Financialization is a process whereby financial markets, financial institutions, and financial
elites gain greater influence over economic policy and economic outcomes.
Financialization transforms the functioning of economic systems at both the macro and micro levels.
Its principal impacts are to (1) elevate the significance of the financial sector relative to the real
sector, (2) transfer income from the real sector to the financial sector, and (3) increase income inequality
and contribute to wage stagnation. Additionally, there are reasons to believe that financialization
may put the economy at risk of debt deflation and prolonged recession.
Financialization operates through three different conduits: changes in the structure and operation of
financial markets, changes in the behavior of nonfinancial corporations, and changes in economic policy.
Countering financialization calls for a multifaceted agenda that (1) restores policy control over
financial markets, (2) challenges the neoliberal economic policy paradigm encouraged by financialization,
(3) makes corporations responsive to interests of stakeholders other than just financial markets, and
(4) reforms the political process so as
to diminish the influence of corporations and wealthy elites.
“The sense of responsibility in the financial community
for the community as a whole is not small. It is nearly nil.”
-- John Kenneth Galbraith, The Great Crash of 1929
The term Casino Capitalism generally is symonim of
neoliberalism (also called
economic liberalism), but it also point out to a specific phase of
neoliberal transformation of capitalism.
Politically it was slow motion corporate coup d'état, which started in 70th and
is now accomplished in the USA and other Western countries which buries social-democratic (New Deal
style) model of capitalism.
It hypertrophied police functions of state (in the form of
state) while completely avoiding economic sphere in ways other then enforcement of laws
(with a notable exclusion from this top 1% -- "Masters of the Universe"). Like bolshevism it uses the state for the enforcement of
the social system. On top level this is crony capitalism for major corporation. On low level of medium and small business
owners it presupposed
a deregulated economy (in a sense of the "law of jungle" as a business environment).
Casino capitalism presupposes strong militarized state, suppressing all the attempts to challenge the new "nomenklatura" (much
like was the case in the USSR). It is quite different from traditional liberalism:
“Liberalism” can refer to political, economic, or even religious ideas. In the U.S. political
liberalism has been a strategy to prevent social conflict. It is presented to poor and working
people as progressive compared to conservative or Right wing. Economic liberalism is different.
Conservative politicians who say they hate “liberals” — meaning the political type — have no real
problem with economic liberalism, including neoliberalism.
In other words this is neoliberal model of corporatism
during the period of "cheap hydrocarbons". The period that is probably near the end and which
by some estimate can last only another 50 years or so (less than 100 years). The major crisis of casino capitalism
in 2008 was connected both with financial excesses (caused by moving to semi-criminal ways of
extracting return on capital, typical for casino capitalism), but also with the rise of the
price of oil and decrease of Energy returned on energy invested (EROEI). In this
sense the last low oil price period which started in late 2014 and ended in spring 2018 can be
viewed as the "last hurrah" of the casino
In understanding neoliberal transformation of the society since early 80th it is important to
understanding of the key role of financialization in this process. When major services are
privatized (education, healthcare, pension plans) financial institution insert themselves as
intermediaries in this arrangement and make it the main source of their profits. Also contrary
to neoliberal propaganda this process is aided and abetted by state. State is used by neoliberalism
as a tool of enforcing market relations even where they are not useless or even harmful (education).
All this talk about irresolvable controversy between market and state is for gullible fools. In
Trotskyism for rich, neoliberalism uses power of the state to enforce market relations by
force on reluctant population even in areas where this can do no good. That make really it close to
Soviet social experiment, which lasted from 1917 to 1991 or almost 75 years. As Marx noted "History repeats itself, first as tragedy, second as farce."
A very good discussion of the role of Financialisation in entrenchment of neoliberalism in modern
societies can be found in the book by
Costas Lapavitsas. Some highlights are provided in his Guardian article
Finance's hold on our everyday life must be broken
This extraordinary public largesse towards private banks was matched by
austerity and wage reductions for workers and households. As for restructuring
finance, nothing fundamental has taken place. The behemoths that continue to
dominate the global financial system operate in the knowledge that they enjoy an
unspoken public guarantee. The unpalatable reality is that financialisation will
persist, despite its costs for society.
Financialisation represents a historic and deep-seated transformation of mature
capitalism. Big businesses have become "financialised" as they have ample profits
to finance investment, rely less on banks for loans and play financial games with
available funds. Big banks, in turn, have become more distant from big businesses,
turning to profits from trading in open financial markets and from lending to
households. Households have become "financialised" too, as public provision in
housing, education, health, pensions and other vital areas has been partly
replaced by private provision, access to which is mediated by the financial
system. Not surprisingly, households have accumulated a tremendous volume of
financial assets and liabilities over the past four decades.
The penetration of finance into the everyday life of households has not only
created a range of dependencies on financial services, but also changed the
outlook, mentality and even morality of daily life. Financial calculation
evaluates everything in pennies and pounds, transforming the most basic goods –
above all, housing – into "investments". Its logic has affected even the young,
who have traditionally been idealistic and scornful of pecuniary calculation.
Fertile ground has been created for neoliberal ideology to preach the putative
merits of the market.
Financialisation has also created new forms of profit associated with financial
markets and transactions. Financial profit can be made out of any income, or any
sum of money that comes into contact with the financial sphere. Households, for
example, generate profits for finance as debtors (mostly by paying interest on
mortgages) but also as creditors (mostly by paying fees and charges on pension
funds and insurance). Finance is not particular about how and where it makes its
profits, and certainly does not limit itself to the sphere of production. It
ranges far and wide, transforming every aspect of social life into a profit-making
The traditional image of the person earning financial profits is the "rentier",
the individual who invests funds in secure financial assets. In the contemporary
financialised universe, however, those who earn vast returns are very different.
They are often located within a financial institution, presumably work to provide
financial services, and receive vast sums in the form of wages, or more often
bonuses. Modern financial elites are prominent at the top of the income
distribution, set trends in conspicuous consumption, shape the expensive end of
the housing market, and transform the core of urban centres according to their own
Financialised capitalism is, thus, a deeply unequal system, prone to bubbles
and crises – none greater than that of 2007-09. What can be done about it? The
most important point in this respect is that financialisation does not represent
an advance for humanity, and very little of it ought to be preserved. Financial
markets are, for instance, able to mobilise advanced technology employing some of
the best-trained physicists in the world to rebalance prices across the globe in
milliseconds. This "progress" allows financiers to earn vast profits; but where is
the commensurate benefit to society from committing such expensive resources to
The term "casino capitalism" was coined by Susan
Strange who used it as a title of her book
Casino Capitalism published in 1986. She was one of the first who realized that
"The roots of the world's economic disorder are monetary and financial";
"The disorder has not come about by accident, but hasin fact been nurtured and
encouraged by a series of government decisions." (p. 60). In other words its was a counter-revolution
of the part of ruling elite (financial oligarchy) which lost its influence in 30th (dismantling New Deal from above
in the USA (Reaganomics) or
Thatcherism in the GB).
According to Susan Strange transformation of industrial capitalism into
neoliberal capitalism ("casino capitalism")
involved five trends. All of them increased the systemic instability of the system and
the level of political corruption:
Innovations in the way in which financial markets work due to introduction of computers;
The sheer size of markets; (with the introduction of 401K the size of stock market
Commercial banks turned into investment banks;
The emergence of Asian nations as large players;
The shift to self-regulation by banks (pp.9-10).
Now it is pretty much established fact that the conversion from "industrial capitalism" to neoliberal,
"casino capitalism" is the natural logic of development of capitalism. In early and incomplete matter
this trend was noticed at early 1990th by many thinkers. This is just the second iteration of the
same trend which was interrupted by the Great Depression and subsequent WWII. So, in a way, replacement of industrial capitalism
with financial capitalism in a natural tendency within the capitalism itself and corruption was contributing, but not decisive factor.
The same is true about globalization, especially about
globalization of financial flows, typical for casino capitalism, which is a form of colonialism (neocolonialism).
this conversion did not happen due to lack of oversight or as a folly. It was a couscous choice made by the
US and GB elite, both of which faced deterioration of rates of return on capital. Also unlike "industrial capitalism"
which was more-or-less stable system, able to outcompete the neo-theocratic system of the USSR, the
financial capitalism is unstable in the same sense as radioactive elements are unstable. And
this instability tend to increase with time. So there is probably natural half-life period for
neoliberalism as a social system. It might be already reached in 2008. In we assume that
global victory of neoliberalism happened in 1990. It is just 18 years. If we think that it
happened in late 60th, then it is closer to 50 years.
The global crisis
of neoliberal capitalism which started from bursting the USA subprime housing bubble in 2008 undermined ideological legitimacy of its central claim that "free
markets" lead to faster and more uniform economic development of all countries. While the peak of its
"ideological" power might be over (much like the peak of attractiveness of "command socialism" was
over after WWII), it will exist in a zombie state for a long time due to economic and military power of the USA and
G7. And as we know from Hollywood films, zombies can be especially bloodthirsty. It probably will remain
the dominant force for at least the next two decades pursuing the same policy of "forceful" opening of energy
rich and resource countries for western multinationals intact using color revolutions and
local wars. But as Napoleon quipped "You can do anything with
bayonets, you just can't sit on them".
Conversion to neoliberal capitalism was a reaction on stagnation of industrial production
and as such it was nurtured and encouraged by a series of government decisions for the last 50 years.
Stagnation of industrial production made expansion of financial sector of paramount importance for the
ruling elite and by extension for Congress which represents this elite. House vote 377:4 for Commodity
Futures Modernization Act of 2000 is pretty telling in this respect.
There were also at least two important parallel developments.
"Appetite comes with eating" and banks which initially rise as an alternative to usury
gradually became indistinguishable from them, the new usury (vampire squid as Matt
Taibbi called GS).
Financial institutions brass became dominant political force partially displacing (or more
correctly complementing) media-military-industrial
complex and oil-energy complex... Sen. Dick Durbin, on a local Chicago radio station
blurted out an obvious truth about Congress which, despite being quite obvious, is rarely
spoken "press scorps" :
“And the banks — hard to believe in a time when we’re facing a banking crisis that many
of the banks created — are still the most powerful lobby on Capitol Hill.And they frankly
own the place.”
In other words the US political system is a brand of corporatism with financial capital
standing on the top stop on interval to Washington, DC corporate hierarchy and holding the most
of political power.
There is more at work here than simply a ramped up version of social Darwinism with its savagely
cruel ethic of “reward the rich, penalize the poor, [and] let everyone fend for themselves,” [ii]
there is also a full scale attack on the social contract, the welfare state, economic equality, and
any viable vestige of moral and social responsibility. The Romney-Ryan appropriation of Ayn Rand’s
ode to selfishness and self-interest is of particular importance because it offers a glimpse of a
ruthless form of extreme capitalism in which the poor are considered “moochers,” viewed with contempt,
and singled out to be punished. But this theocratic economic fundamentalist ideology does more. It
destroys any viable notion of the and civic virtue in which the social contract and common good provide
the basis for creating meaningful social bonds and instilling in citizens a sense of social and civic
responsibility. The idea of public service is viewed with disdain just as the work of individuals,
social groups, and institutions that benefit the citizenry at large are held in contempt.
As George Lakoff and Glenn W. Smith point out, casino capitalism creates a culture of cruelty: “its horrific
effects on individuals-death, illness, suffering, greater poverty, and loss of opportunity, productive
lives, and money.”[iii]
But it does more by crushing any viable notion of the common good and public
life by destroying “the bonds that hold us together.”[iv] Under casino capitalism, the spaces, institutions,
and values that constitute the public are now surrendered to powerful financial forces and viewed
simply as another market to be commodified, privatized and surrendered to the demands of capital.
With religious and market-driven zealots in charge, politics becomes an extension of war; greed and
self-interest trump any concern for the well-being of others; reason is trumped by emotions rooted
in absolutist certainty and militaristic aggression; and skepticism and dissent are viewed as the
work of Satan.
If the Republican candidacy race of 2012 is any indication, then political discourse in the United
States has not only moved to the right—it has been introducing totalitarian values and ideals into
the mainstream of public life. Religious fanaticism, consumer culture, and the warfare state work
in tandem with neoliberal economic forces to encourage privatization, corporate tax breaks, growing
income and wealth inequality, and the further merging of the financial and military spheres in ways
that diminish the authority and power of democratic governance.[v] Neoliberal interests in freeing
markets from social constraints, fueling competitiveness, destroying education systems, producing
atomized subjects, and loosening individuals from any sense of social responsibility prepare the
populace for a slow embrace of social Darwinism, state terrorism, and the mentality of war — not least
of all by destroying communal bonds, dehumanizing the other, and pitting individuals against the
communities they inhabit.
Totalitarian temptations now saturate the media and larger culture in the language of austerity
as political and economic orthodoxy. What we are witnessing in the United States is the normalization
of a politics that exterminates not only the welfare state, and the truth, but all those others who
bear the sins of the Enlightenment — that is, those who refuse a life free from doubt. Reason and freedom
have become enemies not merely to be mocked, but to be destroyed. And this is a war whose totalitarian
tendencies are evident in the assault on science, immigrants, women, the elderly, the poor, people
of color, and youth.
What too often goes unsaid, particularly with the media’s focus on inflammatory
rhetoric, is that those who dominate politics and policymaking, whether Democrats or Republicans,
do so largely because of their disproportionate control of the nation’s income and wealth. Increasingly,
it appears these political elite choose to act in ways that sustain their dominance through the systemic
reproduction of an iniquitous social order. In other words, big money and corporate power rule while
electoral politics are rigged. The secrecy of the voting booth becomes the ultimate expression of
democracy, reducing politics to an individualized purchase—a crude form of economic action. Any form
of politics willing to invest in such ritualistic pageantry only adds to the current dysfunctional
nature of our social order, while reinforcing a profound failure of political imagination. The issue
should no longer be how to work within the current electoral system, but how to dismantle it and
construct a new political landscape that is capable of making a claim on equity, justice, and democracy
for all of its inhabitants. Obama’s once inspiring call for hope has degenerated into a flight from
The Obama administration has worked to extend the policies of the George W. Bush
administration by legitimating a range of foreign and domestic policies that have shredded civil
liberties, expanded the permanent warfare state, and increased the domestic reach of the punitive
surveillance state. And if Romney and his ideological cohorts, now viewed as the most extremists
faction of the Republican Party, come to power, surely the existing totalitarian and anti-democratic
tendencies at work in the United States will be dangerously intensified.
Alternatively, we could have spent more time studying the work of Hyman Minsky. We could also
have considered the possibility that, just as Keynes’s ideas were tested to destruction in the
1950s, 1960s and 1970s, Milton Friedman’s ideas might suffer a similar fate in the 1980s, 1990s
and 2000s. All gods fail, if one believes too much. Keynes said, of course, that "practical men
… are usually the slaves of some defunct economist". So, of course, are economists, even if the defunct economists are sometimes still alive.
Casino capitalism is a nickname for nailibelism. Probably more properly nickname
would be financial corporatism. While
the key idea of corporatism: that political actors are not individual people, but some associations
and first of all corporations (which are officially considered to be "persons" and have rights
as well as
trade unions and some other associations) remains intact, financial corporatism is different from classic corporatism in several
Financial corporatism puts financial oligarchy at the top of pecking order. It is, like the USSR
Nomenklatura, the new ruling class similar to aristocracy in the last, which is allowed to operate essentially outside the law.
The top of this hierachy, kinds of Politburo of neoliberal order are the head sof major
transnational financial corporations ("Masters of the Universe") such as CEO of Goldman Sachs,
Citibank, who now have real political power (GS traditionally controls the Treasury
appointment and most of them were in recent administration were filled with GS alumnae)
Instead of the charismatic leader, "free markets" are deified. People mobilization typical for
corporatism is no longer needed and passivity of individual (or, more correctly, limiting his
activities to consumption) is preferred (Inverted
Labor unions are considered undesirable political actors and organized labor is
blackmailed and prosecuted. While classic corporatism suppressed labor protests by forcing labor unions to asset brokered
by government settlements with capital owners, under casino capitalism labor unions are
considered undesirable political actors and organized labor is blackmailed and prosecuted. Only private corporations
are first class citizens. Atomization of employees by brainwashing people to view
themselves as individual sellers of their labor on job market (rigged by corporations) also make social protest more difficult and
allow capital to dictate condition of employment including shrinking of permanent employment
workforce in favor of contractors and part-timers that we observe in the USA.
The idea of social justice (which in classic corporatism was limited to the middle class of a
particular nation, anyway), was replaced (or more precisely, limited) it to the well-being of transnational,
mainly financial, elite (aka top 1%, or at most top 10% ). Financial corporatism is not only hostile to labor unions,
it's hostile to the large part of the middle class as well.
Casino capitalism is international in nature
and ideologically close to Trotskyism (Trotskyism
for rich). While classic corporatism is national, financial corporatism is international by its nature
making it closer to Trotskyism (with the replacement of Communist Party as the vanguard on
world proletariat with financial oligarchy as a vanguard of transnational elite).
Like Trotskyism it is aggressive and use military force for propagating to any country which resist
it (similar to Trotskyism idea of Permanent revolution is implemented via
color revolutions which
serve for establishing in the country a neoliberal social order).
Promise of well-being is fake. Most of neoliberal ideology is based on lies and
distortions.So powerful propaganda
machine is required for constant brainwashing of population, promising them increase of
individual standards of living to the level that exists in the USA and G7. Which for most
countries can't be achieved.
Historically corporatism in various modifications
became dominant social system after WWII and defeated "command socialism" as was implemented in the
USSR. Here is an instructive review of corporatism history (The
Economic System of Corporatism):
In the last half of the 19th century people of the working class in Europe were beginning to show
interest in the ideas of socialism and syndicalism. Some members of the intelligentsia, particularly
the Catholic intelligentsia, decided to formulate an alternative to socialism which would
emphasize social justice without the radical solution of the abolition of private property.
The result was called Corporatism. The name had nothing to do with the notion of a business corporation
except that both words are derived from the Latin word for body, corpus.
The basic idea of corporatism is that the society and economy of a country should be organized
into major interest groups (sometimes called corporations) and representatives of those interest
groups settle any problems through negotiation and joint agreement. In contrast to a market
economy which operates through competition a corporate economic works through collective bargaining.
The American president Lyndon Johnson had a favorite phrase that reflected the spirit of corporatism.
He would gather the parties to some dispute and say, "Let us reason together."
Under corporatism the labor force and management in an industry belong to an industrial organization.
The representatives of labor and management settle wage issues through collective negotiation. While
this was the theory in practice the corporatist states were largely ruled according to the dictates
of the supreme leader.
One early and important theorist of corporatism was Adam Müller, an advisor to Prince Metternich
in what is now eastern Germany and Austria. Müller propounded his views as an antidote to the twin
dangers of the egalitarianism of the French Revolution and the laissez faire economics of Adam Smith.
In Germany and elsewhere there was a distinct aversion among rulers to allow markets to function
without direction or control by the state. The general culture heritage of Europe from the medieval
era was opposed to individual self-interest and the free operation of markets. Markets and private
property were acceptable only as long as social regulation took precedence over such sinful motivations
Coupled with the anti-market sentiments of the medieval culture there was the notion that
the rulers of the state had a vital role in promoting social justice.Thus corporatism was
formulated as a system that emphasized the positive role of the state in guaranteeing social justice
and suppressing the moral and social chaos of the population pursuing their own individual self-interests.
And above all else, as a political economic philosophy corporatism was flexible. It could
tolerate private enterprise within limits and justify major projects of the state. Corporatism
has sometimes been labeled as a Third Way or a mixed economy, a synthesis of capitalism and socialism,
but it is in fact a separate, distinctive political economic system.
Although rulers have probably operated according to the principles of corporatism from time immemorial
it was only in the early twentieth century that regimes began to identify themselves as corporatist.
The table below gives some of those explicitly corporatist regimes.
Corporatist Regimes of the Early Twentieth Century
Country, Religion, Monarchy
Miguel Primo de Rivera
Third Hellenic Civilization
In the above table several of the regimes were brutal, totalitarian dictatorships,
usually labeled fascist, but not all the regimes that had a corporatist foundation were fascist.
In particular, the Roosevelt New Deal despite its many faults could not be described as fascist.
But definitely the New Deal was corporatist. The architect for the initial New Deal
program was General Hugh Johnson. Johnson had been the administrator of the military mobilization
program for the U.S. under Woodrow Wilson during World War I. It was felt that he did a good
job of managing the economy during that period and that is why he was given major responsibility
for formulating an economic program to deal with the severe problems of the Depression. But
between the end of World War I and 1933 Hugh Johnson had become an admirer of Mussolini's National
Corporatist system in Italy and he drew upon the Italian experience in formulating the New Deal.
It should be noted that many elements of the early New Deal were later declared unconstitutional
and abandoned, but some elements such as the National Labor Relations Act which promoted unionization
of the American labor force are still in effect. One part of the New Deal was the development
of the Tennessee River Valley under the public corporation called the Tennessee Valley Authority
(TVA). Some of the New Dealer saw TVA as more than a public power enterprise. They hoped to make
TVA a model for the creation of regional political units which would replace state governments. Their
goal was not realized. The model for TVA was the river development schemes carried out in Spain in
the 1920's under the government of Miguel Primo de Rivera. Jose Antonio Primo de Rivera, the son
of Miguel Primo de Rivera, was the founder of Franco's National Syndicalism.
Corporatist regime typically promote large governmental projects such as TVA on the basis
that they are too large to be funded by private enterprise. In Brazil the Vargas regime created
many public enterprises such as in iron and steel production which it felt were needed but private
enterprise declined to create. It also created an organized labor movement that came to control those
public enterprises and turned them into overstaffed, inefficient drains on the public budget.
Although the above locates the origin of corporatism in 19th century France it roots can be traced
much further back in time. Sylvia Ann Hewlett in her book, The Cruel Dilemmas of Development:
Twentieth Century Brazil, says,
Corporatism is based on a body of ideas that can be traced through Aristotle, Roman law, medieval
social and legal structures, and into contemporary Catholic social philosophy. These
ideas are based on the premise that man's nature can only be fulfilled within a political
.......... The central core of the corporatist vision is thus not the individual but the political
community whose perfection allows the individual members to fulfill themselves and find happiness.
The state in the corporatist tradition is thus clearly interventionist and powerful.
Corporatism is collectivist; it is a different version of collectivism than socialism but it is
definitely collectivist. It places some importance on the fact that private property is not
nationalized, but the control through regulation is just as real. It is de facto nationalization
without being de jure nationalization.
Although Corporatism is not a familiar concept to the general public, most of the
economies of the world are corporatist in nature. The categories of socialist and pure market
economy are virtually empty. There are only corporatist economies of various flavors.
These flavors of corporatism include the social democratic regimes of Europe and the Americas,
but also the East Asian and Islamic fundamentalist regimes such as Taiwan, Singapore and Iran. The
Islamic socialist states such as Syria, Libya and Algeria are more corporatist than socialist, as
was Iraq under Saddam Hussain. The formerly communist regimes such as Russia and China are
now clearly corporatist in economic philosophy although not in name.
The term "Quiet
coup" which means the hijacking of the political power in the USA by financial oligarchy was introduced
by Simon H. Johnson, a British-American economist, who currently is the Ronald A. Kurtz Professor of
Entrepreneurship at the MIT Sloan School of Management and a senior fellow at the Peterson Institute
for International Economics. From March 2007 through the end of August 2008, he was Chief Economist
of the International Monetary Fund. The term was introduced in his article in Atlantic magazine,
published in May 2009(The
Quiet Coup - Simon Johnson - The Atlantic). Which opens with a revealing paragraph:
The crash has laid bare many unpleasant truths about the United States. One of the most alarming,
says a former chief economist of the International Monetary Fund, is that the finance industry
has effectively captured our government
The wealth of financial sector gave it unprecedented opportunities of simply buying the political
power iether directly or indirectly (via revolving door mechanism):
Becoming a Banana Republic
In its depth and suddenness, the U.S. economic and financial crisis is shockingly reminiscent
of moments we have recently seen in emerging markets (and only in emerging markets): South Korea
(1997), Malaysia (1998), Russia and Argentina (time and again). In each of those cases, global investors,
afraid that the country or its financial sector wouldn’t be able to pay off mountainous debt, suddenly
stopped lending. And in each case, that fear became self-fulfilling, as banks that couldn’t roll
over their debt did, in fact, become unable to pay. This is precisely what drove Lehman Brothers
into bankruptcy on September 15, causing all sources of funding to the U.S. financial sector to dry
up overnight. Just as in emerging-market crises, the weakness in the banking system has quickly rippled
out into the rest of the economy, causing a severe economic contraction and hardship for millions
But there’s a deeper and more disturbing similarity: elite business interests—financiers,
in the case of the U.S.—played a central role in creating the crisis, making ever-larger gambles,
with the implicit backing of the government, until the inevitable collapse. More alarming, they
are now using their influence to prevent precisely the sorts of reforms that are needed, and fast,
to pull the economy out of its nosedive. The government seems helpless, or unwilling, to act
Top investment bankers and government officials like to lay the blame for the current crisis on
the lowering of U.S. interest rates after the dotcom bust or, even better—in a “buck stops somewhere
else” sort of way—on the flow of savings out of China. Some on the right like to complain about Fannie
Mae or Freddie Mac, or even about longer-standing efforts to promote broader homeownership. And,
of course, it is axiomatic to everyone that the regulators responsible for “safety and soundness”
were fast asleep at the wheel.
But these various policies — lightweight regulation, cheap money, the unwritten Chinese-American
economic alliance, the promotion of homeownership—had something in common. Even though some are traditionally
associated with Democrats and some with Republicans, they all benefited the financial sector.
Policy changes that might have forestalled the crisis but would have limited the financial sector’s
profits — such as Brooksley Born’s now-famous attempts to regulate credit-default swaps at the Commodity
Futures Trading Commission, in 1998—were ignored or swept aside.
The financial industry has not always enjoyed such favored treatment. But for the past 25 years
or so, finance has boomed, becoming ever more powerful. The boom began with the Reagan years, and
it only gained strength with the deregulatory policies of the Clinton and George W. Bush administrations.
Several other factors helped fuel the financial industry’s ascent. Paul Volcker’s monetary policy
in the 1980s, and the increased volatility in interest rates that accompanied it, made bond trading
much more lucrative. The invention of securitization, interest-rate swaps, and credit-default swaps
greatly increased the volume of transactions that bankers could make money on. And an aging and increasingly
wealthy population invested more and more money in securities, helped by the invention of the IRA
and the 401(k) plan. Together, these developments vastly increased the profit opportunities in financial
Not surprisingly, Wall Street ran with these opportunities. From 1973 to 1985, the financial sector
never earned more than 16 percent of domestic corporate profits. In 1986, that figure reached 19
percent. In the 1990s, it oscillated between 21 percent and 30 percent, higher than it had ever been
in the postwar period. This decade, it reached 41 percent. Pay rose just as dramatically. From 1948
to 1982, average compensation in the financial sector ranged between 99 percent and 108 percent of
the average for all domestic private industries. From 1983, it shot upward, reaching 181 percent
The great wealth that the financial sector created and concentrated gave bankers enormous
political weight — a weight not seen in the U.S. since the era of J.P. Morgan (the man). In
that period, the banking panic of 1907 could be stopped only by coordination among private-sector
bankers: no government entity was able to offer an effective response. But that first age of banking
oligarchs came to an end with the passage of significant banking regulation in response to the Great
Depression; the reemergence of an American financial oligarchy is quite recent.
The second problem the U.S. faces—the power of the oligarchy—is just as important as the immediate
crisis of lending. And the advice from the IMF on this front would again be simple: break the oligarchy.
Oversize institutions disproportionately influence public policy; the major banks we have
today draw much of their power from being too big to fail. Nationalization and re-privatization
would not change that; while the replacement of the bank executives who got us into this crisis would
be just and sensible, ultimately, the swapping-out of one set of powerful managers for another would
change only the names of the oligarchs.
Ideally, big banks should be sold in medium-size pieces, divided regionally or by type of business.
Where this proves impractical—since we’ll want to sell the banks quickly—they could be sold whole,
but with the requirement of being broken up within a short time. Banks that remain in private hands
should also be subject to size limitations.
This may seem like a crude and arbitrary step, but it is the best way to limit the power of individual
institutions in a sector that is essential to the economy as a whole. Of course, some people
will complain about the "efficiency costs" of a more fragmented banking system, and these costs are
real. But so are the costs when a bank that is too big to fail—a financial weapon of mass self-destruction—explodes.
Anything that is too big to fail is too big to exist.
To ensure systematic bank breakup, and to prevent the eventual reemergence of dangerous behemoths,
we also need to overhaul our antitrust legislation. Laws put in place more than 100years ago to combat
industrial monopolies were not designed to address the problem we now face. The problem in the financial
sector today is not that a given firm might have enough market share to influence prices; it is that
one firm or a small set of interconnected firms, by failing, can bring down the economy. The
Obama administration’s fiscal stimulus evokes FDR, but what we need to imitate here is Teddy Roosevelt’s
Caps on executive compensation, while redolent of populism, might help restore the political
balance of power and deter the emergence of a new oligarchy. Wall Street’s main attraction—to
the people who work there and to the government officials who were only too happy to bask in its
reflected glory—has been the astounding amount of money that could be made. Limiting that money would
reduce the allure of the financial sector and make it more like any other industry.
Still, outright pay caps are clumsy, especially in the long run. And most money is now made in
largely unregulated private hedge funds and private-equity firms, so lowering pay would be complicated.
Regulation and taxation should be part of the solution. Over time, though, the largest part
may involve more transparency and competition, which would bring financial-industry fees down. To
those who say this would drive financial activities to other countries, we can now safely say: fine.
To paraphrase Joseph Schumpeter, the early-20th-century economist, everyone has elites; the important
thing is to change them from time to time. If the U.S. were just another country, coming to the IMF
with hat in hand, I might be fairly optimistic about its future. Most of the emerging-market crises
that I’ve mentioned ended relatively quickly, and gave way, for the most part, to relatively strong
recoveries. But this, alas, brings us to the limit of the analogy between the U.S. and emerging markets.
Emerging-market countries have only a precarious hold on wealth, and are weaklings globally. When
they get into trouble, they quite literally run out of money—or at least out of foreign currency,
without which they cannot survive. They must make difficult decisions; ultimately, aggressive
action is baked into the cake. But the U.S., of course, is the world’s most powerful nation, rich
beyond measure, and blessed with the exorbitant privilege of paying its foreign debts in its own
currency, which it can print. As a result, it could very well stumble along for years—as Japan did
during its lost decade—never summoning the courage to do what it needs to do, and never really recovering.
A clean break with the past—involving the takeover and cleanup of major banks—hardly looks like a
sure thing right now. Certainly no one at the IMF can force it.
In my view, the U.S. faces two plausible scenarios. The first involves complicated bank-by-bank
deals and a continual drumbeat of (repeated) bailouts, like the ones we saw in February with Citigroup
and AIG. The administration will try to muddle through, and confusion will reign.
Boris Fyodorov, the late finance minister of Russia, struggled for much of the past 20 years against
oligarchs, corruption, and abuse of authority in all its forms. He liked to say that confusion and
chaos were very much in the interests of the powerful—letting them take things, legally and illegally,
with impunity. When inflation is high, who can say what a piece of property is really worth? When
the credit system is supported by byzantine government arrangements and backroom deals, how do you
know that you aren’t being fleeced?
Our future could be one in which continued tumult feeds the looting of the financial system, and
we talk more and more about exactly how our oligarchs became bandits and how the economy just can’t
seem to get into gear.
The second scenario begins more bleakly, and might end that way too. But it does provide at least
some hope that we’ll be shaken out of our torpor. It goes like this: the global economy continues
to deteriorate, the banking system in east-central Europe collapses, and—because eastern Europe’s
banks are mostly owned by western European banks—justifiable fears of government insolvency spread
throughout the Continent. Creditors take further hits and confidence falls further. The Asian economies
that export manufactured goods are devastated, and the commodity producers in Latin America and Africa
are not much better off. A dramatic worsening of the global environment forces the U.S. economy,
already staggering, down onto both knees. The baseline growth rates used in the administration’s
current budget are increasingly seen as unrealistic, and the rosy "stress scenario" that the U.S.
Treasury is currently using to evaluate banks’ balance sheets becomes a source of great embarrassment.
Under this kind of pressure, and faced with the prospect of a national and global collapse, minds
may become more concentrated.
The conventional wisdom among the elite is still that the current slump "cannot be as bad as the
Great Depression." This view is wrong. What we face now could, in fact, be worse than the Great Depression—because
the world is now so much more interconnected and because the banking sector is now so big. We face
a synchronized downturn in almost all countries, a weakening of confidence among individuals and
firms, and major problems for government finances. If our leadership wakes up to the potential consequences,
we may yet see dramatic action on the banking system and a breaking of the old elite. Let us hope
it is not then too late.
It is pretty interesting to see how financial oligarchy filters information provided to the population
to fit their biases. For example, the key facts about repeal of Glass-Steagall law (BTW Joe
Biden voted for it) mostly hidden from the public:
Glass-Steagall had been weakened under Reagan, under the recommendation of Alan Greenspan who
was essentially a Wall Street mole in Fed (see below the concept introduced by
Willem Buiter of ‘cognitive regulatory
capture’ of the Fed by Wall Street.)
Clinton administration and Congress supported the repeal but it was Phil Gramm who made it happened.
Not only he was the main cheerleader for the repeal. Gramm essentially wrote the bill. As NYT noted:
The measure, which Mr. Gramm helped write and move through the Senate, also split up oversight
of conglomerates among government agencies. The Securities and Exchange Commission, for example,
would oversee the brokerage arm of a company. Bank regulators would supervise its banking operation.
State insurance commissioners would examine the insurance business. But no single agency would
have authority over the entire company.
"There was no attention given to how these regulators would interact with one another," said
Professor Cox of Duke. "Nobody was looking at the holes of the regulatory structure."
The arrangement was a compromise required to get the law adopted. When the law was signed in
November 1999, he proudly declared it "a deregulatory bill," and added, "We have learned government
is not the answer."
Support was bipartisan which tells something about Clinton Congress:
Commodity Futures Trading Commission — under the leadership of Mr. Gramm’s wife, Wendy — had approved rules in 1989 and 1993 exempting some swaps and derivatives from regulation. In
December 2000, the Commodity Futures Modernization Act was passed as part of a larger bill by unanimous
consent after Senator Gramm dominated the Senate debate...
"He was the architect, advocate and the most knowledgeable person in Congress on these topics,"
Mr. Donovan said. "To me, Phil Gramm is the single most important reason for the current financial
"The virtually unregulated over-the-counter market in credit-default swaps has played a significant
role in the credit crisis, including the now $167 billion taxpayer rescue of A.I.G.,"
Christopher Cox, the chairman of the S.E.C. and a former congressman, said Friday.
But you will never find discussion of flaws and adverse consequences Phil Gram (or Greenspan for
a change) initiatives in Heritage Foundation and other right-wing think tanks publications.
So what we are experiencing is a the completion of the transformation of one phase of capitalism
to another. It happened in stages:
Manufacturing stagnated and can't provide the "decent" rate of growth. Competition from
re-built Europe and Asian markets severely stressed the US manufacturing. due to competition
return of capital dropped and in several industries became negative.
Computers brought innovations into financial markets. They make possible real time trading
of induces like S&P500, complex financial instruments like derivatives, etc. Later they enables superfast
trading (HFT). All those instruments dramatically increased the possibilities of extracting the rent
by financial institutions from the society.
Globalization kicked in due to new opportunities offered by high speed global communications
(Internet). And that is not limited to outsourcing. Due to globalization the sheer size of the
financial markets increased to the extent that they started to represent a different, new transnational
phenomena allowing new types of redistribution of wealth to be practiced. Integration of Russian
elite (oligarchs) is just one example of this process. In case of pro-western oligarchs (fifth
column) West went to significant length to protect them and their racket (Mikhail
Khodorkovsky - Wikipedia,)
Commercial banks turned into investment banks to exploit this opportunity.
Financial sector completely corrupted academic science converting most economists to pay prostitutes
which serve their interests.
Collapse of the USSR provided the financial sector major shoot in the arm and a golden, once
in century opportunity to finance new half-billion consumers and stole for a penny on a dollar huge
industrial assets and natural resources as well as put most of those countries in the debt (Latin-Americanization
of xUSSR space). Harvard Mafia (with some
support from London) did the bidding of western banks in xUSSR space. As more becomes known about
the laundering of Russian money in Western banks, many in the United States will likely try to hide
behind stories of faraway organized crime. But U.S. policy toward Russia has contributed to that
country's sorry conditions--with the Harvard Institute for International Development's Russia project
(HIID) playing a major role (Harvard's
'Best and Brightest' Aided Russia's Economic Ruin ). Professor
Jeffery Sacks provided
a bogus idea of "shock therapy" to achieve spectacular for Western banks result. As a result all
xUSSR space became new Latin America with typical for Latin America problems like huge level of inequality,
prostitution, child poverty, and prominent role of organized crime.
Banks became dominant political force on western societies with no real counterbalance from
other parts of the elite. The first president completely subservient to banking elite was elected
in the USA in 1992. Bill Clinton regime lasted eight years and along with
economic rape of xUSSR space in best colonial powers tradition, it removed what was left of financial
regulations after the flurry of deregulation of the early 1980s. And they behaved as an occupying
force not only in xUSSR space but in the USA as well. They deprived workers out of their jobs, they
abolished the US pension system as it impede playing with population money and replaced in with widely
inadequate 401K plans. They deprived municipalities out of their revenues and assets, while municipalities
became just a den of bond traders looking for then next mark which give them the ability to put municipalities
deeper in debt.
Newly acquired political power of financial elite speeded the shift to bank "self-regulation"
created huge shadow banking system which dwarf "official" under the smoke screen of "free-market"
propaganda and PR from a coterie of corrupts academics (Chicago
Scholl, Harvard Mafia, etc) . It engaged
in pursuit of short term profits and self-enrichment of top brass which became new elite by-and-large
displacing not only the old one, but also the newly minted IT elite of dot-com boom. Using newly
acquired power financial elite remove all regulations that hamper their interests.
Glass-Steagall was repealed at the last
days of Clinton presidency, financial derivatives became unregulated.
Deindustrialization kicked in. As financial speculation proved to be much more profitable
to other activities deindustrialization kicked in the USA as the financial center of the world. Outsourcing
which first was limited to manufacturing jobs now extent its reach on IT and decimate previously
profitable sector and its export potential.
Externalities can no longer be suppressed and economics became unstable. Growth of inequality,
job insecurity, as well as frequency of financial crises were natural consequences of financialization
of the economy. They create huge imbalances, like bubble in residential real estate which was blown
with the help and full support of the USA government as a way to overcome dot-com crisis consequences.
Debt crisis strikes. Growth of debt became unsustainable and produces the financial crisis
of enormous proportions. By their reckless policies and greed financial sector caused huge financial
crisis of 2008 and now they are forcing national governments to auction off their cultural heritage
to the highest bidder. Everything must go in fire sales at prices rigged by twenty-something largest
banks, the most corrupt institutions the world has ever known.
Devastating "local" wars became "new normal". Due to financial crisis, the overconsumption
in western economies came under threat. Debt expansion which led to overconsumption within the western
economies affected (or infected) by financialization. To sustain the current standard of living financial
expansion became the necessity. It took the form of a competition for spheres of influence in the
area of energy supplies, which we see in post USSR space, Iraq, Libya and elsewhere. And central
banks play critical role in financing wars. After all Banks of England was created with this exact
I think by 2008 when the second major financial crisis hit the USA, the transformation on the USA
economy into casino capitalism, which is essentially implementation of neoliberal doctrine (or more
correctly the US brand of corporatism) was by-and-large complete.
In short we are living in a new politico-economic system in which financial capital won victory over
both labor and industrial capital. We might not like what we got, but financial elite is now a new ruling
class and this fact is difficult to dispute. As a result. instead of the robber barons of the early
20th century (some of whom actually created/consolidated new industries), we have the top executives
from investment banks, insurers and mortgage industry who represent a new Rentier class, much like old
They are living off parasitic monopolization of access to any (physical, financial, intellectual,
etc.) kind of property and gaining significant amount of profit without contribution to society (see
Rentier capitalism which
is a very fuzzy term for neoliberal model of capitalism).
Stagnation of industrial manufacturing droved up financial speculation as the method to compensate
for falling rate on return on capital. This stagnation became prominent during Reagan administration
(which started the major shift toward neoliberalism), although signs of it were present from early 60th.
For example Chicago which was a manufacturing center since 1969 lost approximately 400K manufacturing
jobs which were replaced mainly by FIRE-related jobs, In 1995 over 22% of those employed by FIRE industries
(66K people) were working in executive and managerial positions. Another 17% are in marketing, sales
and processional specialty occupations (computer system analysts, PR specialists, writer and editors).
Those changes in the structure of employment had several consequences:
The stagnation of the underlying economy meant that capitalists were increasingly dependent
on the growth of finance to preserve and enlarge their money capital.
The financial superstructure of the capitalist economy could not expand independently of its
base -- underlying productive economy — hence the bursting of speculative bubbles became a recurrent
and growing problem.
Financialization could never overcome stagnation of industrial production. It is just
an opium for rich, not a structural adjustment of the stagnation-prone economy. But like addition
to narcotics does to human body it does tremendous damage to real economy.
Rapid increase in inequality is necessary to sustain the appetites of the elite in the system
with fixed size of the pie. Politico-economic conditions might became even more unfavorable for
labor. Stagnation of industrial production mean shrinking pie, which necessitates redistribution
of wealth in favor of a new, all-powerful financial Rentier class. This redistribution resulted in
partial wipe-out of large swats of middle class. For the past three decades, America has steadily
converted itself into a nation of haves (as Bush II quipped "This is an impressive crowd -- the haves
and the have mores! Some people call you the elite -- I call you my base". ) and have-nots. The cost
of a college education rises rapidly at a time when wages for skilled labor stagnate, so access to
college became against discriminated in favor of upper class of the society. Repressive apparatus
and ideological brainwashing are too strong to mount effective resistance.
The key to understanding of Casino Capitalism is that it was a series of government decisions (or
rather non-decisions) that converted the state into neoliberal model. In other words casino capitalism
has distinct "Government property" mark. It was the USA elite, which refused to act responsibly in the
face of changing economic conditions resulting from its own actions, and instead chose to try to perpetuate,
by whatever means it had at its disposal, the institutional advantages of dollar as a reserve currency
which it had vis-à-vis its main economic rivals and grab as large part of the world economic
pie as it can. And this power grab was supported first of all by the role of dollar as currency in which
oil is traded.
There might be some geo-strategically motives as well as the US elite in late 80th perceived that
competitiveness is slipping out of the USA and the danger of deindustrialization is real. Many accuse
Reagan with the desire to ride dollar status as a world reserve currency (exorbitant privilege)
until the horse is dead. That's what real cowboys do in Hollywood movies... But the collapse
of the main rival, the USSR vindicated this strategy and give a strong short in the arm to financialization
of the economy. Actually for the next ten years can be called a triumphal ascend of financialization in
Dominance of FIRE industries clustered up and in recent years reached in the USA quite dramatic proportions.
The old Bolsheviks saying "When we say Lenin we mean the Party and when we say the Party we mean Lenin"
now can be reworded: "Now it we say US banks, we mean the US government and vise versa if we say US
government we mean US banks".
According to the Center for Responsive Politics, the FIRE sector was and is the biggest contributor
to federal candidates in Washington. Companies cannot give directly, so they leave it to bundlers to
solicit maximum contributions from employees and families. They might have been brought down to earth
this year, but they’ve given like Gods: Goldman Sachs, $4.8 million; Citigroup, $3.7 million; J.P. Morgan
Chase & Co., $3.6 million; Merrill Lynch, $2.3 million; Lehman Brothers, $2.1 million; Bank of America,
$2.1 million. Some think the long-term effect of such contributions to individual candidates was clear
in the roll-call votes for the bailout.
Take the controversial first House vote on bailout of major banks on Sept. 29, 2008. According to
CRP, the "ayes" had received 53 percent more contributions from FIRE since 1989 than those who voted
against the bill, which ultimately failed 228 to 205. The 140 House Democrats who voted for the bill
got an average of $188,572 in this election cycle, while the 65 Republicans backing it got an average
of $185,461 from FIRE—about 23 percent more than the bill’s opponents received. A tinkered bill was
passed four days later, 263 to 171.
According to the article
Fire Sale (The American
Conservative) half of Obama’s top ten contributors, together giving him nearly $2.2 million, are FIREmen.
The $13 million contributed by FIRE executives to Obama campaign is probably an undercount. Democratic
committee leaders are also dependent of FIRE contributions. The list includes Sen. Dodd ( please look
at Senator Dodd's top donors for 2007-8 on openSecrets.org
) and Sen. Chuck Schumer ($12 million from FIRE since 1989), Rep. Barney Frank ($2.5 million), and Rep.
Charlie Rangel ($4 million, the top recipient in the House). All of them have been accused of taking
truckloads of contributions while failing to act on the looming mortgage crisis. Dodd finally pushed
mortgage reform last year but by then as his hometown paper, The Hartford Courant stated, "the damage
At the same time rise of financial capital dramatically increased instability. An oversized financial
sector produces instability due to multiple positive feedback loops. In this sense we can talk about
Financial Sector Induced
Systemic Instability of Economy. The whole society became "House of cards", "Giant Enron" and "extension
of Las Vegas". Reckless management, greed and out-right stupidity in playing derivatives games was natural
consequence of the oversized financial sector, not just a human folly. In a way it was dramatic manifestation
of the oversized financial sector negative influence of the economy. And in 2008 it did brought out
economy to the brink of destruction. Peak oil added to suffocating effect on the economy of reckless
gambling (and related debts) of financial sector producing the economic calamity that rivals Great Depression.
Also, like Socialism, Casino Capitalism demands too much of its elite. And in reality,
the financial elite much like Bolsheviks elite, is having its own interests above the interests of the
As Kevin Phillips noted "In the United States, political correctness, religious fundamentalism,
and other inhibitions sometimes dumb down national debate". And the same statement is true for financial
elite that became the center of power under the Casino Capitalism. Due to avalanche of greed the society
became one giant Enron as money that are made from value addition in the form of manufacturing fade
in significance to the volume of the money that is made from shuffling money around. In other was the
Wall Street's locked USA in the situation from which there is no easy exit.
Self-reinforcing ‘positive’ feedback loops prevalent in Casino Capitalism trigger an accelerating
creation of various debt instruments, interest of which at some point overwhelm the system carrying
capacity. Ability to lend against good collateral is quickly exhausted. At some point apparently there
is no good collateral against which lending freely was possible, even at high rates.This
means that each new stage of financial innovation involves scam and fraud, on increasing scale. In other
words Ponzi economy of "saving and loans" is replaced with Madoff economy.
Whether you shift the resulting huge private debt to public to increase confidence or not, the net
result is of this development of events is a crisis and a huge debt that society needs to take. Actually
the debt bubble in 2008 can only be compared to the debt bubble of 1933. The liquidation of Bear Sterns
and Lehman was only a start of consolidation of finances and we need to find something that replace
financial sector dominance in the national economy. It would be nice is some technological breakthrough
happened which would lift the country out of this deep hole.
Like Bolshevism was marked by deification of teaching of Marx and Lenin, converting them into pseudo-religious
doctrine, the Casino Capitalism has its own deified ideological doctrine. It is the ideology of
Neoliberalism. The latter as an ideology
and an agenda seeks to topple democratic capitalism and replace it with a de facto unaccountable
autocratic government which serves as channel of a wealth transfer from the public to a rentier elite.
In a way it is a spectacular example of a successful (in a very negative sense) pseudo-religious doctrine.
Addiction of the societies to disastrous politico-economical doctrines are similar to addictions
to alcohol and drugs in individuals. It is not easy to recover and it takes a long, long time and a
lot of misery. As dissolution of the USSR aptly demonstrated not all societies can make it. In this
case the USSR elite (nomenklatura) simply shed the old ideology as it understood that it will be better
off adopting ideology of neoliberal capitalism; so it was revolution from above. this abrupt
switch created chaos in economics (which was applauded by Washington which under Clinton
administration adopted the stance the Carnage needs to be destroyed and
facilitated the process), criminal privatization
of major industries, and pushed into object poverty the 99% of population of those countries. For
some period under "drunk Yeltsyn" Russia sees to exist as an independent country and became a vassal
This also means that "society at large" did not had effective brakes to the assent of financial plutocracy
(aka financial oligarchy). I would add to this the computer revolution
and internet that made many financial transaction qualitatively different and often dramatically cheaper
that in previous history. Computers also enabled creation of new financial players like mutual funds
(which created a shadow banking system with their bond funds) , hedge funds,
exchange-traded funds (ETFs), as well as high-frequency trading and derivatives.
From the historical view Reaganomics also can be considered to be the US flavor of
Lysenkoismwith economics instead of genetics as a target.
Here is how Reaganomics is defined
reduce marginal tax rates on income from labor and capital,
reduce government regulation of the economy,
control the money supply to reduce inflation.
In attempting to cut back on domestic spending while lowering taxes, Reagan's approach was a departure
from his immediate predecessors.
Reagan became president during a period of high
unemployment (commonly referred
to as stagflation), which
had largely abated by the time he left office.
Please not that the Number 1 idea ("reduce government spending") was essentially a scam, a smoke
screen designed to attract Rednecks as a powerful voting block. In a way this was a trick similar to
one played by Bolsheviks in Russia with its "worker and peasants rule" smokescreen which covered brutal
dictatorship. In reality all administrations which preached Reagonomics (including Clinton's) expanded
the role of state and government spending. The number two was applied by-and-large to top 1%. The number
three means deregulation in the interests of financial oligarchy and dismantling all social program
that hamper profit of the latter (including privatizing of Social Security). The number fours is a scam,
in the same sense as number one. As soon as financial institutions get in trouble, money are printed
as if there is no tomorrow.
While the essence of Reagonomics was financial deregulation, the other important element was restoring
the Gilded Age level of power of financial oligarchy which influence was diminished by FDR reforms.
In this sense we can say that Reagan revolution was essentially a counter-revolution: an attempt to
reverse the New Deal restrictions on financial sector and restore its dominance in the society.
Like it was the case in Bolshevism the ideology was developed and forced upon the society by a very
small group of players. The key ideas of Casino Capitalism were formulated and implemented by Reagan
administration with some contribution by Nixon (the role of rednecks aka "moral majority", "silent majority"
as an important part of republican political base, which can be attracted to detrimental to its economic
position policies by the smoke screen of false "moral" promises).
It was supported by each president after Reagan (paradoxically with Clinton having the most accomplished
record -- he was the best Republican President in a very perverted way). Like in case of Lysenkoism
opponents were purged and economic departments of the country were captured by principless careerists
ready to tow the party line for personal enrichment. Like in case of Bolshevism, many of those special
breed of careerists rotated from Republican Party into Fed and other government structures. A classic
example of compulsive careerists that were used by finance sector to promote its interests was Alan
One of the key ideas of Reaganomics was the rejection of the sound approach that there should be
a balance between too much government regulation and too little and that government role is important
for smooth functioning of the market. In this area Reagan and its followers can be called Anarchists
and their idea of 'free market" is a misnomer that masks the idea of "anarchic market" (corporate welfare
to be exact -- as it was implemented). Emergence of corporate welfare Queens such as GS,
Citi, AIG, are quite natural consequence of Reaganomics.
Reaganomics was a the US flavor of Lysenkoism with economics
instead of generics as a target... It can and should be called Economic Lysenkoism.
The most interesting part of Reaganomics was that the power of this ideology made it possible to
conditioned "working class" and middle class to act against their own economic interests. It helped
to ensure the stagnation of wages during the whole 25 years period, which is close to what Soviets managed
to achieve with working class of the USSR, but with much more resentment. This makes it in many ways
very similar to Bolshevism as a whole, not just Lysenkoism (extremes meet or in less flattering way:
"history repeats, first as a tragedy, then as farce).
Along with the term Reaganimics which implicitly stresses the deregulation, the other close term
"market fundamentalism" is often used. Here is how market fundamentalism is defined (Longview
Market Fundamentalism is the exaggerated faith that when markets are left to operate on their
own, they can solve all economic and social problems. Market Fundamentalism has dominated
public policy debates in the United States since the 1980's, serving to justify huge Federal tax
cuts, dramatic reductions in government regulatory activity, and continued efforts to downsize the
government’s civilian programs.
Some level of government coercion (explicit or implicit ) is necessary for proper labeling of any
pseudo-scientific theory with the term Lysenkoism. This holds true for both
Market Fundamentalism (after all
Reagan revolution was "revolution from above" by financial oligarchy and for financial oligarchy and
hired guns from academia just do what powers that be expected) and, especially,
side economic. The political genius of those ideas is evident. Supply-side economics transformed
Republicans from a minority party into a majority party. It allowed them to promise lower taxes, lower
deficits and, in effect, unchanged spending. Why should people not like this combination? Who does not
like a free lunch?
In this sense the Republican Party played the role very similar to the Communist Party of the USSR.
For example supply side economics was too bizarre and would never survive without explicit government
support. This notion is supported by many influential observers. For example, in the following
comment for Krugman article (Was
the Great Depression a monetary phenomenon):
Market fundamentalism (neoclassical counter-revolution — to be more academic) was more of a
political construct than based on sound economic theory. However, it would take a while before
its toxic legacy is purged from the economics departments. Indeed, in some universities this
might never happen.
Extreme deregulation and extreme regulation (Brezhnev socialism) logically meets and both represent
a variant of extremely corrupt society that cannot be sustained for long (using bayonets as in the case
of USSR or using reserve currency and increasing leverage as is the case of the USA). In both cases
the societies were economically and ideologically bankrupt at the end.
Actually, elements of market fundamentalism looks more like religious doctrine than political philosophy
— and that bonds its even closer to Lysenkoism. In both cases critics were silenced with the help of
the state. It is interesting to note that Reaganomics was wiped into frenzy after the dissolution of
the USSR, the country which gave birth to the term of Lysenkoism. In a way the last act of the USSR
was to stick a knife in the back of the USA. As a side note I would like to stress that contrary to
critics the USSR was more of a neo-feudal society with elements of slavery under Stalin. Gulag population
were essentially state slaves; paradoxically a somewhat similar status is typical for illegal immigrants
in industrialized countries. From this point of view this category of "state slaves" is generally more
numerous that gulag inmates. Prison population also can be counted along those lines.
It look like either implicitly or explicitly Reagan's bet was on restoration of gilded Age with its
dominance of financial oligarchy, an attempt to convert the USA into new Switzerland on the "exorbitant
privilege" of dollar status as the global fiat currency.
Casino Capitalism is characterized by political dominance of FIRE industries (finance, insurance,
and real estate) and diminished role of other and first of all manufacturing industries. It was also
accompanied by the drastic growth of inequality (New Gilded Age). Its defining feature is "the triumph
of the trader in assets over the long-term producer" in
The huge boost of Casino Capitalism was given by the collapse of the USSR in 1991. That gave a second
life to Reagan era. Collapse of the USSR was used as a vindication of market fundamentalism. After it
New Deal regulations were systematically destroyed. Dumped down variants of
like bastardatized variant promoted by Russian emigrant became fashionable with an individual "creative"
entrepreneur as a new Übermensch,
which stands above morality.
"The word Übermensch [designates] a type of supreme achievement, as opposed to 'modern' men, 'good'
men, Christians, and other nihilists ... When I whispered into the ears of some people that they
were better off looking for a
Cesare Borgia than a
Parsifal, they did not believe
Safranski argues that the combination of ruthless
warrior pride and artistic brilliance
that defined the Italian
Renaissance embodied the sense of the Übermensch for Nietzsche. According to Safranski, Nietzsche
intended the ultra-aristocratic figure of the Übermensch to serve as a Machiavellian bogeyman of
the modern Western middle class and its pseudo-Christian egalitarian value system.
The instability and volatility of active markets can devalue the economic base of real lives, or
in more macro-scenarios can lead to the collapse of national and regional economies. In a very interesting
and grotesque way it also incorporates the key element of Brezhnev Socialism in everyday life: huge
manipulation of reality by mass media to the extend that Pravda and the USSR First TV Channel look pretty
objective in comparison with Fox news and Fox controlled newspapers. Complete poisoning of public discourse
and relying on the most ignorant part of the population as the political base (pretty much reminiscent
of how Bolsheviks played "Working Class Dictatorship" anti-intellectualism card; it can be called "Rednecks
While transformation to casino capitalism was an objective development, there were specific individuals
who were instrumental in killing New Deal regulations. We would single out the following twelve figures:
(although first steps toward casino capitalism were made under Carter).
There is no question that Reagan and most of his followers (Greenspan, Rubin, Phil Gramm, etc) were
rabid radicals blinded by ideology. But they were radicals of quite different color then FDR with disastrous
consequences for society. Here again the analogy with Bolsheviks looms strong. In a way, they can be
called financial terrorists inflicting huge damage on the nation and I wonder if RICO can be use to
prosecute at least some of them.
In Bailout Nation (Chapter 19) Barry
Ritholtz tried to rank major players that led country into the current abyss:
1. Federal Reserve Chairman
2. The Federal Reserve
(in its role of setting monetary policy)
3. Senator Phil
4-6. Moody’s Investors Service, Standard & Poor’s, and Fitch Ratings (rating agencies)
7. The Securities and
Exchange Commission (SEC)
8-9. Mortgage originators and lending banks
11. The Federal Reserve again (in its role as bank regulator)
12. Borrowers and home buyers
13-17. The five biggest Wall Street firms (Bear Stearns, Lehman Brothers, Merrill Lynch,Morgan Stanley,
and Goldman Sachs) and their CEOs
18. President George
19. President Bill
20. President Ronald
21-22. Treasury Secretary Henry Paulson
23-24. Treasury Secretaries
Robert Rubin and
25. FOMC Chief Ben
26. Mortgage brokers
27. Appraisers (the dishonest ones)
28. Collateralized debt obligation (CDO) managers (who produced the junk)
29. Institutional investors (pensions, insurance firms, banks, etc.) for
buying the junk
30-31. Office of the Comptroller of the Currency (OCC); Office of Thrift
32. State regulatory agencies
33. Structured investment vehicles (SIVs)/hedge funds for buying the junk
Hyman Minsky argued that a key mechanism that pushes an economy towards a crisis is the accumulation
of debt and the fact the financial system represents a positive feedback loop that tend to
destabilize the system, creating ossilations in the form of boom and bust cycles. . He identified 3 types of borrowers that contribute to the accumulation of insolvent debt: Hedge
Borrowers; Speculative Borrowers; and Ponzi Borrowers. That corresponds to three stages of Casino Capitalism
of increasing fragility:
Hedge finance: income flows are expected to meet financial obligations in every period.
The "hedge borrower" is one who borrows with the intent of making debt payments from cash flows from
Speculative finance: the firm must roll over debt because income flows are expected to
only cover interest costs (evergreen loans). In other words a "speculative borrower"
is a boorrower, who borrows based on the belief that the appreciation of the value of the
assets (e.g. real estate) to refinance or pay-off their debt but who does not have sufficient
resources to repay the original loan, otherwise. Classic example here are house flippers during
housing boom. Usually the are late to the game.
Ponzi finance: income flows won’t even cover interest cost, so the firm must borrow more
or sell off assets simply to service its debt. The "Ponzi borrower" (named for
Charles Ponzi, see also
Ponzi scheme) is who relies
on continually rolling over the principal obtained from new participants in the Ponzi scheme to cover
interests. After a certain point, the private sector debt can only be perceived as sustainable as
long as asset prices are perceived to be in continuous growth. Since the rise of asset prices is
fueled by rising indebtness, from a certain point onwards, the process acquires a pure speculative
character. When the rise in asset prices is interrupted, the private sector discovers it is insolvent.
The choice become either a horrible end or an endless horror.
Growth of debt and increased levarate at some point create predocition of the crash. The stage of
business cycle at which those preconditions are met is called "Minsky moment":
A Minsky moment is the point in a
credit cycle or
business cycle when
investors are starting to have cash flow problems due to spiraling debt they have incurred in order to finance
speculative or Ponzy investments.
At this point, a major selloff begins due to the fact that no
counterparty can be found
to bid at the high asking prices previously quoted, leading to a sudden and precipitous collapse
in market clearing
asset prices and a sharp drop in
After the collapse of the USSR there were a lot of chest thumping of the status of America as a hyper
power (American exceptionalism)
and the "end of history" where neoliberalism that displaced Brazhvev socialism (and wiped
out the socialist camp) was supposed to reign supreme forever.
But this triumphal march of neoliberalism was short lived. The system proved to be
self-destructive due to strong positive feedback look from the unregulated financial sector.
But in 2000 the first
moment to pay the piper arrives. It was postponed by Iraq war and housing bubble, but reappeared in much
more menacing form in 2008. In 2009 the USA experienced a classic Minsky moment with
high unemployment rate and economy suppressed by (and taken hostage) by Ponzi finance institutions which
threaten the very survival of the capitalist system and way of life. Huge injection freom the state
halped to save the economy from disintration, but the price was very high. And after 2009 the
US economy entered the period prologed stagnation, called the perios of "secular stagnation".
In events preceding 2008 the shift from speculative toward Ponzi finance was speed up by increased corruption of major players.
The drive to redistribute wealth up destroyed any remnants of the rule of the law in the USA. It
became a neo-feudal two casts society with "Masters of the Universe" as the upper cast (top 1% ) and
"despicables" (lower 80%) as the lower cast. With some comprador strata of professional in between
(top 20% or so), who generally support the upper cast.
Loweer cast experienced deterioration of the standard of living, loss of well paying jobs to
outsourcing and offshoring and in 2016 revolted electing Trump, who defeated Hillary Clinton, who
became a real symbol of the corruption of neoliberal system.
"As Minsky observed, capitalism is inherently unstable. As each crisis is successfully contained,
it encourages greater speculation and risk taking in borrowing and lending. Financial innovation
makes it easier to finance various schemes. To a large extent, borrowers and lenders operate on the
basis of trial and error. If a behavior is rewarded, it will be repeated. Thus stable periods
naturally lead to optimism, to booms, and to increasing fragility.
A financial crisis can lead to asset price deflation and repudiation of debt. A debt deflation,
once started, is very difficult to stop. It may not end until balance sheets are largely purged of
bad debts, at great loss in financial wealth to the creditors as well as the economy at large."
For Strange the speed at which computerized financial markets work combined with their much larger
size and near-universal pervasiveness is an important qualitative change, that changes the
social system into what he called "casino capitalism". She actually popularized the term
"Casino Capitalism" with her important book
published in 1997.
One of the side
effects of this change is that volatility extends globally. Approximately $1.5 trillion dollars are
invested daily as foreign transactions. It is estimated that 98% of these transactions are speculative.
In comparison with this casino Las Vegas looks like a aborigine village in comparison with Manhattan.
It was predominantly as a creative scholar and a forceful personality that she exercised her influence.
She was almost single-handedly responsible for creating ‘international political economy’ and turning
it into one of the two or three central fields within international studies in Britain, and she defended
her creation with such robustness, and made such strong claims on its behalf, that her influence
was felt—albeit not always welcomed—in most other areas of the discipline. She was one of the earliest
and most influential campaigners for the closer integration of the study of international politics
and international economics in the English language scholarship.
In the later period of her career, alongside the financial analyses offered in Casino Capitalism
(the analysis in which she felt was vindicated by the South-East Asian financial crisis) and Mad
Money, Strange's contributions to the field include her characterisation of the four different
areas (production, security, finance and knowledge) through which power might be exercised in International
Relations. This understanding of what she termed "structural power", formed the basis of her argument
against the theory of
American Hegemonic Decline in the early eighties.
Her analysis particularly in States and Markets focused on what she called the ‘market-authority
nexus’, the see-saw of power between the market and political authority. The overall argument of
her work suggested that the global market had gained significant power relative to states since the
This led her to dub the Westphalia system Westfailure. She argued that a ‘dangerous gap’ was
emerging between territorially-bound nation states and weak or partial intergovernmental cooperation
in which markets had a free hand which could be constructive or destructive.
Among important early critiques of casino capitalism was John K. Galbraith. He promoted a pretty novel idea
that the major economic function of Governments is to strengthen countervailing powers to achieve
some kind of balance between capital and labor.
While unions are far from being perfect and tend to slide into corruption due to "iron law of
oligarchy" when thier management stop representing interests of thwe worksers and start to
reprreesnt interest of thier own narry strate of fat cats, there were the only sizable
countewailing power that made the New Seal possible.
His prediction proved to be wrong as government actually represent the capitalist class and is
not that interested in creating this balance, which was convincingly demonstrated by Thatcher and
Reagan. Both Britain and the USA start sliding into a new form of corporations, called
neoliberalism which actually does not allocate any space for uniot at the negotiation table and
strive for their complete elimination and "atomization" of work force, when each invididual is up to
himself to find employment and group solidarity is suppressed by instilling neoliberal ideology in
schools and universitites as well as via MSM (which in the USA surprisingly never were allowed to
use the work neoliberlaism, as if it represents some secret Masonic cult)
And it does not look like there is any renewed
support of unions right (including important right to organize) at the post subprime/derivatives/shadow_banking
crisis stageof neoliberalism, when neoliberal ideology became sufficiently discredited
to allow rise of populist politicians such as Trump.
Still John K. Galbraith critique of primitive market fundamentalism of Milton Freedman and the
whole pseudoscience of neoclassical economics which like Marxist political economy is one of there
pillars of neoliberalism (along with Randism as philosophy and Neoconservatism or "Trotskyism for
the rich" in politics), still has its value today. As Joseph Stiglitz noted (CSMonitor,
Dec 28, 2006):
...In many ways, Galbraith was a more critical observer of economic reality.
Driven to understand market realities
Galbraith's vivid depictions of the good, bad, and ugly of American capitalism remain a sorely
needed reminder that all is not quite as perfect as the perfect market models – with their perfect
competition, perfect information, and perfectly rational consumers – upon which so much of Friedman's
Galbraith, who cut his teeth studying agricultural economics, strove to understand the world as
it was, with all the problems of unemployment and market power that simplistic models of competitive
markets ignore. In those models, unemployment didn't exist. Galbraith knew that made them fatally
... ... ...
In his early research, Galbraith attempted to explain what had brought on the Great Crash of 1929
– including the role of the stock market's speculative greed fed by (what would today be called)
irrational exuberance. Friedman ignored speculation and the failure of the labor market as he focused
on the failures of the Federal Reserve. To Friedman, government was the problem, not the solution.
What Galbraith understood, and what later researchers (including this author) have proved, is
that Adam Smith's "invisible hand" – the notion that the individual pursuit of maximum profit guides
capitalist markets to efficiency – is so invisible because, quite often, it's just not there. Unfettered
markets often produce too much of some things, such as pollution, and too little of other things,
such as basic research. As Bruce Greenwald and I have shown, whenever information is imperfect –
that is, always – markets are inefficient; hence the need for government action.
Galbraith reminded us that what made the economy work so well was not an invisible hand but countervailing
powers. He had the misfortune of articulating these ideas before the mathematical models of game
theory were sufficiently developed to give them expression. The good news is that today, more attention
is being devoted to developing models of these bargaining relationships, and to complex, dynamic
models of economic fluctuations in which speculation may play a central role.
While Friedman never really appreciated the limitations of the market, he was a forceful critic
of government. Yet history shows that in every successful country, the government had played an important
role. Yes, governments sometimes fail, but unfettered markets are a certain prescription for failure.
Galbraith made this case better than most.
Galbraith knew, too, that people aren't just rational economic actors, but consumers, contending
with advertising, political persuasion, and social pressures. It was because of his close touch with
reality that he had such influence on economic policymaking, especially during the Kennedy-Johnson
Galbraith's penetrating insights into the nature of capitalism – as it is lived, not as
it is theorized in simplistic models – has enhanced our understanding of the market economy.
He has left an intellectual legacy for generations to come. And he has left a gap in our intellectual
life: Who will stand up against the economics establishment to articulate an economic vision that
is both in touch with reality and comprehensible to ordinary citizens?
Galbraith was vindicated in his belief that the only economics possible is political economics and
that government is always an agent of dominant class. As such it always pursue poklitics favorable
to this class, just making marginal efforts to prevent the open revolt of lower classes.
In 2008 neoliberal economist such as Krugman and (to a lesse extent) Stiglitz
both have eaten humble pie, because according to neoclassical economics the crises should not have happened.
Both should now reread Galbraith's
The Great Crash: 1929 (see also
Krugman also need to shred his previous writings with this mathiness execises of using differential
equations to justify the dominance of financial oligarchy, and eat them with borsch ;-)
BTW it is interesting that in 1996 neoliberal stooge Paul Krugman criticized limitations of Galbright vision in the following
To be both a liberal and a good economist you must have a certain sense of the tragic--that is,
you must understand that not all goals can be attained, that life is a matter of painful tradeoffs.
You must want to help the poor, but understand that welfare can encourage dependency. You must want
to protect those who lose their jobs, but admit that generous unemployment benefits can raise the
long-term rate of unemployment. You must be willing to tax the affluent to help those in need, but
accept that too high a rate of taxation can discourage investment and innovation.
To the free-market conservative, these are all arguments for government to do nothing, to accept
whatever level of poverty and insecurity the market happens to produce. A serious liberal does not
reply to such conservatives by denying that there are any trade-offs at all; he insists, rather,
that some trade-offs are worth making, that helping the poor and protecting the unlucky may have
costs but will ultimately make for a better society.
The revelation one gets from reading John Kenneth Galbraith's The Good Society is that Galbraith--who
is one of the world's most celebrated intellectuals, and whom one would expect to have a deeper appreciation
of the complexity of the human condition than a mere technical economist would -- lacks this tragic
sense. Galbraith's vision of the economy is one without shadows, in which what is good for social
justice always turns out to have no unfavorable side effects. If this vision is typical of liberal
intellectuals, the ineffectuality of the tribe is not an accident: It stems from a deep-seated unwillingness
to face up to uncomfortable reality.
Similar limited understanding of Galbright is demonstrated in London Times (cited from comment to
Economist's View blog) :
Some motifs of Galbraith’s work have entered popular consciousness. Galbraith wrote of private
opulence amid public squalor, illustrating it with a memorable metaphor of a family that travels
by extravagant private car to picnic by a polluted river.
Yet while arguing for increased public expenditure on welfare, Galbraith gave scant attention
to the limits of that approach. His writings perpetuate a debilitating weakness of modern liberalism:
a reluctance to acknowledge that resources are scarce.
In Galbraith’s scheme, said Herbert
Stein, the former chairman of the Council of Economic Advisers: “The American people were only asked
whether they wanted cleaner air and water . . . The answers to such questions seemed obvious — but
they were not the right questions.”
This idea of "casino capitalism" as a driver of financial instability was developed further in the
The Crisis of Global Capitalism by prominent financial speculator and staunch neoliberal George Soros (1998), who
after Minsky highlights the potential for disequilibrium
in the financial system, and the inability of non-market sectors to regulate markets.
the latter is a prominant feature of Casino Capitalism, which can be defined as economic system
were financial barons run amok.
Although the insights of the Soros critique of global capitalism are scarcely new, they were articulated
with such candor and accuracy that the book made a significant impact. The following is a sampling of
Unregulated financial markets are inherently unstable. There is nothing new in this
statement. It is just a repetition of what Keynes and Minsky said much more eloquently. But Soros
made in important observation about the source of constant disequilibrium of markets under
neoliberalism, the observation which permitted for him to achieve spectacular success as a
financial speculator. Soros observes that, contrary to
conventional economic theory, financial markets are not driven toward a relatively stable and rational
price by the objective value assessment of such things as the soundness of a company's management,
products, or record of profitability. Rather they are constantly driven away from equilibrium by the momentum of self-fulfilling expectations -- a rising stock price
attracts buyers who further raise the price-to the point of collapse. The recent massive inflation
and subsequent collapse in the price of the shares of unprofitable dot-com companies illustrates
Bank lending also contributes to the instability, because the price of real and financial assets
is set in part by their collateral value. The higher their market price rises the larger the loans
banks are willing to make to their buyers to bid up prices. When the bubble bursts, the value
of the assets plummets below the amount of the money borrowed against them. This forces banks
to call their loans and cut back on the lending, which depresses asset prices and dries up the
money supply. The economy then tanks-until credit worthiness is restored and a new boom phase
Financial markets are amoral by definition. Following Napoleon Bonaparte ("Money
has no motherland; financiers are without patriotism and without decency; their sole object is
gain. "), Soros stressed
that there is no meaningful place for individual moral behavior of financial oligarchy in the context of financial markets,
because such behavior has no consequences for them other than to reduce the financial return
of a more ethical
actor. In other words modern finance is breeding ground for ruthless sociopath, which
we really observed during 2008.
When I bought shares in Lockheed and Northrop after the managements were indicted for bribery,
I helped sustain the price of their stocks. When I sold sterling short in 1992, the Bank of England
was on the other side of my transactions, and I was in effect taking money out of the pockets
of British taxpayers. But if I had tried to take social consequences into account, it would have
thrown off my risk-reward calculation, and my profits would have been reduced.
Soros argues that if he had not bought Lockheed and Northrop, then somebody else would have, and
Britain would have devalued sterling no matter what he did. "Bringing my social conscience into
the decision-making process would make no difference in the real world; but it may adversely affect
my own results." One can challenge the Soros claim that such behavior is amoral rather than immoral,
but his basic argument is accurate. His understanding that it is futile to look to individual morality
as the solution to the excesses of financial markets is all too accurate.
Corporate employees are duty-bound to serve only corporate financial interests.As
such financial institution are closely related to organized crime and top layers of managers are
essentially institualized criminals. Soros
Publicly owned companies are single-purpose organizations-their purpose is to make money. The
tougher the competition, the less they can afford to deviate. Those in charge may be well-intentioned
and upright citizens, but their room for maneuver is strictly circumscribed by the position they
They are duty-bound to uphold the interests of the company. If they think that cigarettes
are unhealthy or that fostering civil war to obtain mining concessions is unconscionable, they
ought to quit their jobs. Their place will be taken by people who are willing to carry on.
Though not specifically mentioned by Soros, this is why corporations were in the past (at least
partially) excluded from the political processes (although it was never complete and it is well known
fact that Crusades and
Siege of Constantinople
(1204) were financed by Genoese
bankers upset by lack of access to the Byzantium markets). But at least formally other parts of the
society can define their goals and the rules of the marketplace and suppress excessive appetities
of banker, if nessesary by brute force. Financial oligarchy is incapable of distinguishing
between private corporate interests and broader public interests. And that situation became even
worse with the the global dominance of corporatism in the form of neoliberalism.
Financial markets are oblivious to externalities and are infected by "short-termism". Specifically
the fact that a strategy or policy produces economic returns in the short-term does not mean the
long-term results will be beneficial. The focus of financial markets is on short-term individual
gain to the exclusion of both social and longer-term consequences. The fact that particular policies
and strategies are effective in producing short-term financial returns does not mean they are more
generally beneficial or desirable. Soros offers the example that running up a budget or trade deficit
"feels good while it lasts, but there can be hell to pay later."
The relationship between the center and the periphery of the capitalist system is profoundly
unequal. The powerful countries at the center of the capitalist system are both wealthier and
more stable than countries at the periphery because control of the financial system and ownership
of productive assets allows them to shape economic and political affairs to their benefit.
"Foreign ownership of capital deprives peripheral countries of autonomy and often hinders the
development of democratic institutions. The international flow of capital is subject to catastrophic
In times of uncertainty financial capital tends to return to its country of origin, thus depriving
countries at the periphery of the financial liquidity necessary to the function of monetized economies.
"The center's most important feature is that it controls its own economic policies and holds in its
hands the economic destinies of periphery countries."
In the capitalist system greed (aka "monetary values") tend to displace social values in sectors
where this is destructive to important public interests. Soros writes:
Monetary values [under neoliberalism] have usurped the role of intrinsic values, and markets have come to dominate
spheres of existence where they do not properly belong.
Law and medicine, politics, education,
science, the arts, even personal relations-achievements or qualities that ought to be valued for
their own sake are converted into monetary terms; they are judged by the money they fetch rather
than their intrinsic value."
Because financial "capital is free to go where most rewarded, countries vie to attract and retain
capital, and if they are to succeed they must give precedence to the requirements of international
capital over other social objectives.
Ha-Joon Chang, Reader in the Political Economy of Development at Cambridge University, has
written a fascinating book on capitalism's failings. He also wrote the brilliant Bad Samaritans.
Martin Wolf of the Financial Times says he is `probably the world's most effective critic of globalization'.
Chang takes on the free-marketers' dogmas and proposes ideas like
there is no such thing as a free market;
the washing machine has changed the world more than the internet has--[ I respectfully
we do not live in a post-industrial age;
globalization isn't making the world richer;
governments can pick winners;
some rules are good for business;
US (and British) CEOs are overpaid;
more education does not make a country richer;
and equality of opportunity, on its own, is unfair.
He notes that the USA does not have the world's highest living standard. Norway, Luxemburg,
Switzerland, Denmark, Iceland, Ireland, Sweden and the USA, in that order, had the highest incomes
per head. On income per hours worked, the USA comes eighth, after Luxemburg, Norway, France, Ireland,
Belgium, Austria and the Netherlands. Japan, Switzerland, Singapore, Finland and Sweden have the
highest industrial output per person.
Free-market politicians, economists and media have pushed policies of de-regulation and
pursuit of short-term profits, causing less growth, more inequality, more job insecurity and more
frequent crises. Britain's growth rate in income per person per year was 2.4 per cent
in the 1960s-70s and 1.7 per cent 1990-2009. Rich countries grew by 3 per cent in the 1960s-70s
and 1.4 per cent 1980-2009. Developing countries grew by 3 per cent in the 1960s-70s and 2.6 per
cent 1980-2009. Latin America grew by 3.1 per cent in the 1960s-70s and 1.1 per cent 1980-2009,
and Sub-Saharan Africa by 1.6 per cent in the 1960s-70s and 0.2 per cent 1990-2009. The world
economy grew by 3.2 per cent in the 1960s-70s and 1.4 per cent 1990-2009.
So, across the world, countries did far better before Thatcher and Reagan's `free-market revolution'.
Making the rich richer made the rest of us poorer, cutting economies' growth rates, and investment
as a share of national output, in all the G7 countries.
Chang shows how free trade is not the way to grow and points out that the USA was the
world's most protectionist country during its phase of ascendancy, from the 1830s to the 1940s,
and that Britain was one of world's the most protectionist countries during its rise, from the
1720s to the 1850s.
He shows how immigration controls keep First World wages up; they determine wages more than
any other factor. Weakening those controls, as the EU demands, lowers wages.
He challenges the conventional wisdom that we must cut spending to cut the deficit. Instead,
we need controls capital, on mergers and acquisitions, and on financial products. We need
the welfare state, industrial policy, and huge investment in industry, infrastructure, worker
training and R&D.
As Chang points out, "Even though financial investments can drive growth for a while, such
growth cannot be sustained, as those investments have to be ultimately backed up by viable long-term
investments in real sector activities, as so vividly shown by the 2008 financial crisis."
This book is a commonsense, evidence-based approach to economic life, which we should urge
all our friends and colleagues to read.
Loyd E. Eskildson
The 2008 'Great Recession' demands re-examination of prevailing economic thought - the dominant
paradigm (post 1970's conservative free-market capitalism) not only failed to predict the crisis,
but also said it couldn't occur in today's free markets, thanks to Adam Smith's 'invisible hand.'
Ha-Joon Chang provides that re-examination in his "23 Things They Don't Tell You About Capitalism."
Turns out that the reason Adam Smith's hand was not visible is that it wasn't there. Chang, economics
professor at the University of Cambridge, is no enemy of capitalism, though he contends its current
conservative version should be made better. Conventional wisdom tells us that left alone, markets
produce the most efficient and just outcomes - 'efficient' because businesses and individuals
know best how to utilize their resources, and 'just' because they are rewarded according to their
productivity. Following this advice, countries have deregulated businesses, reduced taxes and
welfare, and adopted free trade. The results, per Chang, has been the opposite of what was promised
- slower growth and rising inequality, often masked by rising credit expansion and increased working
hours. Alternatively, developing Asian countries that grew fast did so following a different version
of capitalism, though to be fair China's version to-date has also produced much greater inequality.
The following summarizes some of Chang's points:
"There is no such thing as a free market" - we already have hygiene standards in
restaurants, ban child labor, pollution, narcotics, bribery, and dangerous workplaces, require
licenses for professions such as doctors, lawyers, and brokers, and limit immigration. In 2008,
the U.S. used at least $700 billion of taxpayers' money to buy up toxic assets, justified by
President Bush on the grounds that it was a necessary state intervention consistent with free-market
capitalism. Chang's conclusion - free-marketers contending that a certain regulation should
not be introduced because it would restrict market freedom are simply expressing political
opinions, not economic facts or laws.
"Companies should not be run in the interest of their owners." Shareholders are
the most mobile of corporate stakeholders, often holding ownership for but a fraction of a
second (high-frequency trading represents 70% of today's trading). Shareholders prefer corporate
strategies that maximize short-term profits and dividends, usually at the cost of long-term
investments. (This often also includes added leverage and risk, and reliance on socializing
risk via 'too big to fail' status, and relying on 'the Greenspan put.') Chang adds that corporate
limited liability, while a boon to capital accumulation and technological progress, when combined
with professional managers instead of entrepreneurs owning a large chunk (e.g.. Ford, Edison,
Carnegie) and public shares with smaller voting rights (typically limited to 10%), allows professional
managers to maximize their own prestige via sales growth and prestige projects instead of maximizing
profits. Another negative long-term outcome driven by shareholders is increased share buybacks
(less than 5% of profits until the early 1980s, 90% in 2007, and 280% in 2008) - one economist
estimates that had GM not spent $20.4 billion on buybacks between 1986 and 2002 it could have
prevented its 2009 bankruptcy. Short-term stockholder perspectives have also brought large-scale
layoffs from off-shoring. Governments of other countries encourage longer-term thinking by
holding large shares in key enterprises (China Mobile, Renault, Volkswagen), providing greater
worker representation (Germany's supervisory boards), and cross-shareholding among friendly
companies (Japan's Toyota and its suppliers).
"Free-market policies rarely make poor countries rich." With a few exceptions, all
of today's rich countries, including Britain and the U.S., reached that status through protectionism,
subsidies, and other policies that they and their IMF, WTO, and World Bank now advise developing
nations not to adopt. Free-market economists usually respond that the U.S. succeeded despite,
not because of, protectionism. The problem with that explanation is the number of other nations
paralleling the early growth strategy of the U.S. and Britain (Austria, Finland, France, Germany,
Japan, Korea, Singapore, Sweden, Taiwan), and the fact that apparent exceptions (Hong Kong,
Switzerland, The Netherlands) did so by ignoring foreign patents (a free-market 'no-no'). Chang
believes the 'official historians' of capitalism have been very successful re-writing its history,
akin to someone trying to 'kick away the ladder' with which they had climbed to the top. He
also points out that developing nations that stick to their Ricardian 'comparative advantage,'
per the conservatives prescription, condemn themselves to their economic status quo.
"We do not live in a post-industrial age." Most of the fall in manufacturing's share
of total output is not due to a fall in the quantity of manufactured goods, but due to the
fall in their prices relative to those for services, caused by their faster productivity growth.
A small part of deindustrialization is due to outsourcing of some 'manufacturing' activities
that used to be provided in-house - e.g.. catering and cleaning. Those advising the newly developing
nations to skip manufacturing and go directly to providing services forget that many services
mainly serve manufacturing firms (finance, R&D, design), and that since services are harder
to export, such an approach will create balance-of-payment problems. (Chang's preceding points
directly contradict David Ricardo's law of comparative advantage - a fundamental free market
precept. Chang's example of how Korea built Pohang Steel into a strong economic producer, despite
lacking experienced managers and natural resources, is another.)
"The U.S. does not have the highest living standard in the world." True, the average
U.S. citizen has greater command over goods and services than his counterpart in almost any
other country, but this is due to higher immigration, poorer employment conditions, and working
longer hours for many vs. their foreign counterparts. The U.S. also has poorer health indicators
and worse crime statistics. We do have the world's second highest income per capita - Luxemburg's
higher, but measured in terms of purchasing power parity (PPP) the U.S. ranks eighth. (The
U.S. doesn't have the fastest growing economy either - China is predicted to pass the U.S.
in PPP this coming decade.) Chang's point here is that we should stop assuming the U.S. provides
the best economic model. (This is already occurring - the World Bank's chief economist, Justin
Lin, comes from China.)
"Governments can pick winners." Chang cites examples of how the Korean government
built world-class producers of steel (POSCO), shipbuilding (Hyundai), and electronics (LG),
despite lacking raw materials or experience for those sectors. True, major government failures
have occurred - Europe's Concorde, Indonesia's aircraft industry, Korea's promotion of aluminum
smelting, and Japan's effort to have Nissan take over Honda; industry, however, has also failed
- e.g.. the AOL-Time Warner merger, and the Daimler-Chrysler merger. Austria, China, Finland,
France, Japan, Norway, Singapore (in numerous other areas), and Taiwan have also done quite
well with government-picked winners. Another problem is that business and national interests
sometimes clash - e.g.. American firms' massive outsourcing has undermined the national interest
of maintaining full employment. (However, greater unbiased U.S. government involvement would
be difficult due to the 10,000+ corporate lobbyists and billions in corporate campaign donations
- $500 million alone from big oil in 2009-10.) Also interesting to Chang is how conservative
free marketing bankers in the U.S. lined up for mammoth low-cost loans from the Federal Reserve
at the beginning of the Great Recession. Government planning allows minimizing excess capacity,
maximizing learning-curve economies and economies of scale and scope; operational performance
is enhanced by also forcing government-owned or supported firms into international competition.
Government intervention (loans, tariffs, subsidies, prohibiting exports of needed raw materials,
building infrastructure) are necessary for emerging economies to move into more sophisticated
"Making rich people richer doesn't make the rest of us richer." 'Trickle-down' economics
is based on the belief that the poor maximize current consumption, while the rich, left to
themselves, mostly invest. However, the years 1950-1973 saw the highest-ever growth rates in
the U.S., Canada, Australia, and New Zealand, despite increased taxation of the rich. Before
the 'Golden Age,' per capita income grew at 1-1.5%/year; during the Golden Age it grew at 2-3%
in the U.S. Since then, tax cuts for the rich and financial deregulation have allowed greater
paychecks for top managers and financiers, and between 1979 and 2006 the top 0.1% increased
their share of national income from 3.5% to 11.6%. The result - investment as a ratio of national
output has fallen in all rich economies and the pace at which the total economic pie grew decreased.
"U.S. managers are over-priced." First, relative to their predecessors (about 10X
those in the 1960s; now 300-400X the average worker), despite the latter having run companies
more successfully, in relative terms. Second, compared to counterparts in other rich countries
- up to 20X. (Third, compared to counterparts in developing nations - e.g.. JPMorgan Chase,
world's 4th largest bank, paid its CEO $19.6 million in 2008, vs. the CEO of the Industrial
and Commercial Bank of China, the world's largest, being paid $234,700.
Read more ›
In short each financial
crisis make recovery longer and longer. That's why the US will most likely face a long period
of stagnation: the digestion of huge excessive debt of the private sector might well take a decade:
Since the excess of debt is relative to income and GDP, the lower the rate of growth, the longer
the required period of digestion. This explains for the paradox of trying to stimulate consumption
when the economy faces a monumental crisis provoked exactly by excessive debt and excessive consumption.
A cartoon line best captured the spirit of it: "country addicted to speculative bubbles desperately
searches a new bubble to invest in. "
... ... ...
The roots of the crisis are major international macroeconomic imbalances. Despite the fact that
the excesses of the financial system were instrumental to lead these imbalances further than otherwise
possible, insufficient regulation should not be viewed as the main factor behind the crisis. The
expenditure of central countries, spinned by all sort of financial innovations created by a globalized
financial system, was the engine of world growth. When debt became clearly excessive in central countries
and the debt-financed expenditure cycle came to an end, the ensuing crisis paralyzed the world economy.
With the lesson of 1929 well assimilated, American monetary policy became aggressively expansionist.
The Fed inundated the economy with money and credit, in the attempt to avoid a deep depression. Even
if successful, the economies of the US and the other central countries, given the burden of excessive
debt, are likely to remain stagnant under the threat of deflation for the coming years. The assumption
of troubled assets by the public sector, in order to avoid the collapse of the financial system,
might succeed, but at the cost of a major increase in public debt. Fiscal policy is not efficient
to restart the economy when the private sector remains paralyzed by excessive debt. Even if a coordinated
effort to increase public expenditure is successful, the central economies will remain stagnant for
as long as the excessive indebtedness of the private sector persists. The period of digestion of
excess debt will be longer than the usual recessive cycle. Since imports represent a drain in the
effort to reanimate domestic demand through public expenditure, while exports, on the contrary, contribute
to the recovery of internal demand, the temptation to central economies to also adopt a protectionist
stance will be strong.
This regulatory capture has resulted in an excess sensitivity of the Fed to financial market and
financial sector concerns and fears and in an overestimation of the strength of the link between
financial market turmoil and financial sector deleveraging and capital losses on the one hand, and
the stability and prosperity of the wider economy on the other hand. The paper gives five examples
of recent behavior by the Fed that are most readily rationalized with the assumption of regulatory
capture. The abstract of the paper follows next. The latest version of the entire enchilada can be
found here. Future revisions
will also be found there.
Stiglitz is very unene and early Striglist was actually defender of neoliberalism (aka casino
capitalism). Later he became a critic.
In his 2008 Vanity Fair article
Stiglitz identifies five key steps in transformation of American capitalism to Casino Capitalism
(moments of failure as he called them):
No. 1: Reagan Fires Fed Chairman Volcker and Replaces Him With Greenspan in 1987:
Volcker also understood that financial markets need to be regulated. Reagan wanted someone who
did not believe any such thing, and he found him in a devotee of the objectivist philosopher and
free-market zealot Ayn Rand.
If you appoint an anti-regulator as your enforcer, you know what kind of enforcement you’ll
get. A flood of liquidity combined with the failed levees of regulation proved disastrous.
Greenspan presided over not one but two financial bubbles.
Congress repealed the Glass-Steagall Act in 1999 under Bill Clinton (Glass-Steagall
was a depression-era reform that separated commercial and investment banks)
I had opposed repeal of Glass-Steagall. The proponents said, in effect, Trust us: we will
create Chinese walls to make sure that the problems of the past do not recur. As an economist,
I certainly possessed a healthy degree of trust, trust in the power of economic incentives to bend
human behavior toward self-interest—toward short-term self-interest, at any rate, rather than
Tocqueville’s "self interest rightly understood."
Stiglitz also refers to a 2004 decision by the SEC "to allow big investment banks to increase
their debt-to-capital ratio (from 12:1 to 30:1, or higher) so that they could buy more mortgage-backed
securities, inflating the housing bubble in the process."
Once more, it was deregulation run amuck, and few even noticed.
The Bush tax cuts, both on income and capital gains
The Bush administration was providing an open invitation to excessive borrowing and lending—not
that American consumers needed any more encouragement.
Faking the Numbers
Here he refers to bad accounting, the failure to address problems with stock options, and the
incentive structures of ratings agencies like Moodys that led them to give high ratings to toxic
Paulson and the Flawed Bailout
Valuable time was wasted as Paulson pushed his own plan, "cash for trash," buying up the bad assets
and putting the risk onto American taxpayers. When he finally abandoned it, providing banks with
money they needed, he did it in a way that not only cheated America’s taxpayers but failed to ensure
that the banks would use the money to re-start lending. He even allowed the banks to pour out money
to their shareholders as taxpayers were pouring money into the banks.
The truth is most of the individual mistakes boil down to just one: a belief that markets are
self-adjusting and that the role of government should be minimal. Looking back at that belief during
hearings this fall on Capitol Hill, Alan Greenspan said out loud, "I have found a flaw." Congressman
Henry Waxman pushed him, responding, "In other words, you found that your view of the world, your
ideology, was not right; it was not working." "Absolutely, precisely," Greenspan said. The embrace
by America—and much of the rest of the world—of this flawed economic philosophy made it inevitable
that we would eventually arrive at the place we are today.
The flawed economic philosophy brought by Reagan, and embraced by so many, brought us to this day.
Ideas have consequences, especially when we stop empirically testing them. Republican economics have
created great pain to America and harmed our national interest.
The flaw that Greenspan found was always there: self-regulation does not work. As Stiglitz said:
As an economist, I certainly possessed a healthy degree of trust, trust in the power of economic
incentives to bend human behavior toward self-interest — toward short-term self-interest
Yes, for all their claims to science, the premise conflicts with tendencies of people.
This is the real legacy of Ronald Reagan and Alan Greenspan:
The whole scheme was kick-started under Ronald Reagan. Between his tax cuts for the rich
and the Greenspan Commission’s orchestrated Social Security heist, working Americans lost out in
a generational wealth transfer shift now exceeding $1 trillion annually from 90 million working class
households to for-profit corporations and the richest 1% of the population. It created an unprecedented
wealth disparity that continues to grow, shames the nation and is destroying the bedrock middle class
without which democracy can’t survive.
Greenspan helped orchestrate it with economist Ravi Batra calling his economics "Greenomics" in
his 2005 book "Greenspan’s Fraud." It "turns out to be Greedomics" advocating anti-trust laws, regulations
and social services be ended so "nothing....interfere(s) with business greed and the pursuit of profits."
Instead of conclusion I will reproduce the post from Sudden Debt (March
Animal Farm all animals are equal - except that some are more equal than others. All in the spirit
of law, order and the proper functioning of society, of course. Fittingly, the animals that have
chosen this role by themselves and for themselves, are the pigs.
Cut to US financial
markets today. After years of swinish behavior more reminiscent of
Animal House than anything else, the pigs are threatening to destroy the entire farm. As if it
wasn't enough that they devoured all the "free market" food available and inundated the world with
their excreta, they now wish to be put on the public trough. Truly, some businessmen believe they
are more equal than others.
But do not blame the pigs; they are expected to act as swine nature dictates. The fault lies entirely
with the farmers, those authorities entrusted by the people to oversee the farm because they supposedly
knew better. While the pigs were rampaging and tearing the place apart, they were assuring us all
that farms function best when animals are free to do as they please, guided solely by invisible hooves.
No regulation, no oversight, no common sense. Oh yes, and pigs fly..
So what is to be done now? Two things:
(a) Let financial markets sort themselves out, but with rock solid backing for bank depositors,
pension funds and public institutions. The public purse should not be used to bail out - directly
or indirectly - speculators in hedge funds, private equity funds and the like. Those that live
by the leverage sword can defend themselves or perish by credit destruction.
(b) Revamp public policy towards increasing earned income for working people.
In other words, the focus from now on should be on adding value by means of work and savings (capital
formation), instead of inflating assets and borrowing.
Furthermore, we should realize that in a world already inhabited by close to 7 billion people
and beset by resource depletion and environmental degradation, defending growth for growth's sake
is a losing proposition. The wheels are already wobbling on the Permagrowth model; pumping harder
on the accelerator is not going to make it go any faster and will likely result in a fatal crash.
Debt, and finance in general, should be left to re-size downwards to a level that better reflects
the carrying capacity of our world. The Fed's current actions are shortsighted and "conservative"
in the worst interpretation of the words: they are designed to artificially maintain debt at levels
that myopically projects growth as far as the eye can see.
What level of resizing may be necessary? I hope not as much as at Bear Stearns, which got itself
bought by Morgan at buzz-saw prices: $2 per share represents a 98% discount from its $84 book value.
What scares me, though, is the
statement by Morgan's CFO, who said the price reflected the risk the firm was taking, even though
he was comfortable with the valuation of assets in Bear's books. It "...gives us the flexibility
and margin of error that's appropriate given the speed at which the transaction came together", he
If it takes a 98% discount and the explicit guarantee of the Fed for a large portion of assets
to buy one of the largest investment banks in the world, where should all other financial firms be
trading at? ....Hello? Anyone? Is that a great big silence I hear, or the sound of credit imploding
into a vacuum?
Education is a prime example of where neoliberalism has had a negative effect. It worked well
when labour was pumping billions into it and they invested in early intervention schemes such
as sure start and nursery expansion. Unfortunately under the tories we have had those
progressive policies scaled right back. Children with SEND and/or in care are commodities
bought and sold by local authorities. I've been working in a PRU which is a private company
and it does good things, but I can't help but think if that was in the public sector that it
would be in a purpose built building rather than some scruffy office with no playground.
The facilities aren't what you would expect in this day in age. If we had a proper
functioning government with a plan then what happens with vulnerable children would be
properly organised rather than a reactive shit show.
"Schools teach to the test, depriving children of a rounded and useful education."
Boy do they. I work in Business/IT training and as the years have rolled on I and every
colleague I can think of have noticed more and more people coming to courses that they are
unfit for. Not because they are stupid, but because they have been taught to be stupid. So
used to being taught to the test that they are afraid to ask questions. Increasingly I get
asked "what's the right way to do...", usually referring to situation in which there is no
right way, just a right way for your business, at a specific point in time.
I had the great pleasure of watching our new MD describe his first customer-facing project,
which was a disaster, but they "learned" from it. I had to point out to him that I teach the
two disciplines involved - businesss analysis and project management - and if he or his team
had attended any of the courses - all of which are free to them - they would have learned
about the issues they would face, because (astonishingly) they are well-known.
I fear that these incurious adult children are at the bottom of Brexit, Trump and many of the
other ills that afflict us. Learning how to do things is difficult and sometimes boring. Much
better to wander in with zero idea of what has already been done and repeat the mistakes of
the past. I see the future as a treadmill where the same mistakes are made repetitively and
greeted with as much surprise as if they had never happened before. We have always been at
war with Eastasia...
Tensions in the Persian Gulf are reaching a
of no return
In recent weeks,
have been subjected to
disguised to look like Iranian attacks to induce the United States to take
military action against the Islamic Republic. Some days ago Iran rightfully shot out of the sky a
US Drone. In Yemen, the Houthis have finally started
cruise and ballistic missiles to the Saudis' indiscriminate attacks, causing damage to the Saudi
international airport of Abha, as well as blocking, through
, Saudi oil transportation from east to west through one of the largest
pipelines in the world.
The military-industrial complex would in turn be involved in a war that it would struggle to
contain and even win, destroying the United States' image of invincibility and inflicting a mortal
blow on its ability to project power to the four corners of the world.
Just look at how surprised
were about Iran's capabilities to shot down an advanced US Drone:
"Iran's ability to target and destroy the high-altitude American drone, which was
developed to evade the very surface-to-air missiles used to bring it down, surprised some
Defense Department officials, who interpreted it as a show of how difficult Tehran can make
things for the United States as it deploys more troops and steps up surveillance in the region."
The Fed and the defense of the dollar
The US dollar-based economy has a
huge debt problem
by post-2008 economic policies. All central banks have lowered interest rates to zero or even
negative, thus continuing to feed otherwise dying economies.
The central bank of central banks, the Bank for International Settlements, an entity hardly
known to most people, has
that "the outstanding notional amount of derivative contracts is 542 trillion dollars." The total
combined GDP of all the countries of the world is around 75 trillion dollars.
With the dimensions of the problem thus understood, it is important to look at how Deutsche Bank
(DB), one of the largest financial institutions in the world, is dealing with this. The German bank
alone has assets worth about 40 trillion dollars in derivatives, or more than half of annual global
Their solution, not at all innovative or effective, has been to create yet another bad bank into
which to pour at least 50 billion dollars of long-term assets, which are clearly toxic.
"The bad bank would house or sell assets valued at up to 50 billion euros ($56 billion) –
after adjusting for risk – and comprising mainly long-dated derivatives.
The measures are part of a significant restructuring of the investment bank, a major
source of revenue for Germany's largest lender, which has struggled to generate sustainable
profits since the 2008 financial crisis."
Thus, not only has Deutsche Bank accumulated tens of billions of dollars in unsuccessful options
and securities, it seeks to obtain a profit that has been elusive since 2008, the year of the
financial crisis. Deutsche Bank is full of toxic bonds and inflated debts kept alive through the
flow of quantitative easing (QE) money from the European Central Bank, the Fed and the Japanese
Central Bank. Without QE, the entire Western world economy would have fallen into recession with a
chain of bubbles bursting, such as in public and private debt.
If the economy was recovering, as we are told by soi-disant financial experts, the central-bank
rates would rise. Instead, rates have plummeted for about a decade, to the extent of becoming
If the Western financial trend is undoubtedly heading towards an economic abyss as a result of
the monetary policies employed after 2008 to keep a dying economy alive,
what is the rescue
plan for the US dollar, its status as a global-reserve currency, and by extension of US hegemony?
Simply put, there is no rescue plan.
There could not be one because the next financial crisis will undoubtedly wipe out the US dollar
as a global reserve currency, ending US hegemony financed by unlimited spending power.
countries possessing a modicum of foresight are in the process of de-dollarizing their economies
and are converting strategic reserves
from US or US-dollar government bonds to primary
commodities like gold.
The military-industrial complex and the harsh reality in Iran
In this economic situation that offers no escape, the immediate geopolitical effect is a surge
of war threats in strategic locations like the Persian Gulf. The risk of a war of aggression
against Iran by the Saudi-Israeli-US axis would have little chance of success, but it would
probably succeed in permanently devastating the global economy as a result of a surge in oil
The risk of war on Iran by this triad seems to be the typical ploy of the bad loser who,
rather than admit defeat, would rather pull the rug out from under everyone's feet in order to
bring everybody down with him.
Tankers being hit and then blamed on Iran with no evidence
are a prime example of how to create the
for bombing Tehran.
Upon closer examination, it becomes apparent that the actions of Bolton and Pompeo seem to be
aligned in prolonging the United States' unipolar moment, continuing to issue diktats to other
countries and failing to recognize the multipolar reality we live in. Their policies and actions
are accelerating the dispersal of power away from the US and towards other great powers like Russia
and China, both of which also have enormous influence in the Persian Gulf.
The threat of causing a conflict in the Persian Gulf, and thereby making the price of oil soar
to $300 a barrel, will not save US hegemony but will rather end up accelerating the inevitable end
of the US dollar as a global reserve currency.
Trump is in danger of being crushed between a Fed that sees the US dollar's role as the world's
reserve currency collapse, and the need for the Fed to blame someone not linked to the real causes
of the collapse, that is to say, the monetary policies adopted through QE to prolong the
post-crisis economic agony of 2008.
At the same time, with Trump as president, the neocon-Israeli-Saudi supporters see a
unique opportunity to strike Iran, a desire that has remained unchanged for 40 years.
As foolish as it may seem, a war on Iran could be the perfect option that satisfies all power
groups in the United States. The hawks would finally have their war against Tehran, the world
economy would sink, and the blame would fall entirely on Trump. The Donald, as a result, would lose
any chance of being re-elected so it makes sense for him to call off possible strikes as he did
after the US drone was shot out of the sky.
While unable to live up to his electoral promises, Trump seems to be aware that the path laid
out for him in the event of an attack on Iran would lead to his political destruction and probably
to a conflict that is militarily unsustainable for the US and especially its Saudi and Israeli
allies. It would also be the catalyst for the collapse of the world economy.
In trying to pressure Iran into new negotiations, Trump runs the risk of putting too much
pressure on Tehran and giving too much of a free hand to the provocations of Pompeo and Bolton that
could end up triggering a war in the Strait of Hormuz.
Putin and Xi Jinping prepare for the worst
Our current geopolitical environment requires the careful and considered attention of relevant
heads of state. The repeated meetings between Putin and Xi Jinping indicate that Russia and China
are actively preparing for any eventuality. The closer we get to economic collapse, the more
tensions and chaos increase around the world thanks to the actions of Washington and her close
Xi Jinping and Putin, who have inherited this chaotic situation, have met at least a
dozen times over the last six months
, more recently meeting at least three times over two
The pressing need is to coordinate and prepare for what will inevitably happen,
once again trying to limit and contain the damage by a United States that is completely out of
control and becoming a danger to all, allies and enemies alike.
As Putin just recently said:
"The degeneration of the universalistic model of globalization and its transformation
into a parody, caricature of itself, where the common international rules are replaced by
administrative and judicial laws of a country or group of countries.
The fragmentation of global economic space with a policy of unbridled economic
selfishness and an imposed collapse. But this is the road to infinite conflict, trade wars and
perhaps not just commercial ones. Figuratively, this is the road to the final struggle of all
It is necessary to draft a more stable and fair development model. These agreements
should not only be written clearly, but should be observed by all participants.
However, I am convinced that talking about a world economic order such as this will
remain a pious desire unless we return to the center of the discussion, that is to say, notions
like sovereignty, the unconditional right of each country to its own path to development and,
let me add, responsibility in the universal sustainable development, not just its own."
The spokesman of the Chancellery of the People's Republic of China, Hua Chun Ying, echoed this
"The American leaders say that 'the era of the commercial surrender of their country has
come to an end', but what is over is their economic intimidation of the world and their
The United States must again respect international law, not arrogate to itself
extraterritorial rights and mandates, must learn to respect its peers in safeguarding
transparent and non-discriminatory diplomatic and commercial relations. China and the United
States have negotiated other disputes in the past with good results and the doors of dialogue
are open as long as they are based on mutual respect and benefits.
But as long as these new trade disputes persist, China informs the government of the
United States of America and the whole world that it will immediately impose duties on each
other, unilaterally on 128 products from the United States of America.
Also, we think we will stop buying US public debt. It's all, good night!"
I wonder if Europeans will understand all this before the impending disaster. I doubt
Tens of thousands of Venezuelans
have reportedly already died as a result of this administration's relentless assault on
their economy; those human beings are no less dead than they would have been if the US had
killed them by dropping cluster bombs on Caracas. Yet these deaths have received virtually no
mainstream media coverage, and Americans, while they
strongly oppose attacking Iran militarily , have had very little to say about Trump's
attacks on the nation's economy. The economy which people use to feed their children, to care
for their elderly and their sick.
I'm titling this essay "Starvation Sanctions Are Worse Than Overt Warfare", and I mean it. I
am not saying that starvation sanctions are more destructive or deadly than overt military
force in and of themselves; what I am saying is that the overall effect is worse, because
there's no public accountability for them and because they deliberately target civilians.
If the US were to launch a barrage of Tomahawk missiles into an Iranian suburb with the goal
of killing civilians, there'd be international outrage and the cohesion of the US-centralized
power alliance would take a major hit. Virtually everyone would recognize this as an
unforgivable war crime. Yet America will be able to kill the same number of civilians with the
same deliberate intention of inflicting deadly force, and it would suffer essentially no
consequences at all. There's no public or international pressure holding that form of violence
at bay, because it's invisible and poorly understood.
It reminds me of the way financial abuse gets overlooked and under-appreciated in our
society. Financial abuse can be more painful and imprisoning than physical or psychological
abuse (and I speak from experience), especially if you have children, yet you don't generally
see movies and TV shows getting made about it. In a society where people have been made to
depend on money for survival, limiting or cutting off their access to it is the same as any
other violent attack upon their personal sovereignty, and can easily be just as destructive.
But as a society we haven't yet learned to see and understand this violence, so it doesn't
attract interest and attention. That lack of interest and attention enables the empire to
launch deadly campaigns targeting civilian populations unnoticed, without any public
accountability. It's great that more people are starting to understand the cost of war, to the
extent that we're even seeing US presidential candidates make opposing it central to their
platforms, but this is happening at a time when overt warfare is becoming more obsolete and
replaced with something subtler and more sinister. We must as a society evolve our
understanding of what starvation sanctions are and what they do, and stop seeing them as in any
way superior or preferable to overt warfare.
The fact that people generally oppose senseless military violence but are unable to see and
comprehend a slow, boa constrictor-like act of slaughter via economic strangulation is why
these siege warfare tactics have become the weapon of choice for the US-centralized empire. It
is a more gradual way of murdering people than overt warfare, but when you control all the
resources and have an underlying power structure which maintains itself amid the comings and
goings of your officially elected government, you're in no hurry. The absence of any public
accountability makes the need for patience a very worthwhile trade-off.
So you see this siege warfare strategy employed everywhere by the US-centralized empire:
saw it with Julian Assange , where Ecuador collaborated with the US to slowly make life
in the embassy more and more hellish in the hope that he'd step outside to be arrested by
seeing it now with Chelsea Manning , who is currently racking up $500 a day fines for her
principled stand against a corrupt grand jury proceeding against Assange, fines which will
double next month to $1,000 a day.
The US-centralized power alliance is so powerful in its ability to hurt nations with
financial influence that in 1990 when Yemen voted against a UN Security Council Resolution
authorizing the attack against Iran, a senior US diplomat was caught on a hot mic telling the
Yemeni ambassador, "That will be the most expensive 'no' vote you ever cast." According to
German author Thomas Pogge , "The US stopped $70 million in aid to Yemen; other Western
countries, the IMF, and World Bank followed suit. Saudi Arabia expelled some 800,000 Yemeni
workers, many of whom had lived there for years and were sending urgently needed money to their
That's real power. Not the ability to destroy a nation with bombs and missiles, but the
ability to destroy it without firing a shot.
It's no wonder, then, that the drivers of this empire work so hard to continue growing and
expanding it. The oligarchs and their allies in opaque government agencies no doubt envision a
world where all noncompliant nations like Iran, Russia and China have been absorbed into the
blob of empire and war becomes obsolete, not because anyone has become any less violent, but
because their economic control will be so complete that they can obliterate entire populations
just by cutting them off from the world economy whenever any of them become disobedient.
This is the only reason Iran is being targeted right now. That's why you'll never hear a
factually and logically sound argument defending Trump's withdrawal from the nuclear deal;
there is none. There was no problem with the JCPOA other than the fact that it barred America
from inflicting economic warfare upon Iran, which it needed for the purpose of toppling the
nation's government so that it can be absorbed into the blob of the US-centralized empire.
And all the innocent human beings who die of starvation and disease? They don't matter.
Imperial violence only matters if there are consequences for it. The price of shoring up the
total hegemony of the empire will have been worth it .
For starters, try reading David Graeber's 'Debt: The first 5000 years' for a comprehensive
account on concepts of money, property, debt and obligation from an anthropological
perspective which soundly buries your cherished assumptions and beliefs about the primacy of
private property and it's conflation with freedom. Perhaps one of the most compelling book
I've read in recent times.
"... Friedrich von Hayek, one of the creed's most revered economic gurus, spent his productive years railing against government old age pension and medical insurance schemes. When he became old and infirm, he signed on for both social security and medicare. ..."
Friedrich von Hayek, one of the creed's most revered economic gurus, spent his productive
years railing against government old age pension and medical insurance schemes. When he
became old and infirm, he signed on for both social security and medicare.
Love it. When push comes to shove all those ideologies and beliefs crumble into the dust of
practical needs. Another individual who cloaked the self-interest of the rich and
powerful into some kind of spurious ideology.
George wrote a rather good article about Von
Hayek a few years ago I seem to remember.
It's no wonder the US is so screwed up these days. Somehow the NeoCons, before and after
stealing the 2,000 election for Bush, with the help of abundance of Liars 4 Hire think tanks
like CATO, CEI, AEI, Heritage Foundation blah, blah, blah, bankrolled by the likes of the
Koch Bros, The Scaifes, Exxon, Monsanto, Dow, Dupont the Nuke Industry etc. were, and are
still able to convince low intelligence people that wrong is right, bad is good, meanness is
"compassion" and abuse is "tough love".
But it only works if those being duped are already predisposed to hateful philosophy, and
that they got in spades with careful conditioning (brainwashing) from bastards like Rush
Limbaugh and Rupert Murdoch, people with no moral scruples whatsoever.
Thus the right today (actually for a long while now) is no more than a collection of
racists and bigots, pathological liars and scammers, charlatans and greedmeisters.
It's why they care nothing for the poor, nothing for protection the environment, nothing
for anyone or anything but themselves. They are the cult of mean.
As former right-wing operative Allen Raymond famously said: "this is not about morality,
this is about winning"
Stiglitz does not explain us what forces can bring this so called "progressive capitalism". So far I not see social forces
that can enact it.
Why financial oligarchy that is the ruling class under the neoliberalism relinquish the power voluntarily, without a fight?
After all they control the state and counterattack any changes: look at color revolution (aka Russiagate) launched against Trump,
who represent adherents of a different flavor of neoliberalism.
Neoliberalism entered zombie stage as ideology was discredited in 2008, but there is not still a viable alternative to it. Trump
is promoting "national neoliberalism" -- neoliberalism without globalization and with trade wars between rival economic blocks.
It might be worse then classic neoliberalism for common people.
"... By contrast, the third camp advocates what I call progressive capitalism , which prescribes a radically different economic agenda, based on four priorities. The first is to restore the balance between markets, the state and civil society. Slow economic growth, rising inequality, financial instability and environmental degradation are problems born of the market, and thus cannot and will not be overcome by the market on its own. Governments have a duty to limit and shape markets through environmental, health, occupational safety and other types of regulation. It is also the government's job to do what the market cannot or will not do, such as actively investing in basic research, technology, education and the health of its constituents. ..."
"... The rise in corporate market power, combined with the decline in workers' bargaining power, goes a long way toward explaining why inequality is so high and growth so tepid. Unless government takes a more active role than neoliberalism prescribes, these problems will likely become much worse, owing to advances in robotisation and artificial intelligence. ..."
"... There is no magic bullet that can reverse the damage done by decades of neoliberalism. But a comprehensive agenda along the lines sketched above absolutely can. Much will depend on whether reformers are as resolute in combating problems like excessive market power and inequality as the private sector is in creating them. ..."
"... This agenda is eminently affordable; in fact, we cannot afford not to enact it. The alternatives offered by nationalists and neoliberals would guarantee more stagnation, inequality, environmental degradation and political acrimony, potentially leading to outcomes we do not even want to imagine. ..."
"... Progressive capitalism is not an oxymoron. Rather, it is the most viable and vibrant alternative to an ideology that has clearly failed. As such, it represents the best chance we have of escaping our current economic and political malaise. ..."
Bill Clinton and Tony Blair represented neoliberalism with a human face but remained beholden to an expired ideology. Photograph:
Mark Lennihan/AP W hat kind of economic system is most conducive to human wellbeing? That question has come to define the current
era, because, after 40 years of neoliberalism in the United States and other advanced economies, we know what doesn't work.
The neoliberal experiment – lower taxes on the rich, deregulation of labour and product markets, financialisation, and globalisation
– has been a spectacular failure. Growth is lower than it was in the quarter-century after the second world war, and most of it has
accrued to the very top of the income scale. After decades of
stagnant or even falling incomes for those below them, neoliberalism must be pronounced dead and buried.
Vying to succeed it are at least three major political alternatives: far-right nationalism, centre-left reformism and the progressive
left (with the centre-right representing the neoliberal failure). And yet, with the exception of the progressive left, these alternatives
remain beholden to some form of the ideology that has (or should have) expired.
The centre-left, for example, represents neoliberalism with a human face. Its goal is to bring the policies of former US president
Bill Clinton and former British prime minister Tony
Blair into the 21st century, making only slight revisions to the prevailing modes of financialisation and globalisation.
Meanwhile, the nationalist right disowns globalisation, blaming migrants and foreigners for all of today's problems. Yet as Donald
Trump's presidency has shown, it is no less committed – at least in its American variant – to tax cuts for the rich, deregulation
and shrinking or eliminating social programmes.
By contrast, the third camp advocates what I call
capitalism , which prescribes a radically different economic agenda, based on four priorities. The first is to restore the balance
between markets, the state and civil society. Slow economic growth, rising inequality, financial instability and environmental degradation
are problems born of the market, and thus cannot and will not be overcome by the market on its own. Governments have a duty to limit
and shape markets through environmental, health, occupational safety and other types of regulation. It is also the government's job
to do what the market cannot or will not do, such as actively investing in basic research, technology, education and the health of
The second priority is to recognise that the "wealth of nations" is the result of
scientific inquiry – learning about the world around us – and social organisation that allows large groups of people to work
together for the common good. Markets still have a crucial role to play in facilitating social cooperation, but they serve this purpose
only if they are governed by the rule of law and subject to democratic checks. Otherwise, individuals can get rich by exploiting
others, extracting wealth through rent-seeking rather than creating wealth through genuine ingenuity. Many of today's wealthy took
the exploitation route to get where they are. They have been well served by Trump's policies, which have encouraged rent-seeking
while destroying the underlying sources of wealth creation. Progressive capitalism seeks to do precisely the opposite.
There is no magic bullet that can reverse the damage done by decades of neoliberalism
This brings us to the third priority: addressing the growing problem of concentrated
market power . By exploiting information advantages, buying up potential competitors and creating entry barriers, dominant firms
are able to engage in large-scale rent-seeking to the detriment of everyone else. The rise in corporate market power, combined with
the decline in workers' bargaining power, goes a long way toward explaining why inequality is so high and growth so tepid. Unless
government takes a more active role than neoliberalism prescribes, these problems will likely become much worse, owing to advances
in robotisation and artificial intelligence.
The fourth key item on the progressive agenda is to sever the link between economic power and political influence. Economic power
and political influence are mutually reinforcing and self-perpetuating, especially where, as in the US, wealthy individuals and corporations
may spend without limit in elections. As the US moves ever closer to a fundamentally undemocratic system of "one dollar, one vote",
the system of checks and balances so necessary for democracy likely cannot hold: nothing will be able to constrain the power of the
wealthy. This is not just a moral and political problem: economies with less inequality actually
perform better .
Progressive-capitalist reforms thus have to begin by curtailing the influence of money in politics and reducing wealth inequality.
There is no magic bullet that can reverse the damage done by decades of neoliberalism. But a comprehensive agenda along the
lines sketched above absolutely can. Much will depend on whether reformers are as resolute in combating problems like excessive market
power and inequality as the private sector is in creating them.
A comprehensive agenda must focus on education, research and the other true sources of wealth. It must protect the environment
and fight climate change with the same vigilance as the Green New Dealers in the US and Extinction Rebellion in the United Kingdom.
And it must provide public programmes to ensure that no citizen is denied the basic requisites of a decent life. These include economic
security, access to work and a living wage, health care and adequate housing, a secure retirement, and a quality education for one's
This agenda is eminently affordable; in fact, we cannot afford not to enact it. The alternatives offered by nationalists and neoliberals
would guarantee more stagnation, inequality, environmental degradation and political acrimony, potentially leading to outcomes we
do not even want to imagine.
Progressive capitalism is not an oxymoron. Rather, it is the most viable and vibrant alternative to an ideology that has clearly
failed. As such, it represents the best chance we have of escaping our current economic and political malaise.
"... Republicanism and true Christianity are mutually exclusive. There is nothing for them to quote. Sharing your wealth? Giving to the poor? Egalitarianism? Loving your neighbour? The Good Samaritan? ..."
"... Best to pretend that Christianity is about extreme right wing economic policy (and fascist social mores), even though it is the opposite. ..."
"... And Tea Partiers like Ayn Rand? The most anti-Christian and anti-American lunatic you can find? The corporate agenda and Wall Street interests trump everything else. No news there. ..."
"... A lot of these people describe themselves as Christian, makes you wonder which part of Jesus' message they loved more, the part that said the poor should rot without help, or the part where he said violence was justified and the chasing of wealth is to be lauded. ..."
It never stops to amaze me how the American Republican Right claims to be Christian. Have you
noticed that they NEVER quote the words of Jesus Christ? I don't blame them,
Republicanism and true Christianity are mutually exclusive. There is nothing for them to
quote. Sharing your wealth? Giving to the poor? Egalitarianism? Loving your neighbour? The
Dirty words all. Best to pretend that Christianity is about extreme right wing
economic policy (and fascist social mores), even though it is the opposite.
If Jesus came to the US today, he would not like Republicans and they would not like him.
Santorum, Palin, Limbaugh etc. would strap him to the electric chair and pull the lever if
they could, no doubt.
And Tea Partiers like Ayn Rand? The most anti-Christian and anti-American lunatic you
can find? The corporate agenda and Wall Street interests trump everything else. No news
The most bizarre aspect of the rights infatuation with Ayn Rand is that she was an
ardent Atheist who's beliefs are diametrically opposite to those of Jesus & the
A lot of these people describe themselves as Christian, makes you wonder which part of
Jesus' message they loved more, the part that said the poor should rot without help, or the
part where he said violence was justified and the chasing of wealth is to be lauded.
"... Mr. Macri has slashed subsidies for electricity, fuel and transportation, causing prices to skyrocket, and recently prompting Ms. Genovesi, 48, to cut off her gas service, rendering her stove lifeless. Like most of her neighbors, she illegally taps into the power lines that run along the rutted dirt streets. ..."
"... "It's a neoliberal government," she says. "It's a government that does not favor the people." ..."
"... The tribulations playing out under the disintegrating roofs of the poor are a predictable dimension of Mr. Macri's turn away from left-wing populism. He vowed to shrink Argentina's monumental deficits by diminishing the largess of the state. The trouble is that Argentines have yet to collect on the other element the president promised: the economic revival that was supposed to follow the pain. ..."
"... But as Mr. Macri seeks re-election this year, Argentines increasingly lament that they are absorbing all strife and no progress. Even businesses that have benefited from his reforms complain that he has botched the execution, leaving the nation to confront the same concoction of misery that has plagued it for decades. The economy is contracting. Inflation is running above 50 percent, and joblessness is stuck above 9 percent ..."
"... Poverty afflicts a third of the population, and the figure is climbing. ..."
"... Mr. Macri sold his administration as an evolved form of governance for these times, a crucial dose of market forces tempered by social programs. ..."
"... In the most generous reading, the medicine has yet to take effect. But in the view of beleaguered Argentines, the country has merely slipped back into the rut that has framed national life for as long as most people can remember. ..."
"... "We live patching things up," said Roberto Nicoli, 62, who runs a silverware company outside the capital, Buenos Aires. "We never fix things. I always say, 'Whenever we start doing better, I will start getting ready for the next crisis.'" ..."
"... "When our president Cristina was here, they sent people to help us," she says. "Now, if there's problems, nobody helps us. Poor people feel abandoned." ..."
On the ragged streets of the shantytown across the road, where stinking outhouses sit alongside shacks fashioned from rusted sheets
of tin, families have surrendered hopes that sewage lines will ever reach them.
They do not struggle to fashion an explanation for their declining fortunes: Since taking office more than three years ago, President
Mauricio Macri has broken with the budget-busting populism that has dominated Argentina for much of the past century, embracing the
grim arithmetic of economic orthodoxy.
Mr. Macri has slashed subsidies for electricity, fuel and transportation, causing prices to skyrocket, and recently prompting
Ms. Genovesi, 48, to cut off her gas service, rendering her stove lifeless. Like most of her neighbors, she illegally taps into the
power lines that run along the rutted dirt streets.
"It's a neoliberal government," she says. "It's a government that does not favor the people."
The tribulations playing out under the disintegrating roofs of the poor are a predictable dimension of Mr. Macri's turn away
from left-wing populism. He vowed to shrink Argentina's monumental deficits by diminishing the largess of the state. The trouble
is that Argentines have yet to collect on the other element the president promised: the economic revival that was supposed to follow
Mr. Macri's supporters heralded his 2015 election as a miraculous outbreak of normalcy in a country with a well-earned reputation
for histrionics. He would cease the reckless spending that had brought Argentina infamy for defaulting on its debts eight times.
Sober-minded austerity would win the trust of international financiers, bringing investment that would yield jobs and fresh opportunities.
But as Mr. Macri seeks re-election this year, Argentines increasingly lament that they are absorbing all strife and no progress.
Even businesses that have benefited from his reforms complain that he has botched the execution, leaving the nation to confront the
same concoction of misery that has plagued it for decades. The economy is contracting. Inflation is running above 50 percent, and
joblessness is stuck above 9 percent.
Poverty afflicts a third of the population, and the figure is climbing.
Far beyond this country of 44 million people, Mr. Macri's tenure is testing ideas that will shape economic policy in an age of
recrimination over widening inequality. His presidency was supposed to offer an escape from the wreckage of profligate spending while
laying down an alternative path for countries grappling with the worldwide rise of populism. Now, his presidency threatens to become
a gateway back to populism. The Argentine economy is contracting. Inflation is running above 50 percent, and joblessness is stuck
above 9 percent. Poverty afflicts a third of the population. Credit Sarah Pabst for The New York Times
As the October election approaches, Mr. Macri is contending with the growing prospect of a challenge from the president he succeeded,
Cristina Fernández de Kirchner, who faces a
series of criminal indictments for corruption . Her unbridled spending helped deliver the crisis that Mr. Macri inherited. Her
return would resonate as a rebuke of his market-oriented reforms while potentially yanking Argentina back to its accustomed preserve:
left-wing populism, in uncomfortable proximity to insolvency.
The Argentine peso lost half of its value against the dollar last year, prompting the central bank to lift interest rates to a
commerce-suffocating level above 60 percent. Argentina was forced to secure a $57 billion
rescue from the International
Monetary Fund , a profound indignity given that the fund is widely despised here for the austerity it imposed in the late 1990s,
turning an economic downturn into a depression.
For Mr. Macri, time does not appear to be in abundant supply. The spending cuts he delivered hit the populace immediately. The
promised benefits of his reforms -- a stable currency, tamer inflation, fresh investment and jobs -- could take years to materialize,
leaving Argentines angry and yearning for the past.
In much of South America, left-wing governments have taken power in recent decades as an angry corrective to dogmatic prescriptions
from Washington, where the Treasury and the I.M.F. have focused on the confidence of global investors as the key to development.
Left-wing populism has aimed to redistribute the gains from the wealthy to everyone else. It has aided the poor, while generating
its own woes --
corruption and depression in
Brazil , runaway inflation and financial ruin in Argentina. In Venezuela, uninhibited spending has turned the country with the
world's largest proven oil reserves into a land where
children starve .
Mr. Macri sold his administration as an evolved form of governance for these times, a crucial dose of market forces tempered
by social programs.
In the most generous reading, the medicine has yet to take effect. But in the view of beleaguered Argentines, the country
has merely slipped back into the rut that has framed national life for as long as most people can remember.
"We live patching things up," said Roberto Nicoli, 62, who runs a silverware company outside the capital, Buenos Aires. "We
never fix things. I always say, 'Whenever we start doing better, I will start getting ready for the next crisis.'"
... ... ...
In the beginning, there was Juan Domingo Perón, the charismatic Army general who was president from 1946 to 1955, and then again
from 1973 to 1974. He employed an authoritarian hand and muscular state power to champion the poor. He and his wife, Eva Duarte --
widely known by her nickname, Evita -- would dominate political life long after they died, inspiring politicians across the ideological
spectrum to claim their mantle.
Among the most ardent Peronists were Néstor Kirchner, the president from 2003 to 2007, and his wife, Cristina Fernández de Kirchner,
who took office in 2007, remaining until Mr. Macri was elected in 2015.
Their version of Peronism -- what became known as Kirchnerism -- was decidedly left-wing, disdaining global trade as a malevolent
force. They expanded cash grants to the poor and imposed taxes on farm exports in a bid to keep Argentine food prices low.
As the country's farmers tell it, Kirchnerism is just a fancy term for the confiscation of their wealth and the scattering of
the spoils to the unproductive masses. They point to Ms. Kirchner's 35 percent tax on soybean exports.
"We had a saying," Mr. Tropini says. "'For every three trucks that went to the port, one was for Cristina Kirchner.'"
reduction in export taxes.
"You could breathe finally," Mr. Tropini, the farmer, says.
He was free of the Kirchners, yet stuck with nature. Floods in 2016 wiped out more than half of his crops. A drought last year
wreaked even more havoc.
"This harvest, this year," he says, "is a gift from God."
But if the heavens are now cooperating, and if the people running Buenos Aires represent change, Mr. Tropini is critical of Mr.
Macri's failure to overcome the economic crisis.
A weaker currency makes Argentine soybeans more competitive, but it also increases the cost of the diesel fuel Mr. Tropini needs
to run his machinery. High interest rates make it impossible for him to buy another combine, which would allow him to expand his
In the first years of Mr. Macri's administration, the government lifted controls on the value of the peso while relaxing export
taxes. The masters of international finance delivered a surge of investment. The economy expanded by nearly 3 percent in 2017, and
then accelerated in the first months of last year.
But as investors grew wary of Argentina's deficits, they fled, sending the peso plunging and inflation soaring. As the rout continued
last year, the central bank mounted a futile effort to support the currency, selling its stash of dollars to try to halt the peso's
descent. As the reserves dwindled, investors absorbed the spectacle of a government failing to restore order. The exodus of money
intensified, and another potential default loomed, leading a chastened Mr. Macri to accept a rescue from the dreaded IMF.
Administration officials described the unraveling as akin to a natural disaster: unforeseeable and unavoidable. The drought hurt
Money was flowing out of developing countries as the Federal Reserve continued to lift interest rates in the United States, making
the American dollar a more attractive investment.
But the impact of the Fed's tightening had been widely anticipated. Economists fault the government for mishaps and complacency
that left the country especially vulnerable.
.... ... ...
Among the most consequential errors was the government's decision to include Argentina's central bank in a December 2017 announcement
that it was raising its inflation target. The markets took that as a signal that the government was surrendering its war on inflation
while opting for a traditional gambit: printing money rather than cutting spending.
... ... ...
The government insists that better days are ahead. The spending cuts have dropped the budget deficit to a manageable 3 percent
of annual economic output. Argentina is again integrated into the global economy.
"We haven't improved, but the foundations of the economy and society are much healthier," said Miguel Braun, secretary of economic
policy at the Treasury Ministry. "Argentina is in a better place to generate a couple of decades of growth."
... ... ...
Their television flashes dire warnings, like "Danger of Hyper Inflation." Throughout the neighborhood, people decry the sense
that they have been forsaken by the government.
Trucks used to come to castrate male dogs to control the packs of feral animals running loose. Not anymore. Health programs for
children are less accessible than they were before, they said.
Daisy Quiroz, 71, a retired maid, lives in a house that regularly floods in the rainy season.
"When our president Cristina was here, they sent people to help us," she says. "Now, if there's problems, nobody helps us.
Poor people feel abandoned."
... ... ...
Daniel Politi contributed reporting from Buenos Aires. Peter S. Goodman is a London-based European economics correspondent.
He was previously a national economic correspondent in New York. He has also worked at The Washington Post as a China correspondent,
and was global editor in chief of the International Business Times. @
Our society has a legal structure of self-rule and ownership of capital, but in reality it
is a Neofeudal Oligarchy.
... ... ...
Summary: "The U.S. government does not represent the interests of the
majority of the country's citizens, but is instead ruled by those of the rich and powerful, a
new study from Princeton and Northwestern universities has concluded."
Neofeudalism is not a re-run of feudalism. It's a new and improved, state-corporate
version of indentured servitude. The process of devolving from central political power to
feudalism required the erosion of peasants' rights to own productive assets, which in an
agrarian economy meant ownership of land.
Ownership of land was replaced with various obligations to the local feudal lord or
monastery-- free labor for time periods ranging from a few days to months; a share of one's
grain harvest, and so on.
Another very informative article from one of the few writers with any sense of having a
'finger on the pulse.'
It's sad that it's taken over 30 years for the real shaping influences behind the current
system to be identified and discussed outside the boundaries of a few university
The Right have been absolutely brilliant at media control and obfuscation. Their gurus
have been camouflaged and the whole process of influencing Reagan and Thatcher's governments
from the late 1970's has escaped exactly the kind of scrutiny that George gives Rand.
We might also investigate the influence of John Nash's (A Beautiful Mind) 'Gameplay'
experiments in a similar fashion along with the economic gurus who followed Hayek so
It has been known for years that the neo liberal project was designed not just to under
mine democracy and convert people into passive cloned market junkies, but to put an end to
the whole of the Enlightenment Project, which perhaps naively saw human development,. growth
and other human qualities totally savaged and defeated by this poisonous evil, which emulates
all the worst aspects of Fascism without the flags and theatre.
Sadly, this is not a 'this is happening' phenomenon; it's a 'this has happened
phenomenon.' The taint and viral effect of its impact on uk and usa political structures has
already caused major damage. All three major political parties in the uk have for 30 years
subscribed to its tenets though they were no doubt not presented in such a flagrant form as
How problematic is it to now look at the polity and rescue it from such a major
ideological shift? Certainly, the major parties cannot shuck off the cape of their key
beliefs after promoting Right wing ideologies for so long, and the traditional Left is no
However, it is good to see some pithy journalism that goes to the heart of the matter -
those of us who have been pleading for less x factor celebrity worshipping of politicians can
at least feel as though this shifts the spectrum to real and significant issues that have
affected the lives of everyone for so long.
These submerged policies, Mettler shows, obscure the role of government and
exaggerate that of the market. As a result, citizens are unaware not only of the benefits
they receive, but of the massive advantages given to powerful interests, such as insurance
companies and the financial industry. Neither do they realize that the policies of the
submerged state shower their largest benefits on the most affluent Americans, exacerbating
What has been very noticeable about the development of bureaucracy in the public and private
spheres over the last 40 years (since Thatcher govt of 79) has been the way systems are
designed now to place responsibility and culpability on the workers delivering the services -
Teachers, Nurses, social workers, etc. While those making the policies, passing the laws,
overseeing the regulations- viz. the people 'at the top', now no longer take the rap when
something goes wrong- they may be the Captain of their particular ship, but the
responsibility now rests with the man sweeping the decks. Instead they are covered by tying
up in knots those teachers etc. having to fill in endless check lists and reports, which have
as much use as clicking 'yes' one has understood those long legal terms provided by software
companies.... yet are legally binding. So how the hell do we get out of this mess? By us as
individuals uniting through unions or whatever and saying NO. No to your dumb educational
directives, No to your cruel welfare policies, No to your stupid NHS mismanagement.... there
would be a lot of No's but eventually we could say collectively 'Yes I did the right thing'.
Staff distress? Cleaning ( in another county) was privatised to make profit in Thatcher
times.The work of two cleaners became the task of one person. Extra duties were loaded on
-serving meals and drinks, fetching blankets and equipment. Wages dropped by a small degree
-but important when we ere earning, say, £65 a week. Indemnity/insurance against
catching infections was withdrawn. Firstly owned by Jeyes and then sold on to Rentokill
,obviously good for shareholders. A new 'manager' appeared with their own office.
As someone who thinks von Mises and Hayek made invaluable contributions to economics I was
surprised to see such a ringing endorsement for Mises's ideas in the Guardian:
"Public-service workers are now subjected to a panoptical regime of monitoring and
assessment, using the benchmarks von Mises rightly warned were inapplicable and absurd."
That is spot on. Yes, Mises thought that workers should no more be allowed to corner a
market in labour than companies should be allowed to create monopolies in products, and this
is certainly a point where he can be criticized. Using the name "neoliberal" to cover
such very different ideas as Milton's and Hayek's though is absurd - they had completely
opposite ideas about vast government spending to recover from recession. Try looking up John
James Cowperthwaite, who oversaw post-war development in Hong Kong by getting government out
of the way.
He forbade the use of any performance targets of the type Blair brought in, and refused to
compile GDP statistics, thinking the government would game them.
Both von Mises and Hayek would be horrified at the money printing of modern central banks,
especially since 2008. To ascribe modern policy to their ideas is simply nonsense - they did
not (as far as I know) ever suggest central control of interest rates , stock buying by
central banks or saving a bank that has failed through fraud and greed.
If "neoliberalism" is our present dominant ideology, then please do not use the word to
describe their work.
Finally. A writer who can talk about neoliberalism as NOT being a retro version of classical
laissez faire liberalism. It is about imposing "The Market" as the sole arbiter of Truth on
Only the 'Market' knows what is true in life - no need for 'democracy' or 'education'.
Neoliberals believe - unlike classical liberals with their view of people as rational
individuals acting in their own self-interest - people are inherently 'unreliable',
Only entrepreneurs - those close to the market - can know 'the truth' about anything.
To succeed we all need to take our cues in life from what the market tells us.
Neoliberalism is not about a 'small state'. The state is repurposed to impose the 'all
knowing' market on everyone and everything. That is neoliberalism's political project. It is
ultimately not about 'economics'.
But the world didn't work like that, and the people who didn't fit had to be shoved
under the wheel of history.
This is a remarkably similar summation of Rand's worldview of entire classes of people: if
you are poor, you deserve it. Expect nothing from the State to raise you from the cycle of
poverty. The State is evil and should be eliminated. No evil can come from the Business
Culture (or more accurately the Business Cult). The U.S. Republican worldview summed up right
The only sane response to Ayn Rand is the creation of the Human Values Project ,
where creating a better world for all is its manifesto and mandate.
Many thanks for the article. The Right keep erecting her on a pedestal and saying her
ideas are infallible like the Pope. She can't be pulled down off that pedestal enough
"... Your claim is not that people decide rights via participation in political process (social contract), it is that there are universal natural individual rights that cannot be violated based in... something; there is no negotiability like there is with the social contract. Your apparantly foundationless rights cannot be changed by political process - so where do they come from? ..."
"... Your claim is that some quality of people grants immutable rights, not that rights are decided by people. Are you of the strain that thinks we should be allowed to starve our kids (Rothbard)? Or that non-capitalist societies are fair game to be killed and enslaved, to have thier land put to 'better' use (Locke)? Perhaps that latter one underlies the feeling that it would be easy to up sticks and move to some undefined piece of land. ..."
"... You have changed the nice things you listed now, you said maternity leave/pay, weekends, etc. Those were granted by collective potitical action, not the generosity of the capitalists. If Jeff Bezos could hire 1st graders he obviously would. ..."
"... The State is the gun. Always has been, always will be. And yes, there is a place for the gun in society - defence - but not in extorting money from peaceful people. ..."
Your claim is not that people decide rights via participation in political process (social
contract), it is that there are universal natural individual rights that cannot be violated
based in... something; there is no negotiability like there is with the social contract. Your
apparantly foundationless rights cannot be changed by political process - so where do they
Your claim is that some quality of people grants immutable rights, not that rights are
decided by people. Are you of the strain that thinks we should be allowed to starve our kids
(Rothbard)? Or that non-capitalist societies are fair game to be killed and enslaved, to have
thier land put to 'better' use (Locke)? Perhaps that latter one underlies the feeling that it
would be easy to up sticks and move to some undefined piece of land.
You have changed the nice things you listed now, you said maternity leave/pay, weekends,
etc. Those were granted by collective potitical action, not the generosity of the
capitalists. If Jeff Bezos could hire 1st graders he obviously would.
So you having to leave because you don't wamt to participate in tax paying is coercion,
but people having to leave because they don't want to live under Libertarianism isn't?
Incidentally, which countries at the top of the PISA or OECD rankings do not have massive
As for Hong Kong, its entire existence is predicated on extreme acts of aggression by the
British. The opium trade and its profits started the ball rolling after an aggressive war.
The Hong Kong authority also owns most of the land, leasing it; they therefore have massive
influence on who gets what and what they do with it - more so than most other nations.
"As you are free to leave, no individual state institution is is forcing you to
participate under pain of violence. If the fact you have no place to go that does not take
tax means that you are coerced, then someone who cannot live but by participation in
free-market capitalism would also be coerced into participation"
I think we won't agree on this because we have a fundamentally different understanding of
coercion. The way I see it, I should not have a leave the place I live in to not have
coercive action taking away my money. I should be able to say, no thanks. It is the
difference between my willingly purchasing something and a mugger taking my money at
gunpoint. The State is the gun. Always has been, always will be. And yes, there is a place
for the gun in society - defence - but not in extorting money from peaceful people.
And people can and do live without being part of the capitalist system. They can live off
the land. They can set up communes. They can use a barter system if they want. Capitalism
just gives people more opportunities, but they can opt out if they want. Or move to a place
that doesn't have capitalism, like many places in Africa or South America or Cuba. Funny who
must people try to leave those places though. Millions do not flock there. They do the other
"In your opinion."
Yes, true. In my opinion. But I have backed that opinion up with a well reasoned argument
for my position. It didn't just come out of thin air. It comes from recognising the nature of
government is force, violence and coercion. Again, it is the gun in society. And in my
opinion, I think it is wrong, immoral and will always lead to bad outcomes to use the gun to
solve societies more tricky problems. And we can clearly see the bad results of public /
State education, socialised healthcare, welfare, government involvement in the economy, etc,
etc, etc. All do badly.
"Did I? I didn't sign up before birth to participate, and I have no other options but to
participate or die."
You have other options, as previously mentioned. Live off the land, move to a
non-capitalist country, set up a commune, etc.
"Still unsure upon what these rights are based. The mere fact that people can reason
does not necessarily instill or ground right."
Where else can they come from? If you say "government". Well when does government get its
power and decide on your rights? From the people that make up government. So we are back to
"You tell us elsewhere that we don't really have capitalism, the state and other actors
dominate and fiddle etc. Now you clam capitalism has provided all these nice things* - pick
No. It is not a case of picking one. It is not an "either / or" situation. Economic
freedom and economic oppression exist on a sliding scale. You have more free economies, like
the US (especially prior to 1913) and you have less free economies, like the USSR or Cuba.
The parts of freedom we have, give us the good stuff, gives us innovation and allows society
to grow richer and lift more people out of poverty. The more bad stuff that gets involved,
the less we have, the more society stagnates. The USSR was a lot poorer and dirtier
(environmentally) and had a lot more famine and waste because it was highly centrally
"So it had nothing to do with quasi-British authorities selling narcotics to mainland
Not much. There may have been some of that but nowhere near enough to explain the
explosion of wealth in HK.
We ARE social animals. Which is why I laugh when I hear right-wing opinions compared to
the laws of the jungle. As far as I can gather, in the jungle, there are no such things as
property laws, inheritance, land enclosure, or indeed money! Humanity's development is as
socialised societies, with surpluses, consent, and so on.
And there has never been free-market capitalism. A misnomer if ever there was one.
"... If 'free markets' of enterprising individuals have been tested to destruction, then capitalism is unable to articulate an ideology with which to legitimise itself. ..."
"... Therefore, neoliberal hegemony can only be perpetuated with authoritarian, nationalist ideologies and an order of market feudalism. ..."
"... The market is no longer an enabler of private enterprise, but something more like a medieval religion, conferring ultimate authority on a demagogue. ..."
"... Only in theory is neoliberalism a form of laissez-faire. Neoliberalism is not a case of the state saying, as it were: 'OK everyone, we'll impose some very broad legal parameters, so we'll make sure the police will turn up if someone breaks into your house; but otherwise we'll hang back and let you do what you want'. ..."
"... Hayek is perfectly clear that a strong state is required to force people to act according to market logic. If left to their own devices, they might collectivise, think up dangerous utopian ideologies, and the next thing you know there would be socialism. ..."
"... This the paradox of neoliberalism as an intellectual critique of government: a socialist state can only be prohibited with an equally strong state. That is, neoliberals are not opposed to a state as such, but to a specifically centrally-planned state based on principles of social justice - a state which, to Hayek's mind, could only end in t totalitarianism. ..."
"... It should be understood (and I speak above all as a critic of neoliberalism) that neoliberal ideology is not merely a system of class power, but an entire metaphysic, a way of understanding the world that has an emotional hold over people. For any ideology to universalize itself, it must be based on some very powerful ideas. Hayek and Von Mises were Jewish fugitives of Nazism, living through the worst horrors of twentieth-century totalitarianism. There are passages of Hayek's that describe a world operating according to the rules of a benign abstract system that make it sound rather lovely. To understand neoliberalism, we must see that it has an appeal. ..."
"... However, there is no perfect order of price signals. People do not simply act according to economic self-interest. Therefore, neoliberalism is a utopian political project like any other, requiring the brute power of the state to enforce ideological tenets. With tragic irony, the neoliberal order eventually becomes not dissimilar to the totalitarian regimes that Hayek railed against. ..."
The other point to be made is that the return of fundamentalist nationalism is arguably a
radicalized form of neoliberalism. If 'free markets' of enterprising individuals have
been tested to destruction, then capitalism is unable to articulate an ideology with which to
Therefore, neoliberal hegemony can only be perpetuated with authoritarian, nationalist
ideologies and an order of market feudalism.
In other words, neoliberalism's authoritarian orientations, previously effaced beneath
discourses of egalitarian free-enterprise, become overt.
The market is no longer an enabler of private enterprise, but something more like a
medieval religion, conferring ultimate authority on a demagogue.
Individual entrepreneurs collectivise into a 'people' serving a market which has become
synonymous with nationhood. A corporate state emerges, free of the regulatory fetters of
The final restriction on the market - democracy itself - is removed. There then is no
separate market and state, just a totalitarian market state.
Yes, the EU is an ordoliberal institution - the state imposing rules on the market from
without. Thus, it is not the chief danger. The takeover of 5G, and therefore our entire
economy and industry, by Huawei - now that would be a loss of state sovereignty. But because
Huawei is nominally a corporation, people do not think about is a form of governmental
bureaucracy, but if powerful enough that is exactly what it is.
Pinkie123: So good to read your understandings of neoliberalism. The political project is the
imposition of the all seeing all knowing 'market' on all aspects of human life. This version
of the market is an 'information processor'. Speaking of the different idea of the
laissez-faire version of market/non market areas and the function of the night watchman state
are you aware there are different neoliberalisms? The EU for example runs on the version
called 'ordoliberalism'. I understand that this still sees some areas of society as separate
from 'the market'?
ADamnSmith: Philip Mirowski has discussed this 'under the radar' aspect of neoliberalism. How
to impose 'the market' on human affairs - best not to be to explicit about what you are
doing. Only recently has some knowledge about the actual neoliberal project been appearing.
Most people think of neoliberalism as 'making the rich richer' - just a ramped up version of
capitalism. That's how the left has thought of it and they have been ineffective in stopping
Neoliberalism allows with impunity pesticide businesses to apply high risk toxic pesticides
everywhere seriously affecting the health of children, everyone as well as poisoning the
biosphere and all its biodiversity. This freedom has gone far too far and is totally
unacceptable and these chemicals should be banished immediately.
The left have been entirely wrong to believe that neoliberalism is a mobilisation of
anarchic, 'free' markets. It never was so. Only a few more acute thinkers on the left
(Jacques Ranciere, Foucault, Deleuze and, more recently, Mark Fisher, Wendy Brown, Will
Davies and David Graeber) have understood neoliberalism to be a techno-economic order of
control, requiring a state apparatus to enforce wholly artificial directives.
Also, the work
of recent critics of data markets such as Shoshana Zuboff has shown capitalism to be evolving
into a totalitarian system of control through cybernetic data aggregation.
Only in theory is neoliberalism a form of laissez-faire. Neoliberalism is not a case of the
state saying, as it were: 'OK everyone, we'll impose some very broad legal parameters, so
we'll make sure the police will turn up if someone breaks into your house; but otherwise
we'll hang back and let you do what you want'.
Hayek is perfectly clear that a strong state
is required to force people to act according to market logic. If left to their own devices,
they might collectivise, think up dangerous utopian ideologies, and the next thing you know
there would be socialism.
This the paradox of neoliberalism as an intellectual critique of
government: a socialist state can only be prohibited with an equally strong state. That is,
neoliberals are not opposed to a state as such, but to a specifically centrally-planned state
based on principles of social justice - a state which, to Hayek's mind, could only end in t
Because concepts of social justice are expressed in language, neoliberals
are suspicious of linguistic concepts, regarding them as politically dangerous. Their
preference has always been for numbers. Hence, market bureaucracy aims for the quantification
of all values - translating the entirety of social reality into metrics, data, objectively
measurable price signals. Numbers are safe. The laws of numbers never change. Numbers do not
lead to revolutions. Hence, all the audit, performance review and tick-boxing that has been
enforced into public institutions serves to render them forever subservient to numerical
(market) logic. However, because social institutions are not measurable, attempts to make
them so become increasingly mystical and absurd. Administrators manage data that has no
relation to reality. Quantitatively unmeasurable things - like happiness or success - are
measured, with absurd results.
It should be understood (and I speak above all as a critic of neoliberalism) that
neoliberal ideology is not merely a system of class power, but an entire metaphysic, a way of
understanding the world that has an emotional hold over people. For any ideology to
universalize itself, it must be based on some very powerful ideas. Hayek and Von Mises were
Jewish fugitives of Nazism, living through the worst horrors of twentieth-century
totalitarianism. There are passages of Hayek's that describe a world operating according to
the rules of a benign abstract system that make it sound rather lovely. To understand
neoliberalism, we must see that it has an appeal.
However, there is no perfect order of price signals. People do not simply act according to
economic self-interest. Therefore, neoliberalism is a utopian political project like any
other, requiring the brute power of the state to enforce ideological tenets. With tragic
irony, the neoliberal order eventually becomes not dissimilar to the totalitarian regimes
that Hayek railed against.
"Liberal" originally meant the freedom to trade and do business. Before liberalism trade was
controlled by cartels, guilds and gifted by prerogative. The freedom to trade is not the root
cause of our problems. The drift to monopoly and the legal enforcement of it is new and
should be resisted. But the freedom to do business is a freedom for us all.
1. Hayek's book 'The Road to Serfdom' uses an erroneous metaphor. He argues that if we allow gov regulation, services and spending
to continue then we will end up serfs. However, serfs are basically the indentured or slave labourers of private citizens and
landowners not of the state. Only in a system of private capital can there be serfs. Neo liberalism creates serfs not a public
2. According to Hayek all regulation on business should be eliminated and only labour should be regulated to make it cheap
and contain it so that private investors can have their returns guaranteed. Hence the purpose of the state is to pass laws to
These two things illustrate neo-liberalism. Deception and repression of labour.
"... First, neoliberalism, to those who understand how finance works (no mainstream economist, then) was never an economic theory, but rather a business model: essentially it describes how to structure an economy for rent seeking. ..."
"... Michael Hudson describes it as "pro-finance". His definition of austerity, which is part and parcel of the neoliberal business model, is also worth quoting: "austerity is what a good economic policy looks like to a creditor [rentier]"; in other words, it has nothing to do with the economically meaningless notion of good housekeeping (state finances are radically different from household finances). ..."
"... The term "neoliberal" is misleading. Neoliberals put capital above people. Neoliberals are the next-worst thing to neoconservatives. That said, why would anybody trust a pols promise? ..."
Neoliberalism is not an ideology in its practical application. It is a business model for
structuring the economy for rent seeking or wealth extraction: turning everything into a cash
cow to be milked until it's dry and then move on to the next one.
First, neoliberalism, to those who understand how finance works (no mainstream
economist, then) was never an economic theory, but rather a business model: essentially it
describes how to structure an economy for rent seeking.
Michael Hudson describes it as "pro-finance". His definition of austerity, which is
part and parcel of the neoliberal business model, is also worth quoting: "austerity is what a
good economic policy looks like to a creditor [rentier]"; in other words, it has nothing to
do with the economically meaningless notion of good housekeeping (state finances are
radically different from household finances).
Second, the freedom that Adam Smith talked about was freedom for the real economy from
rent seeking, from wealth extraction - freedom, in modern parlance, from the neoliberal
I think you are confusing the state with the ideology. Neoliberalism is an ideology that has
become embedded in the state. Of course it is the state that privatises public services to
private firms. But the ideology behind that policy is what George Monbiot is writing about.
I work for the NHS myself. Take for example, the policy of foundation trusts bidding to
run services hundreds of miles from their bases, etc. It may be state policy, but it is a
neoliberal nonsense. You would find the NHS littered with bureaucracy that would not be there
if the neoliberal ideology of trying to foster "competition" had not become a state
Only the greedy, selfish, well off, egotistical and share holders believe that Public
Services should, could and would benefit from privatisation and deregulation.
Education and Health for example are (in theory) a universal right in the UK. As numbers
in the population rise and demographics change so do costs ie delivery of the service becomes
more expensive.As market force logic is introduced it also becomes less responsive - hence
people not able to get the right drugs and treatment and challenging and challenged young
people being denied an education that is vital for them in increasing numbers.
Meanwhile - as Public Services are devalued and denuded in this system the private sector
becomes increasingly wealthy at the top while its workers become poorer and less powerful at
With the introduction of Tory austerity which punishes the latter to the benefit of the
former there is no surprise that this system does not work and has provided a platform for
the unscrupulous greedy and corrupt to exploit Brexit and produce conditions which will take
'Neoliberalism' to where logic suggests it would always go - with the powerful rich protected
minority exerting their power over an increasingly poor and powerless majority.
The competitive tender approach ensures the cheapest bids get the contracts and the cheapest
bids are those most likely to employ exploited labour and cheap materials as well as cutting
corners. Result? a job of sorts gets done, but the quality is rubbish, with no investment or
pride in the product. Look at Hong Kong where this is longstanding practice: new tunnel, half
the extractor fans do not work correctly because they were poorly installed. I once spoke to
the Chief Engineer of the Tsing Ma bridge, he was stressed out of his socks for the whole
construction period trying to monitor all the subcontractors who had bid so low they had to
cheat to make a profit with the result that they would try to cut corners and avoid doing
things if they thought they could get away with it. Good job that engineer was diligent.
Others may be less able or willing.
BTW: I seldom find comparisons in UK-media to other countries when those countries are
I think that's because most of the UK media is propaganda for the established system,
which they rely on for advertising revenue and access to information. If an outlet's
journalists start seriously questioning the existing system, a few things happen: 1.
the journo doesn't get promoted within the system; 2. their access to information is
curtailed (they are not invited to briefings etc., and; 3. advertising revenue drops. As the
business model of most mainstream media is to present consumer audiences to advertisers, this
is not going to sit well with the owners, see 1 and 2 above leading to poor evaluations. Any
journo with half a brain quickly learns this and fits in. Only so far and no further.
As a Tory for most of my longish life, I have to agree that whilst some things have
flourished once privatised, certain services must remain in public ownership and control to
enable governments to improve or reduce, depending on national taxation and expenditure - if
people want better services then they must be prepared to pay for them, and of course the
long-term pensions of the workforce. Managers should be subject matter experts before running
departments, not just accountants or management consultants, so they can improve delivery not
just constantly re-structure or carp on about 'efficiency savings'.
Having worked in shipping, that industry has oscillated several times but rail is an
interesting example - a disaster in the dying days of national ownership, the private world
started well improving safety, reliability and capacity but has gone downhill in recent
years, not helped by the track management system. Again, the airlines started well but now
several have gone into administration and BA has 'down-qualitied' itself to become one of the
Some parts of the NHS can be provided by private industry but limited to service provision
and collective buying only - certainly NOT cancer screening.
Then, when you look at private providers who go bust and completely fail to provide any
acceptable capability - jails, probation, social care etc. one wonders when, if ever,
politicians will realise that it costs them, the civil service and commercial management an
incredible amount of time, effort and cost just to fail!
Outsourcing government work is the most inefficient way of getting it done for the benefit of
taxpayers. When the profits private companies make from it are added to what economies must
invest to pay the taxes for it it's astonishing how popular it has become throughout the
world, something only explicable if those authorising it are amongst the most stupid of
financial administrators or the most corrupt.
Outsourcing for example £1m worth of work requires that amount to be paid in taxes,
which needs about £5m to be earned in wages and profits to pay £1m in taxes,
which in turn needs an investment of perhaps ten times that amount, when the £1m is
borrowed by debt laden governments to be repaid by over-borrowed and overtaxed economies.
If the outsourced company is not profit-making it will borrow the capital to be able to
deliver what's required and that in turn will raise the amount it will want for future work,
which is what I think accounts for Carillion and the other outsource giants going to the
The process is generally the fault of governments failing to adhere strictly to the necessity
of only paying its workforce on average the same as the private sector pays its workers,
which in democracies is not an unfair requirement demanded by equality legislation. Many
would claim that such was why Margaret Thatcher decided on privatising so many public
utilities especially after the miners' strike in Ted Heath's government and why it gained so
much support and popularity when wages and benefits for similar skill levels seemed so much
better and jobs more secure for many public sector workers involved than they were in the
private sector. Now of course, the high costs of private necessary public services are making
life unbearable for the majority of workers and welfare recipients while profits are going
abroad to those who own them and the EU in getting the flak – courtesy of the media -
for the resultant poverty and austerity, allowed the false £350m a week to win the
referendum. The £4 billion a week worth of exports to the EU paid most of that and the
way companies are relocating to hedge against Brexit means a lot of lost jobs will go with
them – some earlier estimates but it at more than 100,000 - which doesn't seem to deter
those determinedly wanting out of the EU one little bit.
This is a blessing for the low labour cost Member States, who being in the populous markets
the multinationals need, can attract the UK industries looking to further cut costs and
freight charges so those that go will never come back because higher costs in the Brexit UK
will not be compensated for easily with uncompetitive price hikes for EU customers, unlike
CAP payments that have been promised to farmers by the government proBrexit Minister.
The doom and gloom felt by many I think is well justified when sovereign debt and bank credit
is considered relative to taxes. While sovereign debt is regarded as an asset and future
taxes are acceptable for bank credit and both can be securitized by banking systems to borrow
even more capital that will be acceptable to central banks as QE, it's not surprising that
sovereigns don't need to worry about economies being unable to provide the taxes their
governments unlawfully spend even when leaving it for future generations is also unlawful
i.e. is a crime, since if they don't, their central banks and bond holders covered by them
will. When the cost in trillions since 2016 already spent by government in preparing for
Brexit is included one can't help but think that the financial economy has made a proverbial
killing from UK incorporated and now owns most if not all of it. If most of the finance for
Brexit came from its financiers and investors is it possible that after Brexit they'll pour
trillions back into the economy to make it capable of not only surviving but also competing
favourably with the EU, Japan, China, and the US?
I have to disagree. Hardly anything has flourished after privatisation. The big failures,
which get all the publicity, were generally basket case private businesses which had to be
nationalised to save them from collapse.
Sometimes they are stuffed with public money and
sold at a loss to the public, like the Tory nationalisation of Rolls Royce, or deprived of
funds like British Rail to provide an excuse to liberate thousands of square miles of real
This latter is the scheme for the NHS with hospitals and other property provided at
great public expense sold off to any shark who says he has the money, and once it's private
load the enterprise with debt and walk away.
Unlike the privatisations of the 80s and 90s there's barely any pretence these days
that new sell-offs are anything more than simply part of a quest to find new avenues for
profit-making in an economy with tons of liquid capital but not enough places to profitability
Back in the Thatcher/Reagan years there were at people around who genuinely believed in the
superiority of the market, or at least, made the effort to set out an intellectual case for
Now we're in a different era. After 2008, hardly anyone really believes in neoliberal
ideas anymore, not to the point that they'd openly make the case for them anyway. But while
different visions have appeared to some extent on both left and right, most of those in
positions of power and influence have so internalised Thatcher's 'there is no alternative'
that it's beyond their political horizons to treat any alternatives which do emerge as
serious propositions, let alone come up with their own.
So neoliberalism stumbles on almost as a reflex action. Ben Fine calls it a 'zombie' but I
think the better analogy is cannibalism. Unlike the privatisations of the 80s and 90s there's
barely any pretence these days that new sell-offs are anything more than simply part of a
quest to find new avenues for profit-making in an economy with tons of liquid capital but not
enough places to profitability put it. Because structurally speaking most of the economy is
Privatising public services at this point is just a way to asset strip and/or funnel
public revenue streams to a private sector which has been stuck in neoliberal short-term, low
skill, low productivity, low wage, high debt mode for so long that it has lost the ability to
grow. So now it is eating itself, or at least eating the structures which hold it up and
allow it to survive.
The central premise used by Governments for privatising public servcies seems to have been
that publicly run services are inefficient compared to private companies; that the need to
turn a profit means wasteful systems and behaviours are minimised. Therefore, money can be
saved by outsourcing as private companies can provide the same or better service more
I think this is very disrespectful to all those who work in public service, many of whom
are dedicated to their jobs to provide care or a good service to members of the public. The
idea that making money is the only motivating force that can make someone do their job well
seems flawed. Further, if efficiency gains alone are not enough to make a profit, then the
only recourse for companies is to provide a poorer service or be more exploitative of their
employees, which is regularly played out.
This central premise is not widely challenged by politicians. It seems accepted as fact. I
wonder if there have been any studies to either support or challenge this idea.
'Big-gubment' exists to enforce property-rights. Libertarians bleat on about how freedom
is founded in the right own to property and yet fail to realise that these so-called
'rights', which are a negation of natural rights (the world and it's resources belongs to all
equally, and that lands to land, water and seed are in essence premised on theft) requires a
large, powerful and authoritarian apparatus capable of effectively projecting violence to
enforce property rights. claims to property are premised on violence.
Your so-called philosophy fails on first premises.
And in case you don't get it, the threat of a worker revolution saw the welfare state
arise as a carrot to complement the stick. With the stick becoming increasingly ineffective
in the earlier part of the 20th century, the disquiet needed to be quelled through other
means. That method was the social democratic welfare state. The collapse of Communism as an
existential threat, followed by the emergence of economic globalisation (shopping around for
the cheapest labour), consumerism and automation have all effectively eroded class solidarity
amongst those most disenfranchised by a state enforced inequality and eroded the value of
labour. The beneficiaries of the state as a mechanism for enforcing their claims to property
no longer need the working classes.
Hence we find that around the world, western democracies are withdrawing the carrot and
reasserting the stick.
The hard reality remains that the financial markets are, in the long term, forward-looking.
But in the short-term, they are dominated by high-speed electronic trading.
Anyone who felt
Monday's (December's, Q4's) meltdown, or watched Tuesday night's reopening of equity index
futures, watched in entertained astonishment, if not anguish.
Clearly, sentient, reasoned
thought has now been sacrificed at the altar of short-term profit. The task is to come up with
a thesis moving forward, and the challenge is to stick to that conclusion at times when the
evils of algorithmic, high-frequency and passive trading styles turn against those core
beliefs. Risk Management. Before one might profit with sustained regularity, one must learn to
effectively preserve one's capital.
just so 5 hours ago
have whatever opinion you want about Yahoo's reporting of the daily ups and downs of the
markets, and keep in mind, the exchanges are betting parlors. That said, these types of wild
swings over the last 6 weeks or so, are very similar to what took place before housing bubble
burst in the late mid-ots, keep an eye on the amount of private uncollateralized debt that
mid-cap companies are carrying, if they start defaulting and these private equity houses
start running for cover, it create the same type of liquidity situation that Lehman's
"... Sanders supported Clinton too in the general election. He also actively campaigned for her. ..."
"... apples and oranges, Thomas and Herr, Would you care to defend her "posture" on NATO? Ditto, for her contributing to the "Evil Vlad" narrative? Israel?? Wiki: Warren states she supports a two state solution, but she believes Palestinian application for membership in the UN isn't helpful. ..."
"... "Warren lied about her ancestry to circumvent diversity quotas. Why should anyone believe anything she has to say?" You are going to be told this a million times before 11/20 but that's bullshit. It's been well established that she didn't get any job because of that. ..."
"... "In the most exhaustive review undertaken of Elizabeth Warren's professional history, the Globe found clear evidence, in documents and interviews, that her claim to Native American ethnicity was never considered by the Harvard Law faculty, which voted resoundingly to hire her, or by those who hired her to four prior positions at other law schools. At every step of her remarkable rise in the legal profession, the people responsible for hiring her saw her as a white woman." ..."
"... With Warren and Sanders talking complete sense about our oligarchy, the electorate's expectations are going to improve. Nothing could be better. We've been asked to settle for Republican-lite servants of mammon for too long in the Democratic Party and that's going to change. ..."
"... Hell, if we're going to fine them for data breaches, do we start with the DNC? ..."
"... In a poll last week of 2,312 registered voters in South Carolina, Warren gained nine points to reach 17% compared to Biden's 37%. Among 18-34 year olds, Warren is leading 24% to Sanders' 19% and Biden's 17%. ..."
"... I keep hearing from the mainstream media that Biden is leading in the polls. But we ought to note that Biden's up against a group including Warren, Sanders, Harris etc who are pushing a progressive policies, and if you take their percentages together, Biden cannot compete. Once one of these progressive takes the lead in the group, and hires all the others as running mate, cabinet members etc, he or she will be unbeatable against both Biden and Trump. ..."
"... The latest of that polling features Sanders and Biden nearly neck and neck as far as approval goes. Funny you don't hear about that on CNN or MSNBC. ..."
"... American voters have spent so long being treated like idiots by politicians and to an even greater extent the press that Warren comes across as something new and interesting by comparison. ..."
"... This election won't be decided by defecting Trump voters. ..."
"... Those who would be swayed by Trump using "Pocahontas" as a slur or would even pay attention to it wouldn't vote for Warren anyway. He's not going to change any minds with it, just rile up his existing sheep. ..."
"... That's a very narrow view of her position on Israel. She also supported the Iran treaty, boycotting Netanyahu's speech to the Senate, called on Israel to stop colonizing the West Bank and to recognize the right of Palestinians in Gaza to peaceful protest – her comments about aggression toward Gaza were about Israeli response to missiles fired by Hamas. I don't mind her having a nuanced response to what is in fact a very complex situation. ..."
"... Nerd used to be just an insult, aimed at anyone more intelligent, thoughtful or better-informed than the speaker. But I think now, like 'queer' and other words, it has been reclaimed and repurposed in a much more positive light. ..."
Don't get me wrong. I would certainly vote for her, if needed. I believe she's quite green behind the ears on foreign policy and
how inequality is a global issue. Her backing of our entitled neoliberal wife of an ex-president & neocon dismayed me.
Sanders gets the bigger picture on poverty, race, and war/ neocolonialism:
if you wish: MLK Jr's take on "The Three Evils".
apples and oranges, Thomas and Herr, Would you care to defend her "posture" on NATO? Ditto, for her contributing to the "Evil
Vlad" narrative? Israel?? Wiki: Warren states she supports a two state solution, but she believes Palestinian application
for membership in the UN isn't helpful.
In a town hall meeting in August 2014, Warren defended Israel's shelling of
schools and hospitals during that summer's Israel–Gaza conflict, stating that "when Hamas puts its rocket launchers next to hospitals,
next to schools, they're using their civilian population to protect their military assets. And I believe Israel has a right, at
that point, to defend itself". She also questioned whether future US aid to Israel should be contingent on the halting of Israeli
settlements in the West Bank. In addition she defended her vote in favor of granting Israel $225 million to fund the Iron
Dome air defence system.
While the 2020 election feels critical, the 2024 election will decide the future. Like Trump himself, his base is filled with
old people who are still loyal to Ronald Reagan's Republican Party. Old people watch FoxNews, old people vote, old people love
Trump and in 2016, old people decided the election.
Younger people do NOT vote. The younger someone is, the less likely they are to vote. However, young people voted for Obama,
twice, but when Hillary came along, they stayed home and let the old people choose the president.
And then, in 2018 the young voted again and we learned the next generation plans to take this country into the future. If the
young vote in 2020, Trump is toast. If the young stay home, Trump will see a second term.
However, by 2024 the young will assume their rightful place in history and the age of old white men running the country, and
the world will come to an end.
You are making assumptions that old people are idiots. Making assumptions that middle aged people do not exist or are small in
numbers. Trump gets 200 or so electoral votes. He loses. I don't see any case he wins. He is past his 'used by date' even for
Republicans. You loose Tx to the Ds its game over, add PA and OH to the list. It doesn't even matter what crazy FL man thinks.
Don't forget modern geriatric medicine, by which the dinosaurs in the senate and elsewhere in the hardening arteries of the US
body politic will live - and hold ofice - for even longer than Strom Thurmond. They can afford the private medical insurance to
pay for it.
By the way, MeRaffey , I hope you meant to omit to punctuate in your last phrase so that it would read: ... the age
of old white men running the country and the world will come to an end . Your comma has me worried.
Warren/Harris, said it before but it makes sense. I would've preferred Biden to Clinton but I can't see him getting the same turnout
as Warren. Opinions on Trump are now fixed, it's a red herring to worry about "firing up" Trump supporters, they are already as
fired up as they can get. Swing voters are probably going to vote by where the economy is which is out of our control. Ideally
Democrats will be just as fired up as Trumpists, the investigations will suppress their enthusiasm somewhat (though they wouldn't
care if he killed someone so...) and the coming Trump recession will be brought on by his trade wars and the blame will therefore
fall where it should.
Warren lied about her ancestry to circumvent diversity quotas. Why should anyone believe anything she has to say? Furthermore,
What exactly is she promising that is any different then any of the other radical leftists running right now? It's all "Free Stuff"
that she's going to make the rich pay for. Um..yeah, that always works out doesn't it? Who needs real math when fuzzy math makes
us believe the combined wealth of the richest Americans will finance all this "free" stuff to say nothing about why so many Americans
feel entitled to the earnings of others. Remember folks, if a politician says 2+2=6 then it must be true.
"Warren lied about her ancestry to circumvent diversity quotas. Why should anyone believe anything she has to say?" You are
going to be told this a million times before 11/20 but that's bullshit. It's been well established that she didn't get any job
because of that.
She claimed Native American ancestry on her application to Harvard, a job she got and it wasn't the first time she played this
card either. But hey, in a political party that loves to change races and genders and expects everyone else to go along with the
charade by all means go ahead and believe what you want to believe.
A lie, see Snopes, see any link you've been given each time you post this lie. She got it on merit.
"In the most exhaustive review undertaken of Elizabeth Warren's professional history, the Globe found clear evidence, in
documents and interviews, that her claim to Native American ethnicity was never considered by the Harvard Law faculty, which voted
resoundingly to hire her, or by those who hired her to four prior positions at other law schools. At every step of her remarkable
rise in the legal profession, the people responsible for hiring her saw her as a white woman."
With Warren and Sanders talking complete sense about our oligarchy, the electorate's expectations are going to improve. Nothing
could be better. We've been asked to settle for Republican-lite servants of mammon for too long in the Democratic Party and that's
going to change.
The danger, of course, is that in this transition period Biden gets nominated. However much centrists will clamor for voters
to hold their nose and vote for him, that's not an electoral strategy. Trump's best chance of winning is that Biden gets nominated
and the progressive base of the Democratic Party is totally demoralized and lacking energy by late 2020.
After the US public allowed themselves to be hypnotized by Trump's campaign of fatuous lies, empty promises and racist dog whistles,
I doubted the electorate possessed the wit to understand actual policies. Maybe they've finally woken up - time will tell.
Do you understand how elections work? The US public were hypnotized? He lost the popular vote. The fault lies with the Republican
establishment for letting him put the R after his name. Perot ran on essentially the same ticket back in 92 as a third party candidate.
He got 18% of the vote. Had he run as a Republican he could well have won.
Oh dear. The question is, do you know how US elections work? The popular vote is irrelevant. He's the 5th POTUS who lost
the popular vote. Almost 63 million hypnotized dolts voted for him, and he won - that's why he currently resides in the WH
Or neither "hypnotized" nor "dolts." The people I knew who voted for him in North Carolina thought he was an asshole. But they
wanted a conservative Supreme Court for the next two decades and he has delivered that for them. Why do you assume that people
on the right are idiots who don't know what they want? That essential presumption by the left is one of the reasons the left lost
As one who used to be a Warren supporter, I think she is both patronizing voters and pandering to them. These policies have some
detail, sure, but they don't deal with the consequences that Warren knows very well lurk in the wings and as a result they don't
necessarily make sense.
Her proposal for free college is one example – sounds great, while in reality it would benefit the better-off middle class
at the expense of the most vulnerable students and create a cascade of problems that she has no plans to fix.
Again, fining companies for data breaches? Surely we should fine them *if* they don't immediately report data breaches to their
customers– or maybe if they haven't maintained appropriate data security, although I'd love to see proving that one to a court.
Hell, if we're going to fine them for data breaches, do we start with the DNC?
PS To be clear, I'd still take her in a second over Fat Nixon, I just wish she would pander less and keep her plans to the sensible
and achievable, like her consumer protection bureau, which was a fantastic idea.
Yes, (politely) do you? The fines for HIPAA violation have to do with noncompliance with the act, not with an uncontrollable data
breach. The fines increase on a sliding scale if "willful neglect" has been found (the data were not properly secured) or if the
company delays in reporting a data breach/violation.
Oh, I think he fears going to prison more. Michael Cohen was right – the minute Trump is no longer protected by the presidency
he is going to be facing charges, on tax evasion if nothing else. He will do anything to keep his protection for more years. He's
probably hoping to die in office. (I'd add something to that, but I don't want the Secret Service visiting me!)
The DNC is again placing it's foot on the scale in favor of Biden. I believe that they know Bernie is less likely to win because
of America's irrational fear of the word, "socialism." That's why they put Biden and Sanders on the stage together and pushed
out Elizabeth Warren to the other debate with lesser known and less popular candidates. They do not what her, with her solid plans,
to confront Biden, which would give her a greater boost in the polls and more recognition across the nation.
An inability to believe in coincidence will take you to some strange places. If Sanders and Warren drawn the same night you could
make an argument that Biden was getting set up to look good against the lightweight opponents. Or had Sanders drawn the undercard
that he was being marginalized. Warren will do fine either way. She's a great candidate. Biden isn't.
Biden rides high on President Obama's very long coat tails and Wall Street money even without detailed plans that actually help
the working class and the poor. Bernie is riding high on his honest fight for the working class and the poor.
Elizabeth Warren is rising fast because she not only agrees with Bernie on fighting for the working class and the poor,
but she has detailed plans that are holding up to independent economic scrutiny.
Both Warren and Sanders are honest in their fight for economic justice for all and recognize that the root cause of poverty
and lower middle class' struggle is corporate and wealthy-individual money in politics. They aim to stop it.
Biden claims he can negotiate with McConnell. Obama reached out to McConnell his entire term and drew back a nub. The same
will be true of Biden. For the Republicans and Trumpians, it's all about making Democrats fail no matter how much it hurts the
working class and the poor. Their propaganda network will always assist and sustain them by appealing to the emotions and prejudices
of millions of Americans.