Tag Archives: Edward S. Herman

Neoliberalism: Serving the Interests of the International Business Elitists

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By Edward S. Herman

Source: Dissident Voice

Mark Weisbrot, a co-director with Dean Baker of the Center for Economic and Policy Research (CEPR), has written an enlightening book that pulls together many of the analyses that CEPR has been producing over the past several decades. The book, Failed: What the “Experts” Got Wrong about the Global Economy, is important and useful because it provides an alternative framework of analysis to the one used by establishment experts, media and policy-makers. What is more, this alternative framework and description of reality is well supported by empirical evidence and is convincing. It is marginalized in the mainstream because it runs counter to the interests of the powerful, who over the past three decades, have successfully pushed for a neoliberal world order that scales back the earlier welfare state advances and pursues trickle-down economics and the well-being of the affluent.

In fact, an important feature of Weisbrot’s analysis is his recognition of the extent to which policy failures have flowed from biased analyses that serve a small elite and punish the majority, and that policy successes have often followed the loss of power by those serving elite interests. His first chapter is entitled “Troubles in Euroland: When the Cures Worsen the Disease,” whose central theme is that the long crisis and malperformance of Europe’s economies, and especially the weaker ones of Greece, Portugal, Spain and to a lesser extent, Italy, were in large measure the result of poor policy choices. The crisis, which dates back to 2008, was not due to high sovereign debt, which was only threateningly high in Greece, but rather the refusal of the policy-making “troika,” the European Central Bank (ECB), European Community and IMF, to carry out expansionary policies that would allow the poor countries to grow out of their deficit position.

The Fed met the U.S. crisis with an easy money program which, when combined with modest fiscal expansion efforts, quickly mitigated this crisis (although the fiscal actions fell short of what was needed for a full recovery). But the ECB refused to carry out a comparable expansion policy, and there was no Europe-wide fiscal program in the EU system. So the poor countries were forced to depend for recovery on an “internal devaluation” of cutbacks in mainly social budgets, given that external devaluations for individual countries were ruled out by the use of a common currency, the euro. This didn’t do the job, so the eurozone remained in a depressed state, even up to the present.

Weisbrot shows that this policy failure was deliberate, with the troika leaders–mainly the ECB–taking advantage of the weaker countries’ vulnerability to force on them structural and policy changes that served the interests of the international business elite. These changes, including cutbacks on public outlays for education, health care, social security, and poverty alleviation, mainly harmed ordinary citizens. So did the enforced pro-cyclical monetary and fiscal policies themselves, which produced a eurozone crisis of unemployment and foregone output that extended for six years and is still ongoing. Weisbrot points out that this policy and process was a notable application of Naomi Klein’s “shock doctrine,” according to which elites take advantage of painful developments (here macro-distress) to force policy changes that could not be obtained through a democratic process like a national political vote of approval. Weisbrot shows that the troika leaders were quite conscious of the fact that they were pursuing “reforms” that the public wouldn’t support outside of shock conditions.

This process rested on the undemocratic structure of macro-policy-making in the European community. One of neoliberalism’s instruments is an “independent” central bank, where independent means not subject to democratic control. The ECB meets that standard well, more so than the Fed; and in its statute the ECB is only required to meet a price stability objective, so it is free to ignore unemployment and even deliberately increase it. Neoliberal practice is also encouraged by the 1992 Maastricht Treaty, which placed ceilings on the size of budget deficits and total public debt (3 and 60 percent respectively). These unnecessary ceilings are often breached, but provide levers to put pressure on weaker countries.

The countries victimized by the ECB’s pressure for painful internal devaluation could in theory exit from the euro and rely on expansion via currency devaluation and newly feasible monetary and fiscal expansion. But the risks in the cutoff of aid and money market access and the turmoil in any transition are severe, and although Syriza was voted into power in Greece on an anti-austerity program and pledge, it did not see fit to exit. In this connection Weisbrot discusses the case of Argentina, which, in the midst of a calamitous recession in 2001-2002 did default on its large external debt, ended its peg of the peso to the dollar, froze bank deposit accounts, and installed controls over capital movements. This caused immediate chaos and a worsened crisis, but as Weisbrot stresses, after only a single quarter of further GDP decline (5 percent), freed of its externally imposed constraints, Argentina began its recovery, taking three and a half years to regain its pre-recession level of output, but with real growth of some 100 percent over the next 11 years. Greece, which had a peak GDP loss of 25 percent, and which is still mired in a badly depressed economy, could hardly have fared worse than Argentina if it had exited years ago. Whether that option should still be taken is debatable, and Weisbrot discusses the pros and cons without coming to a definite conclusion, but that an exit might well have a positive result is suggested by the Argentinian experience.

A major theme of Failed is the negative impact of neoliberalism on the growth of low and middle-income countries and the welfare of their people. A major chapter on “The Latin American Spring” features evidence that the triumph of neoliberalism in the years from 1980 to the end of the 1990s was a dismal economic and welfare failure, Per capita GDP growth fell from 3.3. percent per year, 1960-1980 to 0.4 percent 1980-2000, rising again to 1.8 percent in the years 2000-2014. The earlier period (1960-1980) was one of widespread government intervention in the interest of rapid economic development; the middle years were dominated by the triumph of neoliberalism, with widespread imposition of structural adjustment programs under IMF and World Bank auspices, lowering trade and investment barriers, and ruthlessly cutting back development and welfare state programs. The years 2000-2014 saw a resurgence of economic growth, but not up to the pre-Reagan years.

Weisbrot shows that the new spurt in economic growth was closely associated with the victory of leftist governments in quite a few Latin American states, starting in 1998, He also presents a great deal of evidence showing that the growth spurt resulted in major improvements in a range of human welfare indicators, like reduced infant mortality, poverty reduction, more widepread schooling, enlarged pensions, and greater income equality. Thus, for example, the Brazilian poverty rate, which had remained virtually unchanged in the eight neoliberal years before the victory of the Workers Party, saw a 55 percent drop in that rate during the years 2002-2013. Similar changes in this and other welfare measures took place in Ecuador, Bolivia and other Latin states that escaped the neoliberal trap. Although these changes brought improved lives and prospects to millions, Weisbrot points out that the U.S. mainstream has played dumb, refusing to feature and reflect on the significance of this widespread improvement in human welfare and its strange efflorescence associated with the decline in U.S. and IMF-World Bank influence in Latin America.

Weisbrot stresses the importance of democratization and policy space in these growth and welfare improvements. The ECB narrowed that policy space in the eurozone, making it difficult for national leaders to expand or otherwise help improve social conditions. This reflected the weakening of democracy in the eurozone, with the ECB, EC and IMF able to make decisions that local democratic governments would not be able to make. Similarly, the loss of power over Latin governments by the U.S. and IMF following the left political triumphs from 1998, and their record of anti-people actions and other policy failures, made for policy space. So also did the rise of China as an economic power, providing a market for Latin products and loans without political conditions. Weisbrot notes that the common orthodox position that the democratic West would be more likely to help poorer countries develop democracies as compared with what authoritarian China would likely do is fallacious. China lends widely without intervening politically. The United States has a long record of support of undemocratic regimes that will serve as its political instruments and/or provide a “favorable climate of investment.” (This writer’s The Real Terror Network was a dossier of U.S. support of National Security States in Latin America and of its active involvement in many counter-revolutionary “regime changes.”)

It is arguable that an unrecognized benefit of the Iraq and Afghanistan wars was their distracting U.S. officials from major efforts to halt the trend toward democratic government in Latin America, although their participation in the attempts at regime change in Venezuela and their successful support of an undemocratic coup in Honduras in 2009 shows that the longstanding anti-democratic policy thrust of the U.S. leadership is not dead. (Mrs. Clinton, of course, fully supported the Honduras coup. So we may see a more energetic pursuit of the traditional U.S. policy of hostility to democracy in Latin America with her election.)

Weisbrot stresses throughout the importance of per capita growth for improving the human condition. A problem with this premise is that the human race may be growing too fast for ecological survival. Weisbrot confronts this issue, arguing that while population growth is a definite negative productivity growth may on balance be a means of coping by increasing food output and lowering the cost of wind turbines, solar panels and other improvements. However, increases in incomes tend to increase the preference for meat, larger houses, and other resource depleters, so that productivity improvements may, on balance, place even more pressure on the environment.

Weisbrot is possibly over-optimistic on this front. But his book is rich in compelling analyses and data that show how the mainstream live in an Alice-In-Wonderland economic world and the important things we may do to escape that Wonderland.

 

Edward S. Herman is an economist and media analyst with a specialty in corporate and regulatory issues as well as political economy and the media. Read other articles by Edward.

War is Our Business and Business Looks Good

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By Edward S. Herman

Source: Z Magazine

It is enlightening to see how pugnacious the U.S. establishment, led by a Peace Laureate, has been in dealing with the Ukraine crisis. The crisis arguably began when the Yanukovich government rejected an EU bailout program in favor of one offered by Russia. The mainstream media (MSM) have virtually suppressed the fact that the EU proposal was not only less generous than the one offered by Russia, but that, whereas the Russian plan did not preclude further Ukrainian deals with the EU, the EU plan would have required a cut-off of further Russian arrangements. And whereas the Russian deal had no military clauses, that of the EU required that Ukraine affiliate with NATO. Insofar as the MSM dealt with this set of offers, they not only suppressed the exclusionary and militarized character of the EU offer, they tended to view the Russian deal as an improper use of economic leverage, “bludgeoning,” but the EU proposal was “constructive and reasonable” (Ed., NYT, November 20, 2014). Double standards seem to be fully internalized within the U.S. establishment. The protests that ensued in Ukraine were surely based in part on real grievances against a corrupt government, but they were also pushed along by right-wing groups and by U.S. and allied encouragement and support that increasingly had an anti-Russian and pro-accelerated regime change flavor. They also increased in level of violence. The sniper killings of police and protesters in Maidan on February 21, 2014 brought the crisis to a new head. This violence overlapped with, and eventually terminated, a negotiated settlement of the struggle brokered by EU members that would have ended the violence, created an interim government, and required elections by December. The accelerated violence ended this transitional plan, which was replaced by a coup takeover along with the forced flight of Victor Yanukovich.

There is credible evidence that the sniper shootings of both protesters and police were carried out by a segment of the protesters in a false-flag operation that worked exceedingly well, “government” violence serving as one ground for the ouster of Yanukovich. Most telling was the intercepted phone message between Estonia’s Minister of Foreign Affairs, Urmas Paet, and EU Foreign Policy chief Catherine Upton, in which Paet regretfully reported compelling evidence that the shots killing both police and protesters came from a segment of the protesters. This account was almost entirely suppressed in the MSM. For example, the New York Times never mentioned it once through the following two months. It is also enlightening that the protesters at Maidan were never called “militants” in the MSM, although a major and effective segment was armed and violent—that term was reserved for protesters in Eastern Ukraine, who were commonly designated “pro-Russian” as well as militants (for details see the tabulation in Herman and Peterson, “The Ukraine Crisis and the Propaganda System in Overdrive,” in Stephen Lendman, ed,, Flashpoint in Ukraine). There is also every reason to believe that the coup and establishment of a right-wing and anti-Russian government were encouraged and actively supported by U.S. officials.

Victoria Nuland’s intercepted “fuck the EU” words express her hostility to a group that, while generally compliant and subservient, departed from neocon plans for a proper government in Kiev headed by somebody like “Yats.” So she would surely have been pleased when the EU-supported February compromise plan was ended by the violence and coup. The U.S. support of the coup government has been enthusiastic and unqualified. Whereas Kerry and company delayed recognition of the elected government of Maduro in Venezuela,and have strongly urged him to dialogue and negotiate with the Venezuelan protesters—in fact, threatening him if he doesn’t—Kerry and company have not done the same in Ukraine where the Kiev government forces have slowly escalated their attacks on the Eastern Ukraine, but not on “protesters,” only on “militants.”

The Kiev government’s military is now using jets and helicopters to bomb targets in the East and heavy artillery and mortars in its ground operations. Its targets have included hospitals and schools. As of June 8, civilian casualties have been in the hundreds. A dramatic massacre of 40 or more pro-Russian protesters in Odessa on May 2 by a well-organized cadre of neo-Nazi supporters, possibly agents of the Kiev government, was an early high point in this pacification campaign. No investigation of this slaughter has been mounted by the Kiev government or “international community” and it has not interfered in the slightest with Western support of Kiev. In parallel, the MSM have treated it in very low key. (The New York Times buried this incident in a back page continuation of a story on “Deadly Clashes Erupt in Ukraine,” May 5, which succeeds in covering up the affiliation of the killers). Kerry has been silent, though we may imagine his certain frenzy if Maduro’s agents had carried out a similar action in Venezuela. Recall the “Racak massacre,” where the deaths of 40 alleged victims of the Serb military created an international frenzy. But in that case the United States needed a casus belli, whereas in the Odessa case there is a pacification war already in process by a U.S. client, so MSM silence is in order.

It is an interesting feature of media coverage of the Ukraine crisis that there is a regular focus on alleged or possible Russian aid, control of and participation in the actions of the protesters/militants/insurgents in Eastern Ukraine. This was evident in the Times’s gullible acceptance of a claim that photos of insurgents included a Russian pictured in Russia, later acknowledged to be problematic (Andrew Higgins, Michael Gordon, and Andrew Kramer, “Photos Link Masked Men in East Ukraine to Russia,” NYT, April 20, 2014) and another lead article, which was almost entirely speculation (Sabrina Tavernise, “In Ukraine Kremlin Leaves No Fingerprints,” NYT, June 1, 2014). But this interest in foreign intrusion in Ukraine affairs, with the implication of wrongdoing, does not extend to evidence of U.S. and other NATO power aid and control. Visits by Biden, Cain, Nuland and intelligence and Pentagon figures are sometimes mentioned, but the scope and character of aid and advice, of U.S. “fingerprints,” is not discussed and seems to be of little interest. It is in fact normalized so that, as with the aid plans in which Russian, proposals are “bludgeons” but U.S.- EU plans are “constructive and reasonable” the double standard is in good working order here as well.

Isn’t there a danger that Russia will enter this war on behalf of the pro-Russian majority of the eastern part of Ukraine now under assault? Possibly, but not likely, as Putin is well aware that the Obama-neocon-military-industrial complex crowd would welcome this and would use it, at minimum, as a means of further dividing Russia from the EU powers, further militarizing U.S. clients and allies, and firming up the MIC’s command of the U.S. national budget. Certainly there are important forces in this country that would love to see a war with Russia and it is notable how common are political comments, criticisms, and regrets at Obama’s weak response to Russian “aggression” (e.g., David Sanger, “Obama Policy Is put to Test: Global Crises Challenge a Strategy of Caution,” NYT, March 17, 2014). But so far Putin refuses to bite.

In response to this pressure from the powerful war-loving and war-making U.S. constituencies, Obama has been furiously denouncing Russia and has hastened to exclude it from the G-8, impose sanctions and penalties on the villain state, increase U.S. troops and press military aid on the near-Russia states allegedly terrified at the Russian threat, carry out training exercises, and maneuvers with these allies and clients, assure them of the sacredness of our commitment to their security, and press these states and major allies to increase their military budgets. One thing he hasn’t done is to restrain his Kiev client in dealing with the insurgents in eastern Ukraine. Another is engaging Putin in an attempt at a settlement. Putin has stressed the importance of a constitutional formation of a Ukraine federation in which a still intact Ukraine would allow significant autonomy to the Eastern provinces. There was a Geneva meeting and joint statement on April 17 in which all sides pledged a de-escalation effort, disarming irregulars, and constitutional reform. But it was weak, without enforcement mechanisms, and had no effect. The most important requirement for de-escalation would be the termination of what is clearly a Kiev pacification program for Eastern Ukraine. That is not happening, because Obama doesn’t want it to happen. In fact, he takes the position that it is up to Russia to curb the separatists in East Ukraine and he has gotten his G-7 puppies to agree to give Russia one month to do this or face more severe penalties.

This situation calls to mind Gareth Porter’s analysis of the “perils of dominance,” where he argued that the Vietnam war occurred and became a very large one because U.S. officials thought that, with their overwhelming military superiority North Vietnam and its allies in the south would surrender and accept U.S. terms—most importantly a U.S.-controlled South Vietnam—as military escalation took place and a growing toll was imposed on the Vietnamese (see his Perils of Dominance: Imbalance of Power and the Road to War in Vietnam). It didn’t work. In the Ukraine context, the United States once again has a militarily dominant position. On its own and through its NATO arm it has encircled Russia with satellites established in violation of the 1990 promise of James Baker and Hans-Dietrch Genscher to Mikhail Gorbachev to not move eastward “one inch,” and it has placed anti-missile weapons right on Russia’s borders. And now it has engineered a coup in Ukraine that empowered a government openly hostile to Russia, threatening both the well-being of Russian-speaking Ukrainians and the control of the major Russian naval base in Crimea. Putin’s action in reincorporating Crimea into Russia was an inevitable defensive reaction to a serious threat to Russian national security. But it may have surprised the Obama team, just as the Vietnamese refusal to accept surrender terms may have surprised the Johnson administration. Continuing to push the Vietnamese by escalation didn’t work, although it did kill and injure millions and ended the Vietnamese alternative way. Continuing and escalating actions against Russia in 2014 may involve a higher risk for the real aggressor and for the world, but there are real spinoff benefits to Lockheed and other members of the MIC.