We all know the times we live in: global recession, everyone feeling the pinch, austerity measures necessary, etc. In terms of unemployment, the indicator most of us care most about, this is the longest and worst recession since World War II. So we all know the situation’s bad. Here in the US, state budgets are being keenly affected, as they rely on income or sales taxes, both of which have taken cuts — and many states have passed balanced-budget laws, meaning the old US Federal Government standby of borrowing their way out is unavailable. Life has grown grim.
Opinion is rather divided on how to respond, however.
The followers of John Maynard Keynes immediately demanded a stimulus package. Both President George W. Bush and President Obama tried this tactic, although Bush’s was just through tax rebates. Obama’s was somewhat more comprehensive, with tax cuts taken directly out of the paycheck withholdings to try and encourage immediate spending, reinforced by government funding for a variety of projects, particularly in construction (remember “shovel-ready”?). While some claim that the recession is now over, and while some signs on unemployment are encouraging, it’s clear we’re still deeply in the hole, and climbing out only slowly.
So the Keynsian tactics have run into trouble. Explanations abound as to why; but certain parties have their own theories on how to save the day. Speaker of the House John Boehner demanded that the pre-recession Bush tax cuts be made permanent for all Americans — i.e., that they be made permanent for the wealthiest Americans as well as everyone else, as it’s only in dispute for a fraction of the population. “[W]e must cut spending and stop all the looming tax hikes,” he writes. He didn’t get the cuts made permanent, but struck a deal with President Obama to extend them two years. Boehner’s principles seem to be both emblematic of the GOP’s platform and rather neoliberal: tax cuts for the wealthy, spending cuts and privitization, and laissez-faire economics policy from the government (the latter indicated by Boehner’s past resistance to bank reform legislation; more recently, Republicans serving on a panel on the financial crisis voted to expunge all instances of the words “Wall Street” and “deregulation” from their panel’s report. They don’t want their culpability uttered aloud.) Milton Friedman would be proud.
Friedman’s theories — foster free markets by cutting spending and cut regulation to the bone or the death, what’s referred to as neoliberal economics — are also being proposed at the state level. Here in my own Washington State, business leader James Warjone wrote a column in the Seattle Times recently, urging the state to “fundamentally transform how it operates.” He goes on to some specifics: “Manage the size and compensation of the state work force” (layoffs and pay cuts), “Use competitive sourcing” (privatization), and “Inventory assets for possible sale,” in particular “real-property assets” that are “underused or unnecessary” — most likely meaning state parks, although admittedly he did not say so straight out. Classic neoliberal theory: privatization and cuts to pay and benefits. What Warjone did not mention was that his business, Port Blakely Companies, is a major real-estate developer in the Puget Sound region, and that four state parks with waterfront property are within five miles of his business’ namesake town. In other words, if the state started selling off state parks, Warjone would strike gold.
It’s only natural, really. After all, consider his own words: “A singular principle guides business leaders: What must we do to succeed in a competitive marketplace?” Not “the primary principle” or “one of our principles.” No, according to Warjone, profit is the only motivator for business leaders. And if that is true, then it is Warjone’s duty as Port Blakely Co.’s chairman to advocate for the sale of state land so his company can purchase and develop it. He is not unprincipled; he just has fewer principles than some might like.
Consider, for instance, his slight obfustication about his own motives in writing the column. It’s his duty to advocate for privatization, since his business would benefit, but it’s also his duty to be somewhat obscure about his advocacy. “Greed is good” is no longer an acceptable philosophy, at least out loud, and while private profit may be Warjone’s only principle, a lot of people usually stand for the public good as well as their own interests. Warjone must therefore mask his motives and pick his moment carefully, as he’s doing: coming forward in the heart of a budget crisis to push for a sale of land.
Naomi Klein spelled out the basic principle in her highly-regarded book “The Shock Doctrine: the Rise of Disaster Capitalism.” Neoliberal thinking has never been terribly popular among the general human population — most people like at least some social safety nets and prefer to retain a little control and protection over the commons. As neoliberalism demands that the safety nets be removed or privatized and the commons be sold off for exploitation, directly contrary to the usual public will, neoliberals like Friedman and his “Chicago Boys” put forward the idea that the neoliberal agenda is best pushed through during periods of enormous stress, and all at once, to take advantage of the population’s disorientation and anxiety; hence “Shock Doctrine.” Moreover the neoliberal agenda usually requires considerable political repression. Chile in 1973 was Friedman’s first test run, leading directly to Pinochet’s brutal dictatorship and a massive transfer of wealth upward. Unemployment skyrocketed. The “Chicago Boys” had the same result time and time again, from Boliva and Brazil to South Africa and Russia, plus Iraq immediately following the 2003 invasion. In fact, while the US hasn’t been a Friedmanite paradise since before the New Deal–since the 19th century, really — it’s easy to argue that neoliberalism accounts for our current economic woes. Our political leadership (Reagan’s Republicans and Clinton’s Democrats) never quite privatized as much as Friedman wanted, but they certainly cut taxes and they certainly deregulated. That deregulation fueled the present economic disaster, as is now common knowledge.
So it’s particularly daring of the Friedmanites to push for more of the same. It’s classic neoliberal tactics to demand tax and spending cuts during a crisis, but to do so during a crisis of their own making is astoundingly bold. It is, however, totally in keeping with their principles. As Klein puts it, “Like all fundamentalist faiths, Chicago School economics is, for its true believers, a closed loop. The starting premise is that the free market is a perfect scientific system, one in which individuals, acting on their own self-interested desires, create the maximum benefits for all. It follows ineluctably that if something is wrong within a free-market economy — high inflation or soaring unemployment — it has to be because the market is not truly free […] The Chicago solution is always the same: a stricter and more complete application of the fundamentals.” [Klein, pg. 51] Or, in short, if they’re losing their bet, they will always double down.
Moreover this strategy shows both a conservative eye toward the future and a disrespect for the masses, other neoliberal hallmarks: if the crisis continues much longer, neoliberals and conservatives believe the people will grow desperate for a solution, any solution, even one that’s been tried and found wanting, and as such people will snatch at even the cruelest straws.
It’s happened before, after all; in Germany in 1933, the Nazis took power on similar desperation. The German Communist Party took second place in that election; radical solutions were popular in such radical times.
All this might go a long way toward explaining current Republican intransigence on the economy and budget. While much of it is simple party politics, of course, there’s likely a deeper agenda at work; the Republicans famously have a long view, too. Many liberal observers have howled that the GOP platform — roll back health care reform, end jobless benefits, and make the tax cuts permanent — will actually harm the economy, not help. Are the Republicans trying to hurt us? the liberals screech.
Well, quite possibly yes.
If the Republicans prolong (or even worsen) the economic crisis, after all, they will stand to reap the benefits in 2012. A struggling economy has deposed sitting presidents before, and President Obama, justly or not, will likely be saddled with the blame if times are still tough. Once they’re back in power and times are bad enough, Republicans may well be reasoning, their neoliberal economic proposals can be enacted — however responsible neoliberal ideas are for the crisis in the first place.
(Let me say here quickly that I am distinguishing between neoliberal Republicans and more classic conservatives, many of whom are deeply dubious about the GOP’s recent behavior, and let me also say that many Republicans are likely rather worried about the course their party is on. Senator Richard Lugar, for instance, is starting to dissent. If these doubters in the party haven’t broken ranks yet, however, they share the responsibility with their leaders. Finally let me say that I am not accusing the GOP leadership and their neoliberal advisers of being unprincipled; as stated above, profit is their principle. I am simply pointing out what their principle is, and that not everyone will necessarily agree with them.)
If I’m right, this certainly explains the GOP’s current talk about the deficit. The Republicans have done a fascinating 180 in discussing deficit spending in just a few years, going from rubber-stamping Vice-President Cheney’s assertion “Reagan proved deficits don’t matter” to howling that we’re spending ourselves to death. Some liberals, to their shame, have simply followed the Republican reversal and gone from questioning the ballooning Bush budget to claiming that Obama’s deficit isn’t a problem. Certainly the deficit is a less-pressing problem, but it remains potentially deadly in the long run: run up enough debt (ours is already enormous) and eventually paying interest on that debt will exceed the government’s total budget. Neoliberals know this because their policies have made it happen before, in Bolivia in 1985. [Klein, pg. 142] As paying debt interest only accounts for six percent of the total US budget for 2011, we’re clearly a long way off from that. But as the deficits mount, so will the interest, and to pay the interest as mandated by law, the US will have to start making real cuts. This year’s deficit is currently over a trillion dollars, bringing the total debt up to ten trillion. That’s not sustainable. [The Budget Graph] The Republicans’ sudden concern about the deficit, always rather disingenuous, is particularly undermined by their willingness to fund the recent tax cut extension by running up the deficit further, and by their (symbolic) vote to repeal the health-care reform bill. Eliminating collective bargaining for public employees, as is being attempted in Wisconsin and sixteen other states, even when the employees in question agree to substantial cuts, reveals just how transparently neoliberal the GOP’s agenda is.
So GOP concern over the deficit serves a purely Friedmanic purpose, knowingly or not: by yelling about it, Republicans tie the hands of Obama and other would-be Keynsians, prolonging the crisis to a point where “austerity measures” like privatization and social-spending cuts can be pushed through, along with deregulation like banning collective bargaining. Meanwhile the Republicans are content to keep shoveling money to the wealthy through the tax cuts, and content to let two enormously costly wars rage on.
No surprises there. After all, what Klein terms “disaster capitalism,” i.e. profiting off of catastrophe, has always relied heavily on government spending — just in select areas, not for the masses. The huge upsurge in security spending comes from coffers both public and private, but certainly the Homeland Security/defense contracts bonanza since September 11th has been dominated by US government spending. There’s even evidence that Arizona’s new immigration law was created by private prison companies, who stand to benefit from incarcerating hundreds of people indefinitely. (The bank bailouts are governmental too, and certainly further neoliberal purposes, but they aren’t in Friedman’s creed.) Deregulation and privatization are the watchwords of the Chicago Boys, but in practice it boils down to privatization of the profit and socialization of the cost. (This again raises the question I’ve asked before, whether any market has ever been truly free.) It’s Friedmanic sustainability: keep the wealth flowing upward and never back down, and if a crisis like the present recession hits, use it to tighten the screws even more. As Klein points out, modern capitalism has discovered how to thrive on conflict and instability, profiting by crises and using them to further its agenda. It follows, therefore, that perpetual instability — steady-state chaos, if you will — would be ideal for modern capitalism. Or, more precisely, it would be ideal for capitalists and rather miserable for the rest of us.
The elite would probably be fine with this because they can keep such chaos at arms’ length. After Hurricane Katrina I heard a theory proposed about why the Bush Administration was so slow and unhelpful in its response to the disaster: they didn’t understand that not everyone in New Orleans could just gas up the SUV, pay for a few days in a hotel, and wait for everything to blow over. They couldn’t comprehend, the theory goes, people who were living so close to the ground that they had no resources to draw on in such a crisis. A failure of imagination on Bush’s part, and on the part of his advisers. This is a reasonable explanation: I have a hard time imagining across class lines myself, and I am a bit closer to impoverished than Bush or Cheney ever were.
On reflection, however, I find that there is another, equally plausible explanation: that the people in power at that time understood the limitations on the people in New Orleans just fine, but simply didn’t care. Under the doctrine they clearly follow, i.e. that wealth is the only indicator of worth (“A singular principle guides business leaders…”), if a person couldn’t afford the SUV and the credit card and the hotel, that person obviously don’t matter. anyone that poor got that way due to idleness or incompetence or corruption, and deserved to get flooded out. Factor in the “Prosperity Gospel” Christianity that many on the right also follow, factor in at least a little racism, and you have a situation where the leadership might well have felt that anyone who drowned had it coming. A failure of compassion, really.
I expect the truth lies somewhere in between these two explanations, but I strongly suspect that both played their part.
For my own part, I hope that these oligarchs of our current society — and they are not all rich, nor are all rich folks are oligarchs — can find a way to change their behaviors. For their own sakes, I hope so. Because the system they have set in motion cannot endure much longer. They have devised a system that profits from catastrophe, trusting that they will always escape or survive the disasters that strike (and that they occasionally cause to strike), but someday the house of cards will fall.
You see, all the schemes and systems require an infrastructure to work from, an infrastructure they may well simply be taking for granted. Where is the New York Stock Exchange without electricity? Oh, yes, the NYSE predates electric power, and in theory the brokers could go back to the abacus, but presently they rely on computers to handle the sheer volume of stocks flowing through their hands. Turn out the lights and 95% — if not simply all — of Wall Street’s business comes to a halt. Corporate finance of the modern era can’t exist without power. And that power supply is not guaranteed. There have already been accidental blackouts; it’s not too far-fetched to imagine more, perhaps permanent this time, perhaps deliberate.
Take another step back. Where would Wall Street be if, due to some catastrophe, food couldn’t make it into the city? For it must; the only way New York stays fed is if tons of food are brought in each day. Each hour, maybe. So what happens if the food is too expensive to ship? What happens if the food is too expensive to grow? Between rising oil costs, depletion of topsoil and freshwater reserves, and climate chaos, it could happen all too easily.
Heck, it does happen, every day — just not in the US. Not yet.
So the oligarchy — the Wall Street bankers, the neoliberals and the Chicago Boys, the government contractors, and the politicians who lead them or serve them, depending on your view–have been profiting from catastrophes like Katrina or Iraq because they can afford the SUV and the hotel room. (Klein tells us there’s even a growth industry in luxury evacuations. [pg. 415]) Or, better yet, they could afford to live somewhere other than New Orleans. The elite has always been able to escape. Failing that, they pay for protection. Because there is one form of disaster that they will never be able to escape entirely: people.
People rise up; people lash back. Oh, the oligarchs are nothing if not masters of sleight-of-hand, misdirection, and, when all else fails, the jackboot and the “disappearance”–the infrastructure of wealth and business is also a social structure, a hierarchy. The military, in the form of the National Guard has often been called in to protect the persons and interests of the wealthy. In fact, “preserving public order,” so often code for breaking up riots and protests, is arguably the National Guard’s primary purpose; certainly Governor Walker of Wisconsin thinks so. But people rise. People strike. People sabotage. And people mob. The populace enraged can be a wildly destructive force. I don’t seek to unleash that demon, but it can’t be bottled up forever. I would rather see the people’s rage turned to peaceable protest like strikes and marches and boycotts, factories reclaimed by workers and skyscrapers reclaimed by janitors, maybe even a few object lessons on literal powerlessess as described above. I’ll embrace any tactic that is harmless to flesh but lethal to greed, any trick that will make the oligarchy bow to the populace they’ve stepped on. And whatever I learn, I’ll turn around and teach to others.
So there’s no hiding from the natural upheaval that is a popular rising. The oligarchs have always relied on the exploitation of raw materials, and to them the labor force is just another resource to use and abuse, to control through prison or debt. They are in error. Someday someone will show them the depth of their mistake.
For their sakes, I hope it’s me. I don’t want them dead.
Moreover there’s no hiding from the other great storms the oligarchy is unleashing; the literal storms of a climate and an ecosystem in crisis and in flux, and the figurative storm of scarcity — in oil, in water, and from those two, in food. Our planet does not organize and it does not bargain. Pushed too far, it just lashes back, with redoubled fury.
The oligarchs and the neoliberal thinkers who have served them have always protected themselves well. They are always the last to go under, the last to suffer. What’s worse, history tells us that as an oligarchy falls, the people are no better off; the tyrants fall to vengeance, not to the law, and too often the vengeful convulsion is a death spasm. Worse still, whatever structure that comes out of the chaos usually has another set of oligarchs in it somewhere; so it goes. It may be too much to hope for to end the cycle. But either way, the rich do fall.
So for their own sakes, I truly hope they can learn to imagine and learn to care. And I sincerely hope they learn it soon.
Too hard to shoehorn it in, but here’s an opinion piece about the potential repercussions of Shock Doctrine on Egypt’s revolution:
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