The Battle For Economic Primacy

[jclay]

For ten or twenty years the existence of a battle for economic primacy between established nation-states and the corporate world has been apparent to me. It seemed quite obvious but that's about as far as my thinking went. What a surprise to find out that it has formal, academic foundations and that relative to "economic freedom" democracy and the notion of decent lives for the masses are not only nakedly expendable but impediments to be pushed aside as needed. A dystopian world for most, in support of maximum "economic freedom" for the grotesquely wealthy, is totally acceptable in this universe! This short introduction was quite the eye opener, should be required reading everywhere, and I will definitely get the book. This is about as fundamentally profound to the arc of civilization and democracy as germ theory was to medicine and public health.

Democracy doesn’t matter to the defenders of ‘economic freedom’ | Quinn Slobodian | Opinion | The Guardian

[jclay]

My oldest brother called me this morning. Aside from just being seriously, organically smart he is vastly more educated and avocationally knowledgable than I am in matters of this sort; I mentioned the article. Twenty minutes later he stopped talking and I felt an odd combination of anger and depression. I can't possibly recount the threads but suffice it to say that the increasing disparity of wealth, hollowing out of regulations beneficial to our citizenry and such as that isn't an accident or the casual product of random conservative folks. It is the result of 50 years of coordinated and well funded effort. Download a copy of the Powell Memo and go from there after your blood pressure normalizes, said he.

[thollandpe]

Thankfully, the underdogs still win once in a while.

[BBB]

It does rather seem we are moving towards a tipping point. The rich are getting richer, the planet is burning (literally) and the democratic process appears to have been corrupted, or at least populated by politicians who say one thing to get elected, and yet pursue agendas that may work against the masses that voted for them in the first place.

Either these issues are rectified by the normal democratic process by electing people who argue the case for genuine change and the people are willing to accept the status quo being changed, or change is forced on us by calamity (which all the predictions for global warming seem to point to) or there is violence that forces change.

[mzilliox]

fascinating premise. its a shame philosophy is dead.

[vertical_doug]

You can just read Stiglitz. He has been discussing this for a long time.



For 40 years, elites in rich and poor countries alike promised that neoliberal policies would lead to faster economic growth, and that the benefits would trickle down so that everyone, including the poorest, would be better off. Now that the evidence is in, is it any wonder that trust in elites and confidence in democracy have plummeted?

NEW YORK – At the end of the Cold War, political scientist Francis Fukuyama wrote a celebrated essay called “The End of History?” Communism’s collapse, he argued, would clear the last obstacle separating the entire world from its destiny of liberal democracy and market economies. Many people agreed.

Today, as we face a retreat from the rules-based, liberal global order, with autocratic rulers and demagogues leading countries that contain well over half the world’s population, Fukuyama’s idea seems quaint and naive. But it reinforced the neoliberal economic doctrine that has prevailed for the last 40 years.The credibility of neoliberalism’s faith in unfettered markets as the surest road to shared prosperity is on life-support these days. And well it should be. The simultaneous waning of confidence in neoliberalism and in democracy is no coincidence or mere correlation. Neoliberalism has undermined democracy for 40 years.The form of globalization prescribed by neoliberalism left individuals and entire societies unable to control an important part of their own destiny, as Dani Rodrik of Harvard University has explained so clearly, and as I argue in my recent books Globalization and Its Discontents Revisited and People, Power, and Profits. The effects of capital-market liberalization were particularly odious: If a leading presidential candidate in an emerging market lost favor with Wall Street, the banks would pull their money out of the country. Voters then faced a stark choice: Give in to Wall Street or face a severe financial crisis. It was as if Wall Street had more political power than the country’s citizens.Even in rich countries, ordinary citizens were told, “You can’t pursue the policies you want” – whether adequate social protection, decent wages, progressive taxation, or a well-regulated financial system – “because the country will lose competitiveness, jobs will disappear, and you will suffer.”In rich and poor countries alike, elites promised that neoliberal policies would lead to faster economic growth, and that the benefits would trickle down so that everyone, including the poorest, would be better off. To get there, though, workers would have to accept lower wages, and all citizens would have to accept cutbacks in important government programs.

The elites claimed that their promises were based on scientific economic models and “evidence-based research.” Well, after 40 years, the numbers are in: growth has slowed, and the fruits of that growth went overwhelmingly to a very few at the top. As wages stagnated and the stock market soared, income and wealth flowed up, rather than trickling down.
How can wage restraint – to attain or maintain competitiveness – and reduced government programs possibly add up to higher standards of living? Ordinary citizens felt like they had been sold a bill of goods. They were right to feel conned.We are now experiencing the political consequences of this grand deception: distrust of the elites, of the economic “science” on which neoliberalism was based, and of the money-corrupted political system that made it all possible.The reality is that, despite its name, the era of neoliberalism was far from liberal. It imposed an intellectual orthodoxy whose guardians were utterly intolerant of dissent. Economists with heterodox views were treated as heretics to be shunned, or at best shunted off to a few isolated institutions. Neoliberalism bore little resemblance to the “open society” that Karl Popper had advocated. As George Soros has emphasized, Popper recognized that our society is a complex, ever-evolving system in which the more we learn, the more our knowledge changes the behavior of the system.Nowhere was this intolerance greater than in macroeconomics, where the prevailing models ruled out the possibility of a crisis like the one we experienced in 2008. When the impossible happened, it was treated as if it were a 500-year flood – a freak occurrence that no model could have predicted. Even today, advocates of these theories refuse to accept that their belief in self-regulating markets and their dismissal of externalities as either nonexistent or unimportant led to the deregulation that was pivotal in fueling the crisis. The theory continues to survive, with Ptolemaic attempts to make it fit the facts, which attests to the reality that bad ideas, once established, often have a slow death.If the 2008 financial crisis failed to make us realize that unfettered markets don’t work, the climate crisis certainly should: neoliberalism will literally bring an end to our civilization. But it is also clear that demagogues who would have us turn our back on science and tolerance will only make matters worse.

https://www.project-syndicate.org/co...iglitz-2019-11

Joseph E. Stiglitz, University Professor at Columbia University, is the co-winner of the 2001 Nobel Memorial Prize, former chairman of the President’s Council of Economic Advisers, and former Chief Economist of the World Bank. His most recent book is People, Power, and Profits: Progressive Capitalism for an Age of Discontent.

[jclay]

For a one-liner, and for a way too large percentage of our population, this pretty well encapsulates the results of the last 40 or 50 years:

"While you were worried about socialism taking your freedoms, de-regulated capitalism stole your pension, took your savings, sent your jobs overseas, robbed you of health care, dismantled the educational system, and helped put you in debt, leaving only your racism, xenophobia, hate and guns."

Of course broad spectrum socialism has never been on offer, merely things like a national health care system, improved worker, environmental and public health protections, more robust protection related to the financial industry, vigorous anti-trust actions, combating monopolies/oligopolies, and that sort of thing. Bernie's been calling it right for pretty much the entire time. We certianly don't need any more neo-liberal Republicans or Democrats never mind an active, organically destructive personality and crew at the helm of our country.

[Blue Jays]

No thanks on the socialism thing. Gulags are not my style. I will stick with freedom and capitalism.

[vertical_doug]

No thanks on the socialism thing. Gulags are not my style. I will stick with freedom and capitalism.

I think you are confusing socialism with fascism and communism. Gulags were a result of political repression not economic. Capitalism does not necessarily guarantee freedom or if you really want to define it civil liberties.

[fastupslowdown]

I remember seeing Free to Choose on PBS. The documentary had a profound impact on me. I've seen it since and Friedman starts out with a visit to Hong Kong and his making the point that 1970's Hong Kong was the closest example of Adam Smith type Free Market capitalism. Seems a shame that China is messing with that 'secret sauce' -Mike G

[jclay]

No thanks on the socialism thing. Gulags are not my style. I will stick with freedom and capitalism.

Socialism isn't on offer and never has been and the gulag comment is utter nonsense. We are a hybrid economy composed of capitalistic and socialistic components as is just about every other first world country. I hope you'll decide to read a lot more widely and a lot more critically. This is a good place to start: naked capitalism: Finance, economics, politics, power as is this: TomDispatch

There are many others.

Medicare for All won't turn the US into a socialistic economy any more than Medicare or Social Security did.
Support for unions and working class folks, and well regulated capitalism won't do it either; deregulated capitalism can be a problem as should be pretty obvious by now.

I'll tell you what will though; continuing our neo-liberal economic trajectory and sitting idly by while wealth is ever more concentrated in an astonishingly smaller and smaller population. That's also a good way for you to lose your freedoms.

[jclay]

I think the optimum time to have been born was about 1940. Too young for WWII or Korea; too old for Vietnam but riding the economic wave of industrial primacy and a broad distribution of wealth coming from unions and the ashes of WWII before it closed out, like shore pound, in 2008. Electing Reagan was the public codification of the beginning of the end, something my middle brother predicted at the time; of course the seeds were planted earlier and certainly included the efforts of economist James Buchanan and his pals.

Similarly, acquitting Trump, and all that it implies, places us near the end zone of the end. It could take a while to unfold, but I fear the USA is likely toast. Steady general decline evidenced by increasing wealth concentration juxtaposed to a growing impoverished class, reduced relative social status of of whites and increasing civil unrest; all exacerbated by global existential challenges and sins of the long past never fully rectified. It seems to me, and history, that a country either corrects that sort of trajectory before punching a hole in the end of the runway or ends up in a civil war. You cannot maintain a civil society when base facts facts are being disputed, economic instability/concentration of wealth continues towards the excessive, the dominant racial demographic used to top social status and privilege feel they are losing it, and there’s no accountability such as the recent vote to acquit Trump; that and those on the losing end being ill informed, desperate, and easily manipulated by wedge issues.

Maybe "the greatest country ever" was another case of being born on third base and thinking you hit a triple.

Good luck to us.

[Will Neide]

I think the optimum time to have been born was about 1940. Too young for WWII or Korea; too old for Vietnam but riding the economic wave of industrial primacy and a broad distribution of wealth coming from unions and the ashes of WWII before it closed out, like shore pound, in 2008. Electing Reagan was the public codification of the beginning of the end, something my middle brother predicted at the time; of course the seeds were planted earlier and certainly included the efforts of economist James Buchanan and his pals.

Similarly, acquitting Trump, and all that it implies, places us near the end zone of the end. It could take a while to unfold, but I fear the USA is likely toast. Steady general decline evidenced by increasing wealth concentration juxtaposed to a growing impoverished class, reduced relative social status of of whites and increasing civil unrest; all exacerbated by global existential challenges and sins of the long past never fully rectified. It seems to me, and history, that a country either corrects that sort of trajectory before punching a hole in the end of the runway or ends up in a civil war. You cannot maintain a civil society when base facts facts are being disputed, economic instability/concentration of wealth continues towards the excessive, the dominant racial demographic used to top social status and privilege feel they are losing it, and there’s no accountability such as the recent vote to acquit Trump; that and those on the losing end being ill informed, desperate, and easily manipulated by wedge issues.

Maybe "the greatest country ever" was another case of being born on third base and thinking you hit a triple.

Good luck to us.

We're going to be OK.

[9tubes]

You can just read Stiglitz. He has been discussing this for a long time.

“The simultaneous waning of confidence in neoliberalism and in democracy is no coincidence or mere correlation. Neoliberalism has undermined democracy for 40 years.”

This is very odd. Stiglitz seems to be using the word neoliberal with a meaning opposite of reality. “Neoliberalism is contemporarily used to refer to market-oriented reform policies such as "eliminating price controls, deregulating capital markets, lowering trade barriers" and reducing, especially through privatization and austerity, state influence in the economy.” - Wikipedia

“Free market” in Amercian economic parlance used to mean a level playing field. What has undermined democracy over the past 40 years isn’t deregulation, but state influence in the economy through regulation that legalizes acts done by a few that were previously considered bad for society. Examples:

- Some of the most profitable fields in America are those the most regulated: retail banking, stock market, pharma, oil, etc. The big players have used bribery to create the opposite of a free market. The rules are written to favor these mega-companies over the consumer.

- The health care industry is a great example of regulatory capture. In no other field does the law enforce a transaction that says one party agrees to pay whatever the other party chooses to charge later, with an undisclosed price schedule that can vary 500% depending on who the customer is. That sort of agreement is called an “illusory contract” and was unenforceable for 200 years in all 50 states until the last 40 years. The government has legalized predatory dealing.

- Since the Great Depression it was orthodoxy that banks should remain small and not interconnected. This principle was thrown out over the past 40 years to result in banks with enough money and clout to control governments. The retail banks and stockbroker industry routinely defraud people and it’s now effectively legal.

- It is an open secret that certain big players front-run stock trades to skim money from retail stock transactions. The biggest player might be Citadel. Currently we have a new Treasury Secretary who received $7,500,000 in bags of cash from the people she is now regulating. $1,000,000 came from Citadel. What are the odds front-running will be reduced?

- Until 1980 or so it was orthodoxy that loan sharking was bad for society. It was illegal in all 50 states. There were limits on interest rates. Now laws permit and protect loan sharking. The bankruptcy laws were even changed in the 2000s to assist loan sharking. What has changed is that loan sharking is now done by big players. Anytime you hear the word "Fintech," think "loan sharking." Note how often the Democrats talk about income inequality and yet how seldom they mention 200% interest rate loan sharking.

- There was once bipartisan support for campaign finance reform to keep big money out of politics. In 2016 we had a presidential candidate who received $240,000,000 in personal payments from big money. And the winner in that election was worse. The 2020 federal election cycle spent $14 billion, twice the 2016 record.

This isn’t neoliberalism. It’s not a free market. It’s a playing field designed by government laws that is strongly tipped to favor a few. And both political parties support and nurture it. It is the fascist form of economic planning. Not the Nazi kind (that’s the political side of fascism), but the merging of state power with economic power as Mussolini once said.

[ides1056]

The optimum time to have been born was after the polio vaccine.

1956 worked for me.

[BBB]

No thanks on the socialism thing. Gulags are not my style. I will stick with freedom and capitalism.

Amusing to see this pre-Covid and pre-Trump letting the mob loose quote.

No thanks to socialism...well how about governments of all stripes stepping in and making life easier for people during Covid? You've had cheques (signed by Trump) in your country and we had government payments to businesses to keep people employed and to keep them afloat. How about the vaccines? Tax payer funded here. Yep socialism is terrible.

Freedom and capitalism (as opposed to Gulags). Yeah well, don't like the result of an election so you throw a tantrum and set the dogs loose. Fortunately dictatorship was avoided. The Gulags were apparently for Clinton ('lock her up' etc).

[Caleb Evenson]

9tubes, your comment leaves much for me to digest, and for that reason I appreciate it. I will leave you with a quick initial response in the form of rhetorical question, though: is it not possible deregulation has contributed to democracy's decline alongside what you say has undermined democracy in its stead?

Will Neide: Do you completely believe we will be okay, and if so, why?

[jclay]

Neoliberal action harmful to the broader public interest doesn't prevent the existence of regulatory actions that are similarly harmful to the public interest and the proponents of one are generally proponents of the other, at least from my vantage point.

Glass Steagal was regulation in the public interest; was it's repeal neoliberal deregulation or simply corporate crony regulation not in the public interest? Whichever label best suits it was clearly action that wasn't in the best interests of society.

At the root of all this is, at a minimum, is the battle for power and economic primacy between state and corporate interests. Under the general category of influence peddling we have politicians who will employ either as it suits.

Must dash.

[9tubes]

9tubes, your comment leaves much for me to digest, and for that reason I appreciate it. I will leave you with a quick initial response in the form of rhetorical question, though: is it not possible deregulation has contributed to democracy's decline alongside what you say has undermined democracy in its stead?

Yes. We have three categories and Stiglitz and the economists must be careful when using terms like "neoliberalism." Also, I've never met anyone who truly advocates for a completely regulation-free market. Milton Freedman's views were an extreme outlier. The notion of a free market has meant level playing field. The three categories:

- Deregulation of the previously regulated. E.g., medical pricing.

- Failure to regulate new innovations and technologies. E.g., derivatives market, which is 20 times the size of the world's stock market and gets nearly zero attention by Congress. This also falls into category 1 above, as this was previously illegal gambling.

- Government action in new ways against the public interest. E.g., the government giving research money to big pharma, pharma then patents (a government-granted monopoly), and only big pharma gets the profits. Or mandating that landlords cannot evict tenants for a year, knowing that some landlords will have to sell, and simultaneously giving 0% rate loans to megaplayers to enable them to buy those apartments.

Neoliberal action harmful to the broader public interest doesn't prevent the existence of regulatory actions that are similarly harmful to the public interest and the proponents of one are generally proponents of the other, at least from my vantage point.

Glass Steagal was regulation in the public interest; was its repeal neoliberal deregulation or simply corporate crony regulation not in the public interest? Whichever label best suits it was clearly action that wasn't in the best interests of society.

At the root of all this is, at a minimum, is the battle for power and economic primacy between state and corporate interests. Under the general category of influence peddling we have politicians who will employ either as it suits.

I'll suggest that it is a battle for power and primacy not between state and corporate interests, but with state and mega-corporate interests joined on one side, and the rest of business and consumers on the other.

[Caleb Evenson]

I'm feeling very tired and dumb. When you said, "Yes." in response to my question, did you mean that deregulation has not contributed to democracy's decline? I should have stated that previous question in a simpler way...