forces—the compounding of interest, the long-term imperatives of markets—that make money beget more money. They can do pretty much whatever they want in this life, and therein lies the distinction. A millionaire enjoys a profoundly lucky economic condition. A billionaire is an existential state.

This helps explain the cosmic reverence draped over so many billionaires, their most banal notions about innovation and vision repackaged as inspirational memes, their insights on markets and customers spun into best sellers. Their extravagances are so over the top as to inspire legend more often than revolution…

The Gospel of Wealth According to Marc Benioff (Wired)

One of the most potent demonstrations that the modern-day rich are mad kings, comes form the story of Adam Neumann of WeWork. This is the impression I got from the Behind the Bastards podcast on Neumann: The Idiot Who Made, and Destoryed, WeWork (Podtail)

Counting Jeff Bezos’s fortune using 1 grain of rice = $100,000
byu/GallowBoob innextfuckinglevel

Bezos Reveals His Ugly Vision For The World He’s Trying To Rule

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By Caitlin Johnstone

Source: CaitlinJohnstone.com

“Guess what the best planet is in this solar system?” asked Amazon CEO Jeff Bezos at a recent media event on his Blue Origin space program.

“It’s easy to know the answer to that question,” he continued. “We’ve sent robotic probes like this one to all of the planets in our solar system. Now, some of them have been fly-bys, but we’ve examined them all. Earth is the best planet. It is not close. This one is really good.”

Bezos then went on to discuss his plan to ship humans off of the best planet in the solar system and send them to live in floating cylinders in space.

Bezos claimed that the growing human population and growing energy consumption will force us to make a choice between “stasis and rationing” and “dynamism and growth”, and claimed that the latter item in his dichotomy is possible only by moving humans off the planet.

“If we’re out in the solar system, we can have a trillion humans in the solar system, which means we’d have a thousand Mozarts and a thousand Einsteins,” Bezos said. “This would be an incredible civilization. What would this future look like? Where would a trillion humans live? Well it’s very interesting, someone named Gerry O’Neill, a physics professor, looked at this question very carefully and he asked a very precise question that nobody had ever asked before, and it was, ‘Is a planetary surface the best place for humans to expand into the solar system?’ And he and his students set to work on answering that question, and they came to a very surprising–for them–counterintuitive answer: No.”

Bezos went on to describe how the limited surface areas, distance, and gravitational forces of the other planets in our solar system make settling on those planets impractical and cost-prohibitive, while constructing giant space cylinders closer to Earth which can hold a million people is far more practical. These cylinders would spin to replicate Earth’s gravitational pull with centrifugal force.

Here are some illustrations Bezos used in his presentation to show us what these “O’Neill colonies” might look like:

“These are really pleasant places to live,” Bezos said. “Some of these O’Neill colonies might choose to replicate Earth cities. They might pick historical cities and mimic them in some way. There’d be whole new types of architecture. These are ideal climates. These are short-sleeve environments. This is Maui on its best day, no rain, no storms, no earthquakes.”

No rain? No weather? Just big, spinning cylinders floating monotonously in space? A trillion divided by a million is one million, which means that the best idea the richest man in the world can come up with for the future of our species is to fill our solar system with a million of these floating homogenized space malls.

“If we build this vision, these O’Neill colonies, where does it take us? What does it mean for Earth?” Bezos asked. “Earth ends up zoned, residential, and light industry. It’ll be a beautiful place to live, it’ll be a beautiful place to visit, it’ll be a beautiful place to go to college, and to do some light industry. But heavy industry, polluting industry, all the things that are damaging our planet, those will be done off Earth. We get to have both. We get to keep this unique gem of a planet, which is completely irreplaceable–there is no Plan B. We have to save this planet. And we shouldn’t give up a future of our grandchildren’s grandchildren of dynamism and growth. We can have both.”

Now, if you look at the behavior of Jeff Bezos, who exploits his employees and destroys his competitors, and who some experts say is trying to take over the underlying infrastructure of our entire economy, you can feel reasonably confident that this man has no intention of leaving “this unique gem of a planet”, nor of having the heirs to his empire leave either. When you see this Pentagon advisory board member and CIA contractor planning to ship humans off the Earth’s surface so the planet can thrive, you may be certain that he’s talking about other humans. The unworthy ones. The ones who weren’t sociopathic enough to climb the capitalist ladder by stepping on the backs of everyone else.

And make no mistake, when Bezos talks about saving the planet for “our grandchildren’s grandchildren”, he’s not just talking about his heirs, he’s talking about himself. Bezos has invested large amounts of wealth in biotech aimed at reversing the aging process and cracking the secret of immortality.

This is the sort of guiding wisdom that is controlling the fate of our species, everyone. The world’s most ambitious plutocrat envisions a world in which, rather than evolving beyond our destructive tendencies and learning to live in collaboration with each other and our environment, we are simply shipped off into space so that he can stretch out and enjoy our beautiful planet. That’s his best idea.

Our plutocratic overlords aren’t just sociopaths. They’re morons.

Bezos’ incredibly shallow vision for humanity reminds me of something Julian Assange said at a 2017 London festival via video link about the way Silicon Valley plutocrats are trying to become immortal by finding a way to upload their brains onto computers.

“I know from our sources deep inside those Silicon Valley institutions, they genuinely believe that they are going to produce artificial intelligences that are so powerful, relatively soon, that people will have their brains digitized, uploaded on these artificial intelligences, and live forever in a simulation, therefore will have eternal life,” Assange said. “It’s a religion for atheists. They’ll have eternal life, and given that you’re in a simulation, why not program the simulation to have endless drug and sex orgy parties all around you. It’s like the 72 virgins, but it’s like the Silicon Valley equivalent.”

I mean, damn. First of all, how stupid do you have to be to overlook the fact that science has virtually no understanding of consciousness and doesn’t even really know what it is? Even if these idiots find a way to upload their neurological patternings onto some AI’s virtual simulation, it’s not like they’d be there to experience it. It would just be a bunch of data running in a computer somewhere, mimicking the personality of a dead person and experienced by no one. People who believe that all there is to them is their dopey mental patterns have not spent any time whatsoever exploring what they are, and have no idea what it is to be human. The fact that anyone would think they could become immortal by digitizing their churning, repetitive personality patterns is crazy, and the fact that they’d want to is even crazier.

People who think this way should shut up and learn about life, not rule the world in a plutocratic system where money translates directly to political influence. People who think that humans can be happily unplugged from the ecosystemic context in which they evolved, the ecosystemic context of which they are an inseparable part, and people who think they can become immortal by uploading their wanky personalities onto a computer should shut the fuck up, spend some time alone with themselves, maybe try some psilocybin mushrooms, and learn a bit about what it means to be human. They certainly shouldn’t be calling the shots.

Earth is our home. It’s what we’re made for. The earth went through a lot to give you life. Sparks had to catch, oceans had to freeze, billions of cells had to survive endless disease, all of these amazing things had to happen just right to give you life. You belong here. You are as much a creation of the earth as the air you breathe. You may feel like a singular organism but you’re actually as much a singular organism as one of the many billions of organisms that make up your body. You and earth are one. And because you evolved on earth, you are perfectly adapted to earth and it is perfectly adapted to you. It yearns for your breath as you yearn for its breeze on your face.

We absolutely have the ability to transcend our unhealthy tendencies as a species which, when you really look at them, are merely creations of a mind that feels alone and separate and like it is in a constant fight for its life. If we just put down our mental swords for a hot second and learned to channel our creativity into the thriving of our society and our ecosystem instead of into killing and out-competing one another then we will be okay. The way out of this is the way towards health. For example, once women have been given back even the most basic rights of sexual sovereignty such as birth control and access to terminations as they have in most western countries, birth rates fall below replication levels. Women’s own internal bodily wisdom makes the problem of overpopulation moot if given half a chance just to make decisions on behalf of her own body.

Another example. People lament the lack of jobs due to AI and automation but we actually desperately need people to do less. We need a whole lot of people doing nothing, not using the roads every morning and evening, not producing widgets that no one needs and creating advertising campaigns to brainwash people into buying them anyway, just to have them end up in the ocean or leaching heavy metals into the earth. Having a whole lot of people doing nothing for more of their week would take the strain off of our health systems as the single biggest factor in disease is stress. Studies show that stress also shrinks your brain and lessens your creativity and innovation too, so all the punitive-minded libertarians out there who are worried that we won’t progress as a species if we start sharing resources around to people who aren’t doing things that traditionally made money because we’ll be too relaxed can chill too. We don’t need to crack the whip to get people to make beautiful innovations. Humans are at their best when feeling playful and relaxed. Nearly all the technological advances of the past came from people who had a lot of leisure time due to their privileged status. Releasing humans from 9 to 5 slavery would be the fastest way to slow our resource consumption and take pressure off of all our systems and would have the added benefit of making us smarter, funnier, more creative and more innovative too.

And for that matter, having every idea and innovation be required to make money is also killing us. We need the ability to fund things that will not make profit. How many times have you been in a conversation and someone’s come up with an idea that will solve a major environmental, energy or health problem and no one’s got excited because it will never get off the ground because it will never make money? Fully disappearing a problem never made anyone any money. Healthy people, for example, never spend a dime at the doctors. The way out of this is detaching human innovation from money and allowing solutions to flourish without the imposition of also having to turn a profit.

These are merely three things I can think of that will dramatically improve our collective ability to reverse this extinction event and all we have to do is get saner, stop punishing each other, start sharing and start collaborating. The only issue we have as humans is that a handful of highly competitive, highly sociopathic and yet incredibly mediocre people have all the power to build our future for us with virtually no input from anyone else. Because all the power in the form of all the money has been allowed to pool into the hands of those most willing to do whatever it takes to get it, we have just a few ruthless yet surprisingly dumb individuals calling the shots on the future of all living beings. The competitive mindset that gave rise to Jeff Bezos is the exact opposite of the kind of collaborative, harmonious mindset we’ll need if we’re going to overcome the challenges we face on the horizon.

 

Degrowth: closing the global wealth divide

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Contradicting the dominant paradigm that economic growth equals development, degrowth theorists argue that serious cutbacks are crucial to protect life on our planet.

By Riccardo Mastini

Source: ROAR

Today, some 4.3 billion people — more than 60 percent of the world’s population — live in debilitating poverty, struggling to survive on less than the equivalent of $5 per day (which is the mean average of all the national poverty lines in the Global South). Half do not have access to enough food. And these numbers have been growing steadily over the past few decades.

With these data, Jason Hickel, an anthropology professor and global development expert, starts his controversial book, The Divide: A Brief Guide to Global Inequality and Its Solutions, in which he meticulously and convincingly debunks the narrative told by the UN and the likes of Bill Gates and Steven Pinker. In fact, while the good-news story leads us to believe that poverty has been decreasing around the world, in reality the only places this holds true are in China and East Asia. And these are some of the only places in the world where free-market capitalism was not forcibly imposed by the World Bank and the IMF, allowing these governments to pursue state-led development policies and gradually liberalize their economies on their own terms.

Development agencies, NGOs and the world’s most powerful governments explain that the plight of poor countries is a technical problem — one that can be solved by adopting the right institutions and the right economic policies, by working hard and accepting a bit of help. As Hickel writes: “It is a familiar story, and a comforting one. It is one that we have all, at one time or another, believed and supported. It maintains an industry worth billions of dollars and an army of NGOs, charities and foundations seeking to end poverty through aid and charity.” But it’s against this narrative that Hickel takes aim.

ECONOMIC UNEQUAL EXCHANGE OVER THE CENTURIES

The main argument presented in the book is that the discourse of aid distracts us from seeing the broader picture. It hides the patterns of extraction that are actively causing the impoverishment of the Global South today and actively impeding meaningful development. “The charity paradigm obscures the real issues at stake: it makes it seem as though the West is ‘developing’ the Global South, when in reality the opposite is true. Rich countries aren’t developing poor countries; poor countries are effectively developing rich countries — and they have been since the late 15th century,” argues Hickel.

In the book it is laid bare for all to see that underdevelopment in the Global South is not a natural condition, but a consequence of the way Western powers have organized the world economic system.

It’s not that the $128 billion in aid disbursements that the West gives to the Global South every year doesn’t exist — it does. But if we broaden our view and look at it in context, we see that it is vastly outstripped by the financial resources that flow in the opposite direction.

If all of the financial resources that get transferred between rich and poor countries each year are tallied up, we find that in 2012, the last year of recorded data, developing countries received a little over $2 trillion, including all aid, investment and income from abroad. But more than twice that amount, some $5 trillion, flowed out of them in the same year. In other words, developing countries “sent” $3 trillion more to the rest of the world than they received.

What do these large outflows from the Global South consist of? “Well, some of it is payments on debt. Today, poor countries pay over $200 billion each year in interest alone to foreign creditors, much of it on old loans that have already been paid off many times over, and some of it on loans accumulated by greedy dictators,” states Hickel. Another major contributor is the income that foreigners make on their investments in developing countries and then repatriate. Think of all the profits that Shell extracts from Nigeria’s oil reserves, for example, or that Anglo American pulls out of South Africa’s gold mines.

But by far the biggest chunk of outflows has to do with capital flight. A big proportion of this takes place through “leakages” in the balance of payments between countries. Another takes place through an illegal practice known as “trade misinvoicing.” Basically, corporations report false prices on their trade invoices in order to spirit money out of developing countries directly into tax havens and secrecy jurisdictions. A similarly large amount flows out annually through “abusive transfer pricing”, a mechanism that multinational companies use to steal money from developing countries by shifting profits illegally between their own subsidiaries in different countries. But perhaps the most significant loss has to do with exploitation through trade.

Hickel explains that “from the onset of colonialism through to globalization, the main objective of the North has been to force down the cost of labor and goods bought from the South. In the past, colonial powers were able to dictate terms directly to their colonies. Today, while trade is technically “free,” rich countries are able to get their way because they have much greater bargaining power.” On top of this, trade agreements often prevent poor countries from protecting their workers in ways that rich countries do. And because multinational corporations now have the ability to scour the planet in search of the cheapest labor and goods, poor countries are forced to compete to drive costs down. As a result of all this, there is a yawning gap between the “real value” of the labor and goods that poor countries sell and the prices they are actually paid for them. This is what economists call “unequal exchange.”

Since the 1980s, countries of the West have been using their power as creditors to dictate economic and trade policies to indebted countries in the South, effectively governing them by remote control, without the need for bloody interventions. “Leveraging debt,” argues Hickel, “they imposed “structural adjustment programs” that reversed all the economic reforms that Global South countries had painstakingly enacted in the previous two decades. In the process, the West went so far as to ban the very protectionist and Keynesian policies that it had used for its own development, effectively kicking away the ladder to success.”

DEGROWTH FOR SUSTAINABLE AND FAIR LIVELIHOODS

Hickel then ponders over how — if these unfair trade and business practices were amended — poor countries could actually go about developing their economies following the same path as the one embraced by the Global North over the past two centuries. He references a study by the economist David Woodward in which the latter shows that given our existing economic model, poverty eradication can’t happen. Not that it probably won’t happen, but that it physically can’t. It is a structural impossibility.

He explains that:

Right now, the main strategy for eliminating poverty is to increase global GDP growth. The idea is that the yields of growth will gradually trickle down to improve the lives of the world’s poorest people. But all the data we have shows quite clearly that GDP growth doesn’t really benefit the poor. While global GDP per capita has grown by 65 percent since 1990, the number of people living on less than $5 a day has increased by more than 370 million. Why does growth not help reduce poverty? Because the yields of growth are very unevenly distributed. The poorest 60 percent of humanity receive only 5 percent of all new income generated by global growth. The other 95 percent of the new income goes to the richest 40 percent of people. And that’s under best-case-scenario conditions.

Given this distribution ratio, Woodward calculates that it will take more than 100 years to eradicate absolute poverty at $1.25 a day. At the more accurate level of $5 a day, eradicating poverty will take 207 years. To eradicate poverty at $5 a day, global GDP would have to increase to 175 times its present size. In other words, we need to extract, produce and consume 175 times more commodities than we presently do. It is worth pausing for a second to think about what this means. Even if such outlandish growth were possible, the consequences would be disastrous. We would quickly chew through our planet’s ecosystems, destroying the forests, the soils and, most importantly, the climate.

According to data compiled by researchers at the Global Footprint Network in Oakland, our planet only has enough ecological capacity for each of us to consume 1.8 “global hectares” annually — a standardized unit that accounts for resource use, waste, pollution and emissions. Anything over this means a degree of resource consumption that the Earth cannot replenish, or waste that it cannot absorb; in other words, it locks us into a pathway of progressive degradation. The figure of 1.8 global hectares is roughly what the average person in Ghana or Guatemala consumes.

By contrast, Europeans consume 4.7 global hectares per person, while in the US and Canada the average person consumes 8 — many times their fair share. To get a sense of how extreme this overconsumption is: if we were all to live like the average citizen of the average high-income country, we would require the ecological capacity equivalent to 3.4 Earths. Hickel elaborates:

Scientists tell us that even at existing levels of aggregate global consumption we are already overshooting our planet’s ecological capacity by about 60 percent each year. And all of this is just at our existing levels of aggregate economic activity — with the existing levels of consumption in rich and poor countries. If poor countries increase their consumption, which they will have to do to some extent in order to eradicate poverty, they will only tip us further towards disaster. Unless, that is, rich countries begin to consume less.

If we want to have a chance of keeping within the 2°C threshold — which the Paris Agreement on climate change sets as an absolute cap — we can emit no more than another 805 gigatons of CO2 at the global level. Now, let’s accept that poor countries will need to use a portion of this carbon budget in order to grow their incomes enough to eradicate poverty; after all, we know that for poor countries human development requires an increase in emissions, at least up to a relatively lowish point. This principle is already widely accepted in international agreements, which recognize that all countries have a “common but differentiated responsibility” to reduce emissions. Because poor countries did not contribute much to historical emissions, they have a right to use more of the carbon budget than rich countries do — at least enough to fulfill basic development goals (as I also argue in this article). This means that rich countries have to figure out how to make do with the remaining portion of the budget.

Professor Kevin Anderson, one of Britain’s leading climate scientists, has been devising potential scenarios for how to make this work. If we want to have a 50 percent chance of staying under 2°C, there’s basically only one feasible way to do it — assuming, of course, that negative emissions technologies is not a real option. In this scenario, poor countries can continue to grow their economies at the present rate until 2025, using up a disproportionate share of the global carbon budget. That’s not a very long time, so this strategy will only work to eradicate poverty if the gains from growth are distributed with a heavy bias towards the poor.

As Hickel writes: “The only way for rich countries to keep within what’s left of the carbon budget is to cut emissions aggressively, by about 10 percent per year. Efficiency improvements and clean energy technologies will contribute to reducing emissions by at most 4 percent per year, which gets them part of the way there. But to bridge the rest of the gap, rich countries are going to have to downscale production and consumption by around 6 percent each year. And poor countries are going to have to follow suit after 2025, downscaling economic activity by about 3 percent per year.” This strategy of downscaling the production and consumption of a country is called “degrowth.”

Hickel describes this visionary idea as follows: “All it means is easing the intensity of our economy, cutting the excesses of the very richest, sharing what we have instead of plundering the Earth for more, and liberating ourselves from the frenetic consumerism that we all know does nothing to improve our wellbeing or happiness.” And since the book first came out in 2017, Hickel has been developing an increasingly clearer position on how we can go about making such changes happen.

His thinking on degrowth was recently encapsulated in a captivating blog exchange he had with Branko Milanović, another global development expert. But Milanović still maintains that economic growth should be at the core of poverty relief. Paraphrasing a passage from Kate Raworth’s Doughnut Economics, we could summarize Milanović’s position as “economic growth is still necessary, and so it must be possible,” while Hickel argues that “economic growth is no longer possible, and so it cannot be necessary.” I side with the latter, simply because the laws of physics trump the laws of economics.

In light of this, perhaps we should regard countries like Costa Rica not as underdeveloped, but rather as appropriately developed. We should look at societies where people live long and happy lives at low levels of income and consumption not as backwaters that need to be developed according to Western models, but as exemplars of efficient living — and begin to call on rich countries to cut their excess consumption.

Facebook’s New Propaganda Partners

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By Alan Mcleod

Source: FAIR

Media giant Facebook recently announced (Reuters, 9/19/18) it would combat “fake news” by partnering with two propaganda organizations founded and funded by the US government: the National Democratic Institute (NDI) and the International Republican Institute (IRI). The social media platform was already working closely with the NATO-sponsored Atlantic Council think tank (FAIR.org, 5/21/18).

In a previous FAIR article (8/22/18), I noted that the “fake news” issue was being used as a pretext to attack the left and progressive news sites. Changes to Facebook’s algorithm have reduced traffic significantly for progressive outlets like Common Dreams (5/3/18), while the pages of Venezuelan government–backed TeleSur English and the independent Venezuelanalysis were shut down without warning, and only reinstated after a public outcry.

The Washington, DC–based NDI and IRI are staffed with senior Democratic and Republican politicians; the NDI is chaired by former Secretary of State Madeleine Albright, while the late Sen. John McCain was the longtime IRI chair. Both groups were created in 1983 as arms of the National Endowment for Democracy (NED), a Cold War enterprise backed by then–CIA director William Casey (Jacobin, 3/7/18). That these two US government creations, along with a NATO offshoot like the Atlantic Council, are used by Facebook to distinguish real from fake news is effectively state censorship.

Facebook’s collaboration with the NED organizations is particularly troubling, as both have aggressively pursued regime change against leftist governments overseas. The NDI undermined the Sandinista government of Nicaragua in the 1980s, and continues to do so to this day, while the IRI claimed a key role in the 2002 coup against leftist President Hugo Chávez of Venezuela, announcing that it had

served as a bridge between the nation’s political parties and all civil society groups to help Venezuelans forge a new democratic future…. We stand ready to continue our partnership with the courageous Venezuelan people.

The Reuters report (9/19/18) mentioned that Facebook was anxious to better curate what Brazilians saw on their feeds in the run-up to their presidential elections, which pits far-right Jair Bolsonaro against leftist Fernando Haddad. The US government has a long history of undermining democracy in Brazil, from supporting a coup in 1964 against the progressive Goulart administration to continually spying on leftist President Dilma Rousseff (BBC, 7/4/15) in the run-up to the parliamentary coup against her in 2016 (CounterSpin, 6/2/17).

Soon after it partnered with the Atlantic Council, Facebook moved to delete accounts and pages connected with Iranian broadcasting channels (CNBC, 8/23/18), while The Intercept (12/30/17) reported that in 2017 the social media platform met with Israeli government officials to discuss which Palestinian voices it should censor. Ninety-five percent of Israeli government requests for deletion were granted. Thus the US government and its allies are effectively using the platform to silence dissenting opinion, both at home and on the world stage, controlling what Facebook‘s 2 billion users see and do not see.

Progressives should be deeply skeptical that these moves have anything to do with their stated objective of promoting democracy. Bloomberg Businessweek (9/29/17) reported that the far-right Alternative fur Deutschland (AfD) party went to Facebook headquarters for discussions with US companies about how it could use the platform for recruitment and micro-targeting in the 2017 elections. AfD tripled its previous vote share, becoming the third-largest party in Germany, the far right’s best showing since World War II.

Public trust in government is at 18 percent—an all-time low (Pew, 12/14/17). There is similar mistrust of Facebook, with only 20 percent of Americans agreeing social media sites do a good job separating fact from fiction. And yet, worldwide, Facebook is a crucial news source. Fifty-two percent of Brazilians, 61 percent of Mexicans, and 51 percent of Italians and Turks use the platform for news; 39 percent of the US gets their news from the site.

This means that, despite the fact that even its own public mistrusts it, the US government has effectively become the arbiter of what the world sees and hears, with the ability to marginalize or simply delete news from organizations or countries that do not share its opinions. This power could be used at sensitive times, like elections. This is not an idle threat. The US created an entire fake social network for Cubans that aimed to stir unrest and overthrow the Cuban government, according to the Guardian (4/3/14).

That a single corporation has such a monopoly over the flow of worldwide news is already problematic, but the increasing meshing of corporate and US government control over the means of communication is particularly worrying. All those who believe in free and open exchange of information should oppose Facebook becoming a tool of US foreign policy.

For Economic Truth Turn To Michael Hudson

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By Paul Craig Roberts

Source: PaulCraigRoberts.org

Readers ask me how they can learn economics, what books to read, what university economics departments to trust. I receive so many requests that it is impossible to reply individually. Here is my answer.

There is only one way to learn economics, and that is to read Michael Hudson’s books. It is not an easy task. You will need a glossary of terms. In some of Hudson’s books, if memory serves, he provides a glossary, and his recent book “J Is for Junk Economics” defines the classical economic terms that he uses. You will also need patience, because Hudson sometimes forgets in his explanations that the rest of us don’t know what he knows.

The economics taught today is known as neoliberal. This economics differs fundamentally from classical economics that Hudson represents. For example, classical economics stresses taxing economic rent instead of labor and real investment, while neo-liberal economics does the opposite.

An economic rent is unearned income that accrues to an owner from an increase in value that he did nothing to produce. For example, a new road is built at public expense that opens land to development and raises its value, or a transportation system is constructed in a city that raises the value of nearby properties. These increases in values are economic rents. Classical economists would tax away the increase in values in order to pay for the road or transportation system.

Neoliberal economists redefined all income as earned. This enables the financial system to capitalize economic rents into mortgages that pay interest. The higher property values created by the road or transportation system boost the mortgage value of the properties. The financialization of the economy is the process of drawing income away from the purchases of goods and services into interest and fees to financial entities such as banks. Indebtedness and debt accumulate, drawing more income into their service until there is no purchasing power left to drive the economy.

For example, formerly in the US lenders would provide a home mortgage whose service required up to 25% of the family’s monthly income. That left 75% of the family’s income for other purchases. Today lenders will provide mortgages that eat up half of the monthly income in mortgage service, leaving only 50% of family income for other purchases. In other words, a financialized economy is one that diverts purchasing power away from productive enterprise into debt service.

Hudson shows that international trade and foreign debt also comprise a financialization process, only this time a country’s entire resources are capitalized into a mortgage. The West sells a country a development plan and a loan to pay for it. When the debt cannot be serviced, the country is forced to impose austerity on the population by cutbacks in education, health care, public support systems, and government employment and also to privatize public assets such as mineral rights, land, water systems and ports in order to raise the capital with which to pay off the loan. Effectively, the country passes into foreign ownership. This now happens even to European Community members such as Greece and Portugal.

Another defect of neoliberal economics is the doctrine’s denial that resources are finite and their exhaustion a heavy cost not born by those who exploit the resources. Many local and regional civilizations have collapsed from exhaustion of the surrounding resources. Entire books have been written about this, but it is not part of neoliberal economics. Supplement study of Hudson with study of ecological economists such as Herman Daly.

The neglect of external costs is a crippling failure of neoliberal economics. An external cost is a cost imposed on a party that does not share in the income from the activity that creates the cost. I recently wrote about the external costs of real estate speculators. https://www.paulcraigroberts.org/2018/04/26/capitalism-works-capitalists/ Fracking, mining, oil and gas exploration, pipelines, industries, manufacturing, waste disposal, and so on have heavy external costs associated with the activities.

Neoliberal economists treat external costs as a non-problem, because they theorize that the costs can be compensated, but they seldom are. Oil spills result in companies having to pay cleanup costs and compensation to those who suffered economically from the oil spill, but most external costs go unaddressed. If external costs had to be compensated, in many cases the costs would exceed the value of the projects. How, for example, do you compensate for a polluted river? If you think that is hard, how would the short-sighted destroyers of the Amazon rain forest go about compensating the rest of the world for the destruction of species and for the destructive climate changes that they are setting in motion? Herman Daly has pointed out that as Gross Domestic Product accounting does not take account of external costs and resource exhaustion, we have no idea if the value of output is greater than all of the costs associated with its production. The Soviet economy collapsed, because the value of outputs was less than the value of inputs.

Supply-side economics, with which I am associated, is not an alternative theory to neoliberal economics. Supply-side economics is a successful correction to neoliberal macroeconomic management. Keynesian demand management resulted in stagflation and worsening Phillips Curve trade-offs between employment and inflation. Supply-side economics cured stagflation by reversing the economic policy mix. I have told this story many times. You can find a concise explanation in my short book, “The Failure of Laissez Faire Capitalsim.” This book also offers insights into other failures of neoliberal economics and for that reason would serve as a background introduction to Hudson’s books.

I can make some suggestions, but the order in which you read Michael Hudson is up to you. “J is for Junk Economics” is a way to get information in short passages that will make you familiar with the terms of classical economic analysis. “Killing the Host” and “The Bubble and Beyond” will explain how an economy run to maximize debt is an economy that is self-destructing. “Super Imperialism” and “Trade, Development and Foreign Debt” will show you how dominant countries concentrate world economic power in their hands. “Debt and Economic Renewal in the Ancient Near East” is the story of how ancient economies dying from excessive debt renewed their lease on life via debt forgiveness.

Once you learn Hudson, you will know real economics, not the junk economics marketed by Nobel prize winners in economics, university economic departments, and Wall Street economists. Neoliberal economics is a shield for financialization, resource exhaustion, external costs, and capitalist exploitation.

Neoliberal economics is the world’s reigning economics. Russia is suffering much more from neoliberal economics than from Washington’s economic sanctions. China herself is overrun with US trained neoliberal economists whose policy advice is almost certain to put China on the same path to failure as all other neoliberal economies.

It is probably impossible to change anything for two main reasons. One is that so many greed-driven private economic activities are protected by neoliberal economics. So many exploitative institutions and laws are in place that to overturn them would require a more thorough revolution than Lenin’s. The other is that economists have their entire human capital invested in neoliberal economics. There is scant chance that they are going to start over with study of the classical economists.

Neoliberal economics is an essential part of The Matrix, the false reality in which Americans and Europeans live. Neoliberal economics permits an endless number of economic lies. For example, the US is said to be in a long economic recovery that began in June 2009, but the labor force participation rate has fallen continuously throughout the period of alleged recovery. In previous recoveries the participation rate has risen as people enter the work force to take advantage of the new jobs.

In April the unemployment rate is claimed to have fallen to 3.9 percent, but the participation rate fell also. Neoliberal economists explain away the contradiction by claiming that the falling participation rate is due to the retirement of the baby boom generation, but BLS jobs statistics indicate that those 55 and older account for a large percentage of the new jobs during the alleged recovery. This is the age class of people forced into the part time jobs available by the absence of interest income on their retirement savings. What is really happening is that the unemployment rate does not include discouraged workers, who have given up searching for jobs as there are none to be found. The true measure of the unemployment rate is the decline in the labor force participation rate, not a 3.9 percent rate concocted by not counting those millions of Americans who cannot find jobs. If the unemployment rate really was 3.9 percent, there would be labor shortages and rising wages, but wages are stagnant. These anomalies pass without comment from neoliberal economists.

The long expansion since June 2009 might simply be a statistical artifact due to the under-measurement of inflation, which inflates the GDP figure. Inflation is under-estimated, because goods and services that rise in price are taken out of the index and less costly substitutes are put in their place and because price increases are explained away as quality improvements. In other words, statistical manipulation produces the favorable picture required by The Matrix.

Since the financial collapse caused by the repeal of Glass-Steagall and by financial deregulation, the Federal Reserve has robbed tens of millions of American savers by driving real interest rates down to zero for the sole purpose of saving the “banks too big to fail” that financial deregulation created. A handful of banks has been provided with free money—in addition to the money that the Federal Reserve created in order to take the banks’ bad derivative investments off their hands—to put on deposit with the Fed from which to collect interest payments and with which to speculate and to drive up stock prices.

In other words, for a decade the economic policy of the United States has been run for the benefit of a few highly concentrated financial interests at the expense of the American people. The economic policy of the United States has been used to create economic rents for the mega-rich.

Neoliberal economists point out that during the 1950s the labor force participation rate was much lower than today and, thereby, they imply that the higher rates prior to the current “recovery” are an anomaly. Neoliberal economists have no historical knowledge as the past is of no interest to them. They do not even know the history of economic thought. Whether from ignorance or intentional deception, neoliberal economists ignore that the lower labor force participation rates of the 1950s reflect a time when married women were at home, not in the work force. In those halcyon days, one earner was all it took to sustain a family. I remember the days when the function of a married woman was to provide household services for the family.

But capitalists were not content to exploit only one member of a family. They wanted more, and by using economic policy to suppress pay while fomenting inflation, they drove married women into the work force, imposing huge external costs on the family, child-raising, relations between spouses, and on the children themselves. The divorce rate has exploded to 50 percent and single-parent households are common in America.

In effect, unleashed Capitalism has destroyed America. Privatization is now eating away Europe. Russia is on the same track as a result of its neoliberal brainwashing by American economists. China’s love of success and money could doom this rising Asian giant as well if the government opens China to foreign finance capital and privatizes public assets that end up in foreign hands.

Neo-Liberalism and the Retreat of Democracy

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By David Schultz

Source: CounterPunch

Democracy across the world is under siege. This according to the latest Freedom House report documenting that for 2017, “democracy faced its most serous crisis in decades” as seventy-one countries experienced declines in freedom or fair government, including the United States, and only thirty-five an improvement. This was the twelfth consecutive year of decline in democracy world-wide.

The question is why? Why has confidence in democracy retreated? Freedom House does not provide an answer, but there is a reason. It is democracy’s marriage to neo-liberal capitalism has fostered the conditions leading to its own undoing, similar to the way Karl Marx once described in the Communist Manifesto the “gravedigger thesis” (What the Bourgeoisie therefore produces, above all, are its own grave diggers”) where capitalism would produce the conditions that would undermine its own existence.

From the 1960s until the early 1990s democracy was in the upswing internationally. African de-colonization produced initially popularly elected governments. In South America the demise of strongmen led to a wave of democratic regimes. And the fall of the Berlin Wall in 1989 and the break up of the USSR in 1991 produced the dismantling of communist authoritarian or totalitarian governments that made it possible for Francis Fukuyama to proclaim that democracy had won and emerged as the last grand global political meta-narrative.

Yet several problems upset this rosy picture. Most prominently, it was the marriage of these new emerging democracies with free market capitalism and the victory of neo-liberalism. Internationally as post-colonial and post-communist countries emerged, international organizations such as the World Bank and the IMF forced them to adopt market reforms, often pushing them into what was then called “shock therapy.” Shock therapy involved rapid privatization of state owned enterprises and rapid dismantling of welfare states. This shock therapy was often accompanied by significant corruption as a few rich oligarchs emerged who came to own these newly privatized state enterprises.

Simultaneously, emerging democracies were rapidly pushed into what sociologist Immanuel Wallerstein would call the world-capitalist system. This system turned politically to right in the 1970s and 1980s as Margaret Thatcher in the United Kingdom and Ronald Reagan in the United States pushed neo-liberalism or market fundamentalism as an alternative to the Keynesian welfare state that had dominated the west since the 1930s. It was adopted both for ideological reasons and because of what political economist James O’Connor would call the fiscal crisis of the state tht affect economics across the world in the 1970s. This was a crisis of declining profit among private businesses and therefore declining revenue for states to fund welfare programs. Something had to give, and it was the welfare state.

Neo-liberalism is a political economic theory of the state committed to the laissez-faire market fundamentalism ideology that traces back to Adam Smith and David Ricardo. It includes a belief in comparative advantage, a minimalist state, and market freedom, and is, as articulated in the 1990s and 2000s, driven by finance capital. At the state level, neo-liberalism defines a theory of public administration. If neo-liberalism includes a commitment to market fundamentalism, then that also means that it is dedicated to a politics of limited government. This includes privatization, deregulation, and a scaling back of many traditional functions that capitalist and communist states had performed since at least World War II. But neo-liberalism as a theory transcends the state, providing also an international economic theory committed to free trade and globalism.

This emergence of neo-liberalism in the 1970s and its linkage to democracy is central to the crisis affecting the latter. As neo-liberalism retrenched the welfare state and pushed globalism it was accompanied by a dramatic increase in economic inequality in the world, as Thomas Piketty has pointed out. This occurred in the US and much of the western world. But it also impacted newly emerging democracies in Africa, Eastern Europe, and South America. Pressures for shock therapy market reforms, austerity, and open borders meant export of jobs to other countries, dismantling of social safety nets, and other economic pressures placed on governments and ruling parties.

Politically voters turned on globalism and free trade. This happened here with Trump voters in 2016, but also in Brexit in the UK. But many voters also blamed immigrants for the loss of jobs or social unrest in places ranging from France, to Italy, to Hungary. The increasing economic gap between rich and poor and, more importantly, the erosion of the economic conditions of the working class soured them on democracy. This paved the way for the emergence of strongmen as political leaders, the rise of far-right nationalist parties, and disenchantment with democracy and democratic structures to deliver the economic goods.

What we see today then in terms of the decline in support for democracy across the world is a product of its marriage to neo-liberalism. Capitalism and democracy always had an uneasy co-existence, but the neo-liberal democracy variant demonstrates the powerful contradictions in them. Either their linkage is producing outright rejection of democracy or a populist, rightist version that is merely democracy in form but not in substance.

Billionaires Want Poor Children’s Brains to Work Better

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By Gerald Coles

Source: CounterPunch

Why are many poor children not learning and succeeding in school? For billionaire Bill Gates, who funded the start-up of the failed Common Core Curriculum Standards, and has been bankrolling the failing charter schools movement, and Facebook’s Mark Zuckerberg, it’s time to look for another answer, this one at the neurological level. Poor children’s malfunctioning brains, particularly their brains’ “executive functioning”–that is, the brain’s working memory, cognitive flexibility, and inhibitory control–must be the reason why their academic performance isn’t better.

Proposing to fund research on the issue, the billionaires reason that not only can executive malfunctioning cause substantial classroom learning problems and school failure, it also can adversely affect socio-economic status, physical health, drug problems, and criminal convictions in adulthood. Consequently, if teachers of poor students know how to improve executive function, their students will do well academically and reap future “real-world benefits.” For Gates, who is always looking for “the next big thing,” this can be it in education.

Most people looking at this reasoning would likely think, “If executive functioning is poorer in poor children, why not eliminate the apparent cause of the deficiency, i.e., poverty?” Not so for the billionaires. For them, the “adverse life situations” of poor students are the can’t-be-changed-givens. Neither can instructional conditions that cost more money provide an answer. For example, considerable research on small class size teaching has demonstrated its substantially positive academic benefits, especially for poor children, from grammar school through high school and college. Gates claims to know about this instructional reform, but money-minded as he is, he insists these findings amount to nothing more than a “belief” whose worst impact has been to drive “school budget increases for more than 50 years.”

Cash–rather, the lack of it–that’s the issue: “You can’t fund reforms without money and there is no more money,” he insists. Of course, nowhere in Gates’ rebuke of excessive school spending does he mention corporate tax dodging of state income taxes, which robs schools of billions of dollars. Microsoft, for example, in which Gates continues to play a prominent role as “founder and technology advisor” on the company’s Board of Directors would provide almost $29.6 billion in taxes that could fund schools were its billions stashed offshore repatriated.

In a detailed example of Microsoft’s calculated tax scheming and dodging that would provide material for a good classroom geography lesson, Seattle Times reporter, Matt Day, outlined one of the transcontinental routes taken by a dollar spent for a Microsoft product in Seattle. Immediately after the purchase, the dollar takes a short trip to Microsoft’s company headquarters in nearby Redmond, Washington, after which it moves to a Microsoft sales subsidiary in Nevada. Following a brief rest, the dollar breathlessly zigzags from one offshore tax haven to another, finally arriving in sunny Bermuda where it joins $108 billion of Microsoft’s other dollars. Zuckerberg’s Facebook has similarly kept its earnings away from U.S. school budgets.

By blaming poor children’s school learning failure on their brains, the billionaires are continuing a long pseudoscientific charade extending back to 19th century “craniology,” which used head shape-and-size to explain the intellectual inferiority of “lesser” groups, such as southern Europeans and blacks. When craniology finally was debunked in the early 20thcentury, psychologists devised the IQ test, which sustained the mental classification business. Purportedly a more scientific instrument, it was heavily used not only to continue craniology’s identification of intellectually inferior ethnic and racial groups, but also to “explain” the educational underachievement of black and poor-white students.

After decades of use, IQ tests were substantially debunked from the 1960s onward, but new, more neurologically complex, so-called brain-based explanations emerged for differing educational outcomes. These explanations conceived of the overall brain as normal, but contended that brain glitches impeded school learning and success. Thus entered “learning disabilities,” “dyslexia,”and “attention deficit hyperactivity disorder (ADHD)” as major neuropsychological concepts to (1) explain school failure, particularly for poor children, although the labels also extended to many middle-class students; and (2) serve as “scientific” justification for scripted, narrow, pedagogy in which teachers seemingly reigned in the classroom, but in fact, were themselves controlled by the prefabricated curricula.

In the forefront of this pedagogy was the No Child Left Behind legislation (NCLB), with its lock-step instruction, created under George W. Bush and continued by Barack Obama. Supposedly “scientifically-based,” federal funds supported research on “brain-based” teaching that would be in tune with the mental make-up of poor children, thereby serving to substitute for policy that would address poverty’s influence on educational outcomes. My review of the initial evidence supposedly justifying the launching of this diversionary pedagogy revealed it had no empirical support. However, for the students this instruction targeted, a decade had to pass before national test results confirmed its failure.

The history of “scientific brain-based” pedagogy for poor children has invariably been a dodge from addressing obvious social-class influences. In its newest iteration– improve poor children’s  executive functioning–billionaires Gates and Zuckerberg will gladly put some cash into promoting a new neurological fix for poor children, thereby helping (and hoping) to divert the thinking of education policy-makers, teachers and parents. Never mind that over three years ago, a review of research on executive functioning and academic achievement failed to find “compelling evidence that a causal association between the two exists.” What’s critical for these billionaires and the class they represent is that the nation continues to concoct policy that does not deplete the wealth of the rich and helps explain away continued poverty. Just because research on improving executive functioning in poor children has not been found to be a solution for their educational underachievement, doesn’t mean it can’t be!

Now that’s slick executive functioning!

 

Gerald Coles is an educational psychologist who has written extensively on the psychology, policy and politics of education. He is the author of Miseducating for the Global Economy: How Corporate Power Damages Education and Subverts Students’ Futures (Monthly Review Press).

America’s Dystopian Future

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By Robert Hunziker

Source: CounterPunch

Imagine a privatized America where rugged individualism reigns supreme within a vast network of corporate America, Inc., similar to 19th century wild west lifestyle, no social security, no Medicare, no Medicaid, no public law enforcement as individuals stand their own ground. Read all about it in Scott Erickson’s History of the Decline and Fall of America (Azaria Press, 2018).

Erickson’s newly released semi-fictional satire of American history and subsequent decline into deepening pits of despair is a sure-fire treasure trove of Americana, at its best. It’s a page-turner par excellence, rich in accurate textured American history and jam-packed with imagery of a dystopian future that is simply unavoidable based upon America’s character and development over the past two centuries. The dye was cast long before onset of dystopian existence.

The History of the Decline and Fall of America highlights and exposes inherent limitations of democratic capitalism whilst explaining in full living color a future American dystopia that is fully expected based upon America’s beginnings from the time of Captain John Smith at historic Jamestown (1607). The history lesson therein is superb, not missing a beat of what shaped America up to the final tipping point of neoliberal dogma and beyond into a deep dark world order.

This beautifully written and conceived historical fiction is a witty tour de force of America past, present, and future, weaving together all of the historical elements into one coherent story from the widely accepted version of American “business success ” of the early period, but over time wistfully morphing into abject failure!

That process of failure, the root causes, is what intrigues, for example, “Americans were not only inventing a country but inventing what it meant to be an American.” Indeed, America came into being as a brand new experiment in capitalistic democracy. Within that quest for a new way forward, inclusive of equality and fraternity amongst equals, Erickson discovers and reveals unique American traits that belie that mission, leading to a neoliberal/privatization hellhole that goes horribly wrong.

That fascinating pathway is explained via enchanting quips, for example, de Tocqueville’s remarkably astute comment: “ I know of no country, indeed, where the move of money has taken a stronger hold on the affections of men.” This one isolated statement from the 1830s tells a tale of American character molded by artificiality of wealth creation simply for the sake of possessing it. America’s pursuit of happiness was the “pursuit of affluence” and remained its dominant trait for the “remaining 200-plus years of American history.”

Indeed, those predominant American character traits are flushed-out and analyzed in the context of eventual failure, of a dystopian world order emanating out of America’s clumsy experimentation with empire-building and constantly striving for the pot at the end of the rainbow, meaning economic growth above all else. It was a frontier spirit that fed into elusive goals of preeminence: “The frontier resulted in Americans being doers rather than thinkers….”

Real scenes of real American cocksuredness, as well as the clumsiness associated with raw ignorance, come to life, e.g., during the presidential race between Ike and Adlai Stevenson in 1954: “A revealing incident occurred while Stevenson was campaigning for president. A citizen shouted to Stevenson that he ‘had the vote of every thinking person.’Stevenson replied, ‘That’s not enough. We need a majority!”
This is excellent history, comparable to a textbook, as well as a peek into the future shaped via trends rooted throughout Americana. Erickson’s lessons in American history are genuine and accurate, which gives the book depth and a powerful sense of significance well beyond similar treatises that try to lay the challenging groundwork leading to how a nation turns sour into a dystopian society.

He weaves the path of Manifest Destiny all the way from 1840s to the planting of the American flag on the surface of the moon. Until the 1970s when American pre-eminence tipped downward, humiliated in Vietnam in what future generations came to know as The Vietnam Syndrome,” the psychological attempt to live with the unacceptable reality that it was possible for America to not win.

Not only was America no longer a winner in war, its “unparalleled level of affluence… began to decline.” The 1970s marked the high point, forever downward into a bottomless septic tank, a cloaca of messy foul shit earmarking America’s final destiny, third world status within a realm of excessive, pretense of wealth glistening behind spiked electronic gates.

The signs of decline were easy to spot by the early-mid 2000s: “… the situation had declined dramatically. According to statistics from 2015, among industrialized nations, America was notable for having the highest poverty rate, the lowest score on the UN index of ‘material well-being of children,’ the highest health care expenditures, the highest infant mortality rate, the highest prevalence of mental health problems, the highest obesity rate, the highest consumption of antidepressants per capita, the highest homicide rate, and the largest prison population per capita. By international standards, the rural counties of southern West Virginia and eastern Kentucky qualified as developing countries, as did large sections of American cities such as Detroit, Cleveland, Gary, and many others.” (Pg. 112)

Thereafter, America’s youth no longer embraced the long-standing belief that they would have more than their parents. No, they knew it would be less and less. America entered a “permanent recession” cycle.
By the late 2030s American experienced a series of extreme crises. A number of cities declared bankruptcy. Houston, America’s 4th largest city goes bankrupt. Cleveland goes bankrupt. The head of the Federal Reserve quits and becomes a banjo player in a bluegrass group. America’s banking system collapses under the weight of fishy loans and massive crazed derivatives all permitted by increasingly hands-off regulations. The brutal hand of libertarianism smears a once proud republic.

Regular citizens, entire families carry torches surrounding Wall Street in protest of loss savings, ATMs not functioning, banks closed. An economic death spiral unleashed. The Save America Act followed, consisting of pure right wing neoliberal fix-its to save corporate America, to save Wall Street, turning to America, Inc. as the only answer to all that ails.

And, as the financial markets unravel in the face of nationwide bankruptcies, the government convincingly informs the public: “We need to defy the Constitution in order to preserve it… Americans were so thoroughly confused about the relationship between government and economics that most of them thought that the terms democracy, free-enterprise, and capitalism were the same thing.” (Pg. 165)

As time progresses, America’s Labor Day is changed to Management Day, and the Catholic Church is permitted to re-name the Statue of Liberty as “Our Lady of Perpetual Economic Growth.” America the nation turns into America, Inc. It is the only way the establishment knows to drive the country out of its doldrums. As such, The Star Spangled Banner is changed to The Free Market Ramble.

Privatization of the entire country in harmony with massive tax cuts alongside elimination of Social Security, Medicare, Medicaid, public education, law enforcement, postal service, and maintenance of roads and infrastructure, thereafter, people take care of themselves from birth to the death, alone with family backing. Self-directed medical care becomes a beacon of survival of the fittest of the fittest. Those that participated as y0ungsters in Boy/Girl Scouts have a leg up in a society that increasingly places emphasis on rugged individualism. However, the many, many weaklings stumble in rows after rows of slimy gutters.

In the end, and similar to America’s 2008-09 financial collapse, which was only a warm up for much bigger things to come: “The decisive trigger, the one that pushed America beyond the point of no return, was the total collapse of the economy. It had been something of a miracle that the doomed economy had not collapsed long before. Toward the end it had been sustained by little more than momentum, since according to all economic indicators it should not have been functioning at all. The economic system based on infinite growth had reached the point where it could grow no more. American banks could not pay off previous debt by making further loans to generate more money. The pyramid scheme was over… An eerie calm descended upon all those involved in economics and finance.”