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Neoliberalism as a New, More Dangerous, Form of Corporatism

Neoliberalism = Casino Capitalism = "Transnational elites, Unite!"
(It is a neoTrotskyism with the word "proletarians" substituted by the word "elites"
 in famous "Proletarians of all countries, Unite!" slogan
and "Color revolutions" instead of Communist  "Permanent revolution"  )

Version 5.0

Skepticism and Pseudoscience  > Who Rules America > Neoliberal Brainwashing

News Who Rules America Recommended books Recommended Links Neocolonialism as Financial Imperialism Definition of neoliberalism Globalization of Financial Flows
Neoliberalism as Trotskyism for the rich Neoliberalism and Christianity Pope Francis on danger of neoliberalism Casino Capitalism Neoliberal Brainwashing Neoclassical Pseudo Theories Ayn Rand and Objectivism Cult
Key Myths of Neoliberalism Lawrence Summers Robert Rubin, the man who helped to convert the USA into banana republic Phil Gramm Ronald Reagan: modern prophet of profligacy Sandy Weill: the banker who bought Bill Clinton Milton Friedman -- the hired gun for Deification of Market
Media-Military-Industrial Complex  Globalization of Corporatism New American Militarism Neocons Corporatist Corruption: Systemic Fraud under Clinton-Bush-Obama Regime Psychological Warfare and the New World Order: The Secret War Against the American People Gangster Capitalism
Financial Crisis of 2008 as the Crisis of Neoliberalism and shift to neo-fascism Peak Cheap Energy and Oil Price Slump Financial Sector Induced Systemic Instability of Economy Corruption of Regulators In Goldman Sachs we trust: classic example of regulatory capture by financial system hackers The Deep State Deconstructing neoliberalism's definition of 'freedom'
Elite Theory The Iron Law of Oligarchy Compradors Fifth column Color revolutions Anti-globalization movement Inverted Totalitarism
Resurgence of neofascism as reaction on crisis of neoliberalism and neoliberal globalization Alternatives to neoliberalism If Corporations Are People, They Are Psychopaths Jeremy Grantham On The Fall Of Civilizations Super Capitalism as Imperialism Neoliberalism as a Cause of Structural Unemployment in the USA Neoliberalism and inequality
Neoliberal corruption "Fight with Corruption" as a smoke screen for neoliberal penetration into host countries IMF as the key institution for neoliberal debt enslavement Blaming poor and neoliberalism laziness dogma Predator state Disaster capitalism Audacious Oligarchy and "Democracy for Winners"
The Great Transformation Harvard Mafia Two Party System as polyarchy Republican Economic Policy Monetarism fiasco Small government smoke screen Over-consumption of Luxury Goods as Market Failure
Libertarian Philosophy Media domination strategy Neoliberal Brainwashing -- Journalism in the Service of the Powerful Few In Foreign Events Coverage Guardian Presstitutes Slip Beyond the Reach of Embarrassment History of neoliberalism Humor Etc


Even though I agreed with him, I warned that whenever someone tried to raise the issue, he or she was accused of fomenting class warfare. “There’s class warfare, all right, "Mr. Buffett said, “but it’s my class, the rich class, that’s making war, and we’re winning."

- New York Times

Make no mistake, the neo-Liberal fuckers are just as bad as the Stalinists

May '68 and its Afterlives [Review]

GB: once a great cultured nation, now a poorly-educated gangster mafia state, ruled by oligarchs and inhabited by soccer hooligans

The Kremlin Stooge


Introduction


Neoliberalism is not a post-war version of capitalism. It’s a post-war version of fascism.

washunate September 10, 2015 at 2:05 pm; comment to the post

David Kotz: Understanding Contemporary Capitalism, Part I

Imagine if the people of the Soviet Union had never heard of communism. The ideology that dominates our lives has, for most of us, no name. Mention it in conversation and you'll be rewarded with a shrug. Even if your listeners have heard the term before, they will struggle to define it. Neoliberalism: do you know what it is? Its anonymity is both a symptom and cause of its power.

Neoliberalism – the ideology at the root of all our problems
 by The Guardian,  April 15, 2016

 

 

Neoliberalism is a new form of corporatism based on the ideology of market fundamentalism, dominance of finance in the economy (and restoration of the political power of financial oligarchy) and cult of the rich ("greed is good") instead of ideology based on racial or national superiority typical for classic corporatism. Like many religious doctrines it belongs to the class of Theological Voluntarism (with some pseudo mathematical voodoo attached as a justification; actually even this is not new. Iranian ayatollahs in the past needed to demonstrate proficiency in mathematics) , but unlike most philosophies and religions it does not try to suppress greed. On the contrary it pronounces it to be a virtue ("Greed is good"). It simply profess that all actions of the elite  need to be covered under smokescreen of propaganda which is unprecedented in its cynicism, hypocrisy and contempt to the ordinary people.  Probably exceeding cynicism of the USSR leadership which promoted  the same redistribution of wealth up  ( in case of the USSR mainly to military industrial complex and nomenklatura )  using Big Brother style slogans like  "The Party cares for the wellbeing of the people".  This is a tailor-made ideology for financial oligarchy and  large international corporations who simply want to to carve the "economic cake"  on the whole globe. They created a political system that is the very opposite of what our leadership, the mass media, opinion leaders, think tanks etc. proclaim to be the world's foremost, exemplary democracy.

While neoliberalism (or "corporations uber alles" as we can call it) proved to be a more dynamic social system then stagnant "Brezhnev's socialism" which it successfully destroyed (with the whole "Socialist camp"), it is one step forward two steps back in comparison with New Deal type of capitalism and, especially, social democracies of Scandinavian countries.  Which neoliberalism also successfully destroying.  At the same time like communism this is another "universalist ideology" based on false hopes. Similar to communist expansion( Trotsky idea of "permanent revolution") the neoliberal world now is preoccupied with the neoliberal expansionism, with the opening of foreign markets for transnational corporations.  Like with Communism,  imperial ambitions are not only territorial; they are also ideological. This ideology, or is you wish, secular religion (there is nothing scientific in neoliberal doctrine, especially in economic part of it) can be exported to any country via so called color revolutions. Unlike classic colonialism neoliberal occupation is not dependent on direct occupation of the country by military forces.  It's more like financial occupation via debt slavery (neocolonialism) and it uses as local occupying force the part of local elite closely connected to transnational corporations and storing their financial assets in Western banks.  Neoliberalism proved that the empire could be successfully expanded not only by conquest but via co-optation of a part of the local elites (aka fifth column of globalization).

In way neoliberal is a unique social system that mobilized the power of greed (in a very destructive for the society way) while most previous social system tried to suppress it. Usury laws are an example which were revoked under neoliberalism (payday loans is plain vanilla usury; credit card debt is close). The only criteria of any activity is economic success (which closely relates neoliberalism to Marxism, which similarly viewed as economics as primary force of progress of human civilization and social "superstructure" as secondary element in human societies which automatically reflects the economic base). As an economic doctrine neoliberalism  repudiates Keynesian welfare state economics and promoted the "law of jungle" principles using bought ideologues like Milton Friedman and earlier by the dubious fighter for economic freedom  Friedrich von Hayek. In other words it favor of "dog eats dog" forms of competition which were the hallmark of early capitalism (Austrian aristocrat Friedrich von Hayek probably would have a stoke if he saw the current "dog eats dog" implementation of his ideas).

Commonly under the term "neoliberalism" we understand a set ideas such as a radically free market, maximized competition and free trade achieved through economic de-regulation, elimination of tariffs, a range of monetary and social policies favorable to business and indifferent toward poverty, adopting explicit policies redistribution of wealth up via casino properties of stock market (which is a central institution of neoliberal order), cultural decimation, acceleration of Earth resource depletion and environmental destruction due to the "race to the bottom"  in increasing profits by any means possible. But it is more then that. Like Marxism and most world religions neoliberalism provides humans with what is called " neoliberal rationality" which organizes the world view of adherents to neoliberalism. It reaches beyond the market. Neoliberal rationality defines human beings as market actors (homo economicus). All dimensions of human life are cast in terms of a market relations. Actions and policies are reduced to the bare question of profitability. For example under neoliberalism universities became service provider with the primary goal of profitability not enhancing the society knowledge and preparing educated citizens. It becomes a narrow, overspecialized preparation for entering the "job market". and explicitly design to produced narrow minded individuals, who never question the social system they live in and who view themselves as entrepreneurs (privileged set of market actors, above regular employees) and who know only Excel calculations of profitability, the rules of competition and are ready to play it hard to get themselves a space under the sun in dog eats dog game. 

In other words neoliberalism subvert university education like other institutions into instruments for developing, dissimilating and institutionalizing such a rationality. Exactly like universities in the USSR were structured to indoctrinate students in Marxism orthodoxy. Neoliberals reject the idea that the economy must be directed and protected by society laws and policy as well as by the dissemination of social norms designed to facilitate not only competition but cooperation as well. universities used to teach its students to consider the costs, benefits, and consequences of individual action in view of the "society at large".  The need to support for the vulnerable and needy. This set of ideas is completely withdrawn. Poor are guilty themselves for their miserable status. and should  better die, not to crowd the Earth surface. Everybody is on his/her own. As Thatcher quipped: “There is no such thing as society. There are individual men and women, and there are families

Political citizenship is radically reduced within the neoliberal framework to unprecedented degree of passivity and political complacency. The role of citizen is downgraded to consumption: "go shopping" was the famous Bush Ii recommendation after 9/11.  elections were emasculated to the choice of two preselected representative of the ruling elite (Two Party System as Polyarchy) selection of which is fully controlled by ruling oligarchy (in the USA via monetary mechanism as candidates need a "war chest" to run in elections which typically can come only from the powers that be). 

Even nation-states must think and behave like a market actors. The languages of cost-benefit analysis and calculation sweep into governmental decision-making. In the "neoliberal rationality" the health and growth of the economy (with absolutization of GDP) is the only basis of legitimacy of the state. The slogan is  “It’s the economy, stupid.

"Economic colonization" of the life under neoliberal ideology sometimes reached grotesque forms with even dating analyzed in market terms, with marriage as the final compromise of the "deal". 

Neoliberalism like Marxism before it is truly expansionist ideology with global ambitions. Like was the case with Marxism there is no "rational" limit to the neoliberal global expansion (actually only the size of  the planet Earth is the limit). Neoliberal states and especially the USA as the center of global neoliberal empire are aggressive globalists in very precise meaning of this word (with the stress of the word "aggressive")  and wants to overthrow each and every government which is not friendly enough to "Washington consensus" (neoliberal charter for all countries outside G7).  For this purpose the mechanism of overthrowing foreign governments via close interaction of local fifth column and intelligence agencies of the USA and several other Western countries called "color revolution" was invented and polished via repeated coups in various part of the globe.

Color revolutions performed under the banner of democracy and  liberty could not easily stopped by governments of many third world and xUSSR countries as they undermine legitimacy of the government in a very vicious way: pretending that such a revolution is not a tool of neoliberal occupation of the country but genuine fight for the  "spread of democracy". Yet, the neoliberal experience on many country that experienced neoliberal revolutions directed by State Department now clearly see that spread of neoliberalism is in reality a neocolonial expansion had crippled traditional institutions as well as national social security net in the colonized countries and brutally enforced exploitative foreign ownership of country strategic resources. All that creates huge level of inequality of population and a great divergence in the standard of living between neoliberal center (G7) and neoliberal periphery. Poverty as well as arrested economic development, if not under-development and sliding into debt slavery (with gentle encouragement of IMF) are common. 

The process of transition from a neoliberal colony status to sustainable independence is currently uncharted territory. Only few countries made significant steps in this direction (Russia is one example although progress  is limited and it remains "a second rate" neoliberal country (it entered WTO under Putin) not allowed to the club of "prime" neoliberal countries; there are also some steps in Latin American countries in the same direction, but due to proximity of the USA and absence of nuclear deterrent for neoliberal aggression their position is more fragile and success can be temporary.

As of 2015 neoliberalism remains the dominant social ideology and practice in the world.  It survived and entered in "non-dead" (zombie) stage after 2008 crisis (see The Strange Non-death of Neo-liberalism by Colin Crouch). It is till expanding and trying to colonize new states into global neoliberal empire (Libya and Ukraine are two recent examples).

At the same time after approximately 35 years of being dominant in world (if we assume that 1980 was the year then neoliberalism came to power in the USA; in reality it happened earlier under Carter  and Chile coup of 1973 was the first country converted into neoliberal governance) is shows some significant cracks.  So we can think about neoliberalism coming to power in the USA in 1965 with the establishment of free trade zones and Mexican maquiladoras (factories that produce for export) under so called the Border Industrialization Program which makes it 50 years old.

In any case neoliberalism now is close to the longevity as the New Deal Capitalism (1933-1980). And unless oil price goes through the roof (undercutting globalization) neoliberalism in the USA has chances to outlive socialism in Soviet Russia which lasted 74 years (1917-1991), as there is no viable countervailing force on the horizon. Opposition to the new world order by resource nationalists (like Putin) and Catholic church does not cardinally changes this situation. After all Russia by all accounts is still "yet another neoliberal state" (the same is true for China).  It entered WTO under Putin. Russian elite, like German elite just want a better place in neoliberal world, which was denied for them by the USA and other Western European elites.

Formally we can view neoliberalism as a flavor of corporatism (in sense that corporations are dominant political actors -- as Senator Dick Durbin aptly quipped about US Congress "Banks frankly own the place").  As such it might be  more properly called neo-corporatism and it is district from classic corporatism which rely of dominant political party and suppression of dissent by force by using indirect "iron fist in soft glove" methods based on the power of finance (see  Inverted Totalitarism). While rhetoric of Lebensraum im Osten and natural selection (like in "separating incompetent or systematically unlucky people from the control of valuable resources") is not unique to neoliberalism, it is neofascist  in spirit  (see neofascism and  National Socialist Program).  While globalist in nature, it paradoxically stimulates growth of local far right or openly neofascist parties (as we see in Greece, Hungary, Israel and Ukraine).

Under neoliberalism the wealthy and their bought academic servants, see inequality as a noble outcome. University professors of economics form the most corrupt part of intellectual elite – they are nothing more than employees of the financial oligarchy paid to administer intellectual anesthetic to those among debt slaves, who still have enough time to ask what’s going on. For a relatively modest (in comparison with politicians like Hillary Clinton)  remuneration they help to enrich top 1%, shrink middle class making it less secure, and impoverish poor.  Please note that redistribution of wealth up is an officially stated goal. In 1992, when asked what Iran-Contra operation was really all about, Bush I replied that it was done for "...the continuous consolidation of money and power into higher, tighter and righter hands."

Neoliberalism enjoyed strong political ascendance since 1980th, although ideology is much older and its origins can be traced to first decade after WWII; the seeds were firmly planted in 1965 with the establishment of free trade zones and Mexican maquiladoras (factories that produce for export) under so called the Border Industrialization Program. Even at this, early stage the key feature of neoliberalism were evident -- outsourcing labor to the third word countries, as the method of undermining power of unions in the USA. Along with the elimination of unions, classic neoliberalism promotes reduced taxation of rich and corporations, reduced regulation, and minimizing redistributive function of government and favoring the rich and powerful elite and first of all financial oligarchy. This minimization of government functions is not about the reduction of military budget, but about dismantling of safety net established under New Deal, including the privatization of health and retirement benefits. In countries outside the USA neoliberalism is also a strong proponent of opening up of the economy to foreign competition. Supporters of neoliberalism created real "fifth column" out of universities economic departments with small targeted grants and various forms of corruption of large percentage of professors (speaking engagements, higher salary, exorbitant consulting fees, etc).

In its essence neoliberalism was a counterrevolution aimed at destroying established after WWII compromise between workers and capitalists based on state capitalism model, which in the US was called the New Deal.  In most simple form neoliberalism can be defined as an attempt to restore the rule of international financial oligarchy over society, as a new form of corporatism, of, if you like, neofascism (not always velvet gloves for countries outside G7; see Pinochet history of repression in Chile, for example) .  Unlike classic forms of corporatism such as German and Italian fascism here we do not see the dominant nationalistic, far right political party that suppresses all the political opponents. Instead this is an organized movement of the top echelon of corporations and, first of all, global/transnational corporations, who decided to enforce the same indirect and mostly economic form of  control over population that were polished within corporate environment and in battles with the unions. It  can be called "fascism without nationalism". Such social system also sometimes was called Inverted Totalitarism, "casino capitalism", or "fascism in velvet gloves".

As a social system neoliberalism is a derivative, a new form of classic corporatism and involves complete dominance of large corporations over government, including but not limited to conversion of goals of multinationals into state foreign policy goals (achievable by wars, if other means fail). The usurpation of large multinationals of political life of the country is achieved mainly by economic means, but assassinations of "non-conformant" political leaders are not excluded as "deep state" is a part of neoliberal power structure and has capabilities of physically eliminating opponents.  Still the main form is by buying politicians and key intellectuals as well as controlling all major political appointments (including the selection of Presidential Candidates). In a way the society became "occupied" in a very precise meaning of this word (and that's why "Occupy Wall Street" movement is misnomer; it should be called anti-occupation movement). Citizens and most countries are transformed into indented servants of large corporations and their economic and political interests.

Debt slavery is the standard, preferred tool of neoliberal control both over individuals and countries. One of the key strategy of subduing the countries by bringing to power neoliberal elite (fifth column of globalization) as well as enforcing on the country large unplayable debt. Essentially converting such a country into debt slave rules by vassal government, which oversee transfer of funds to metropolia.  Thos model replaces direct occupation model used by British and other empires. 

Greece and Ukraine are two most recent examples of this policy in action. Typically this is done with giving the country large loans for questionable projects, and large part of allocated money is promptly stolen by local neoliberal elite. Then when crisis struck and institutions that took the load can't pay, they are bailed out by  converting those loads from private to public via IMF. This is the key mechanism of redistribution of wealth -- profits are private, but losses s are public.

From the other point of view we can view neoliberalism as the next stage of corporatism, as corporatism that had outgrown national boundaries and became global. In other words in 70th of the last century, the civilization made an interesting turn, returning to the state where a supranational structures, which in the middle ages were called religious orders, returned to the prime scène in the form of transnational corporations, IMF (which represents interests of US financial oligarchy) and World Bank with budgets that exceed the GDP of most States and political influence, exceeding traditional political influence of international institutions such as UN, UNESCO, etc.   An interesting nuance is that national three letter agencies also became important players in this new global governing corporatist alliance, acquiring a political role similar to transnational corporations as the key part of National Security State and forming the core of so called "deep state":

Yes, there is another government concealed behind the one that is visible at either end of Pennsylvania Avenue, a hybrid entity of public and private institutions ruling the country according to consistent patterns in season and out, connected to, but only intermittently controlled by, the visible state whose leaders we choose. My analysis of this phenomenon is not an exposé of a secret, conspiratorial cabal; the state within a state is hiding mostly in plain sight, and its operators mainly act in the light of day. Nor can this other government be accurately termed an “establishment.” All complex societies have an establishment, a social network committed to its own enrichment and perpetuation. In terms of its scope, financial resources and sheer global reach, the American hybrid state, the Deep State, is in a class by itself. That said, it is neither omniscient nor invincible. The institution is not so much sinister (although it has highly sinister aspects) as it is relentlessly well entrenched. Far from being invincible, its failures, such as those in Iraq, Afghanistan and Libya, are routine enough that it is only the Deep State’s protectiveness towards its higher-ranking personnel that allows them to escape the consequences of their frequent ineptitude. [2]

... ... ...

The Deep State does not consist of the entire government. It is a hybrid of national security and law enforcement agencies: the Department of Defense, the Department of State, the Department of Homeland Security, the Central Intelligence Agency and the Justice Department. I also include the Department of the Treasury because of its jurisdiction over financial flows, its enforcement of international sanctions and its organic symbiosis with Wall Street. All these agencies are coordinated by the Executive Office of the President via the National Security Council. Certain key areas of the judiciary belong to the Deep State, such as the Foreign Intelligence Surveillance Court, whose actions are mysterious even to most members of Congress. Also included are a handful of vital federal trial courts, such as the Eastern District of Virginia and the Southern District of Manhattan, where sensitive proceedings in national security cases are conducted. The final government component (and possibly last in precedence among the formal branches of government established by the Constitution) is a kind of rump Congress consisting of the congressional leadership and some (but not all) of the members of the defense and intelligence committees. The rest of Congress, normally so fractious and partisan, is mostly only intermittently aware of the Deep State and when required usually submits to a few well-chosen words from the State’s emissaries.

The American and British elite in 70th (starting with President Carter in the USA but coming into full force with President Reagan; Thatcher played similar role in GB) decided to liquidate the New Deal coalition and to cover up the upward redistribution of income with a smokescreen of neoliberal ideology. Which also served as anesthetic for lemmings which were mercilessly deprived of most safety net that they acquired due to New Deal ;-). As Lames Levy noted in his comment to Why the Claims Neoliberals Make About Markets Are Wrong naked capitalism

 Jefferson’s notion of “marketplace of ideas” doesn’t apply to the ideology of the market. Bad ideas, like bad people, often thrive. Many of us were taught that this was not the case–good triumphs over evil, virtue is its own reward, and the arc of history is long, but it bends towards justice. The older I get, the more I doubt these things, the less evidence I see for them, and the less self-correction I see in scholarship

The institutions of neoliberal capitalism, while promoting an expanded role in the economy for "market forces" (read "financial oligarchy")  simultaneously transform labor relations. The “market” under neoliberalism certainly no longer refers to competition as a form of the production and distribution goods and services. Instead, it means something more along the lines of international financial monopolies protected by collusion between captured vassal state institutions ( including neoliberal fifth column domination in the all major branches of government, especially executive and  legislative branches, educational institutions and media) and multinationals, which pay money to sustain this social order. The term “Free markets” under neoliberalism means letting rich people do what they want and neutralizing any government interference on this path, not promoting efficient allocation of resources through competition and the price mechanism. The core of the fifth column are local oligarchs and so called "Chicago boys" -- sons and daughters of local elite who are trained for and indoctrinated for this purpose in Western universities.

Under neoliberalism labor relations assumes the form of full domination of labor by capitalists under the disguise of "labor market' smokescreen which tries to atomize workers and deprive them of any solidarity actions. Unions ore officially suppressed and large part of middle class is brainwashed to hate using set of propaganda stories about unions corruption, welfare quinsy, lack of competitiveness in unionized industries (with Detroit as a prime story), etc.  In this sense crushing by Reagan of the strike of air controllers was one of the first manifestation of this dominance. Workers again are downgraded to the role of debt slaves, who should be glad to get subsistence wages. And, for example, wages in Wal-Mart are really on subsistence level, no question about it (Making Change at Walmart » Fact Sheet – Wages):

Walmart jobs are poverty-level jobs.

Walmart’s average sale Associate makes $8.81 per hour, according to IBISWorld, an independent market research group. This translates to annual pay of $15,576, based upon Walmart’s full-time status of 34 hours per week1. This is significantly below the 2010 Federal Poverty Level of $22,050 for a family of four. The Wall Street Journal reported that the average Walmart cashier makes just $8.48 an hour, far below the $11.22 national average for all cashiers.

This contrasts with the capital-labor compromise that characterized the state capitalism that existed several post-WWII decades and that was crushed by neoliberalism in 1970th. Neoliberalism also brought change in the relation between financial and non-financial capital: financial capital now again like in 1920th plays a dominant role dictating the rules of the game to manufacturing sector and controlling it via banks.

Role of deception under neoliberalism: elevating deception into a vital political tool

The key in understanding of neoliberalism is that nothing in neoliberal ideology can be taken in face value -- the cornerstone of neoliberal ideology is deception. More precisely, deception and propaganda (aka brainwashing) are two cornerstones of neoliberalism.  As such is has a lot of common with criminal societies and like them has a definite tendencies to self-destruction.  Here is one telling comment (Caelan MacIntyre, 12/05/2015 at 2:37 pm )

if we have a system that cheats, then anything is game.

Then I can cheat too. (And, along with others, I’ll likely be doing it on the ‘nitrous oxide’ of fury and resentment that some– maybe most– can feel when they wake up and realize that they’ve been cheated.)

So if sufficient numbers of (livid) people catch on, if they get out from under the cheating system’s ideological indoctrinations (that it’s not a cheat and that, say, coercive taxation, kid-killing cops and corporate parasites are all well and good and for our benefit), and find out that the game is really one big nasty rig/scam/dupe/hoodwink, what do you think will happen?

Let’s run the model/simulation and see.

Like new religion and much like the USSR in the past, neoliberalism cultivates a set of complex myths. Those myths via indoctrination  became the way of thinking of most people in neoliberal societies. That's an example of amazing power of brainwashing for preservation of particular social order; the trait the neoliberalism also shares with Marxism (implemented as Bolshevism in the USSR and other Eastern block countries).  But like was the case with the USSR, there is a danger of shocks that can kill those myths. If we agree with that hypothesis, then, simplifying, the longevity of neoliberal myths depends on the how long the role of the USA as the world hegemon will last and how long "cheap oil" regime will last.

For example the myth that neoliberalism produces poverty reduction and improve social wellbeing for all has become an alibi for the dismantling of the welfare state and along with it the dismantling of social rights of workers, on the one hand, and to the channeling of state coffers into private interests to the benefit of banks, financial institutions, and private business, on the other. This myth came under attack after 2008 crisis. Now most of the people see that neoliberal policies of wealth redistribution are shoveling most of the wealth gains into the pockets of a few rich plutocrats, As such they are incompatible with economic growth and reduction of poverty. Growing income inequality is a the main cause of excess saving and, hence, secular stagnation. But as a whole set of neoliberal myths proved to be pretty resilient; the same can be said about gradual process of eroding Marxist myths after 1945. It took almost 50 years (and rise of neoliberalism) to be be abandoned by most of the population of the USSR and Eastern Europe after which those societies became "house of cards" and were successfully toppled by bribing part of the elite by Reagan administration via color revolution mechanisms. But it was the USSR elite (and first of all the elite of KGB), that first changed sides and let it happen.

Every society has its set of myths that are directed on increase chances of the society survival. What is new is that neoliberal elite like feudal elites before it openly  despise even "lower 50%" of their own societies.  Neoliberal elite event went further. It advacates a pretty self0destuctive idea that that social safety nets created under New Deal should be completely dismantled. It looks to me like just a new form of elimination of undesirables: "While there will be political pressures to buffer folks from the consequences of economic folly or bad luck, it is socially dangerous to do so." This is reminiscent of Arbeit macht frei  slogan used in Nazi extermination camp. In other words this is equivalent to saying that we should go shoot all the monkeys because they are the wrong, inferior to humans branch of evolution (Neoliberalism is fascism ). Compare with:

"[Slavs, Latin, and Hebrew immigrants are] human weeds ... a deadweight of human waste ... [Blacks, soldiers, and Jews are a] menace to the race." "Eugenic sterilization is an urgent need ... We must prevent multiplication of this bad stock." -- Margaret Sanger, April 1933 Birth Control Review .

As such this is an elitist ideology (see The Iron Law of Oligarchy ), kind of Revolt of the Elite against common folk (aka  "shmucks", see  Randism,  an Americanized plagiarism of Nietzschean philosophy  created by a Russian emigrant).

While completely based on deception and leading to impoverishment of lower 80% of population and shrinking of middle class, neoliberalism (as of  2015)  still remains a powerful, dominant global ideology. Or more correctly  a new secular religion (there is nothing scientific in neoliberal doctrine and very little in  neoclassical economics, which like in case of Marxism serves as the cornerstone of his ideology). Since early 80th it became the  dominant ideology in the world, which defeated and displaced both communism and social-democracy models.

It is important to stress that it is probably the first worldwide ideology based on deception in a sense that it pretends to provide benefits to all nations while in reality for all nations outside "first class nations" (G7 and a few others industrialized nations)  it enforces neocolonial model of economic relations. It also operates with pseudoscientific concepts like "free market" that have tremendous propaganda value, serving as an opening door for neoliberalism into minds on many people.  To disperse  the smoke of this propaganda proved to be not that easy tasks, as it became self-sustainable providing wealth to Wall Street which trickle down small part of it to corrupt MSM.  "Free market" propaganda even managed to survive the crash of neoliberal doctrine in 2008.

The essence of  neoliberalism is redistribution of wealth up is also carefully hidden under the smoke screen. Neoliberalism in principle can't deliver prosperity for all, as the key idea is just the opposite. But revolt is suppressed by powerful propaganda machine as well as the raw military and technological power of the USA ("Lord protector" of neoliberalism) and speculation on human greed (which represents a variation of classic "divide and conquer" approach).  It is difficult to define neoliberalism precisely but the restoration of unlimited power of financial oligarchy under smoke screen of "return to prosperity via accelerated development" is definitely its one of key features. And the level of unlimited unchecked power now is very similar it enjoyed at the beginning of XX century and which was destroyed by the Great Depression.

Another interesting deception used by neoliberalism is absolutizing the value of competition in social systems. This is  used as a smoke screen via an abstract, ideologically charged construct called "free market" (free for whom? why not "fair market" ?) . Simplifying you can see it as a power grab by globalized economic (and first of all financial) elite and a race to the bottom for the rest of world population. In this sense neoliberalism is not only about the redistribution of wealth up, toward the top 0.1%.  It is also about putting the elite outside the framework of the law and  institualizing fraud and deception as a business model for elite (and only for elite). Much like in feudalism neoliberal lords stand above the law.  This ability of the elite to commit criminal acts with impunity is the key component of neoliberalism as a political system (which 2008 events aptly demonstrated to the world)

Neoliberal revolution as an internal color revolution in the USA

Color revolutions is a new method of warfare modeled after Trotsky idea of Permanent revolution. The most interesting part is that is can be used within the society as it uses existing democratic mechanisms to bring to power desired set of political actors. The key idea is undermining the society from within, by introducing a Trojan horse into it. Among mechanisms used are:

  1. Establishing a strong network of think tanks. Buying part of "intelligencia" .  Along with think tanks another target was economic departments of universities. Bribing economics proved to be extremely successful and relatively cheap (in comparison with the cost of political lobbing) operation.  See  Neoclassical Pseudo Theories and Crooked and Bought Economists as Fifth Column of Financial Oligarchy. Buying influential members within the country intellectual community was an important part of this scheme.  Milton Friedman was one of the most successful acquisitions. After spending life of relatively modest means he really enjoyed his new affluent status at the end of this life. That is what Powell memo is about.  See The Powell Memo A Call-to-Arms for Corporations BillMoyers.com
  2. Reusing set of Bolsheviks/Trotskyite ideas and political practices which were introduced to Republican Party by "turncoats" from US Trotskyite movement -- American neoconservatives, who were mostly Jewish intellectuals. Among those who changes sides were Irving Kristol  who is considered to be the father of Neoconservatism and before him James Burnham (see American Machiavelli) who did much of the transfer of political methods and approaches from Trotskyism to Republican Party  
  3. A new version of Internationalism -- "Corporate Internationalism": "Businessmen of the World, Unite!"

     The number of corporations with public affairs offices in Washington grew from 100 in 1968 to over 500 in 1978. In 1971, only 175 firms had registered lobbyists in Washington, but by 1982, nearly 2,500 did. The number of corporate PACs increased from under 300 in 1976 to over 1,200 by the middle of 1980.[5] On every dimension of corporate political activity, the numbers reveal a dramatic, rapid mobilization of business resources in the mid-1970s.

    What the numbers alone cannot show is something of potentially even greater significance: Employers learned how to work together to achieve shared political goals. As members of coalitions, firms could mobilize more proactively and on a much broader front. Corporate leaders became advocates not just for the narrow interests of their firms but also for the shared interests of business as a whole. ( The Powell Memo A Call-to-Arms for Corporations BillMoyers.com)

  4. The ethnic and religious fragmentation. The starting point of any color revolution is identification of the usable social tensions and their systematic aggravation so that that at the end they can serve as a detonator of the planned crisis. This means mutual divide constitutive of the community, with an emphasis on what sets them apart, and at the same time reducing the weight of what they have in common.  For example neoliberalism stresses creativity (in a very narrow sense of ability to amass money)  and despise poor. Wedge issues such a gay marriage were also successfully used for this purpose especially in view of alliance of neoconservatives and fundamentalist Christian sects. 
  5. Deceptive promise of higher standard of living and creation of various material temptations to support the politically desired behavior. The majority of the population responded positively to these fake prospects of improving their standard of living (at the expense of other , "inferior" members of society -- as in Latin proverb  Homo homini lupus est) and totally failed to realize gravity of the real costs of economic and social transition to neoliberalism for lower 80% of population.  And the extent of redistribution of wealth up under neoliberalism.
  6. Control of MSM for the purpose of influencing/alterting the perception and behavior of the masses. MSM promoted the almost uniform and factually incorrect narrative about the benefits that would come from a  neoliberal transformation of the society.  They also act of a powerful spoiler of any attempt to fight neoliberal transformation of the society.  The level of altering the perception of certain issues in the USA is nothing short from brainwashing. See Neoliberal Brainwashing -- Journalism in the Service of the Powerful Few and In Foreign Events Coverage Guardian Presstitutes Slip Beyond the Reach of Embarrassment
  7. Politically marginalizing part of the population, which is resistant to neoliberal brainwashing and continues to hold its own narrative. That includes decimation of trade unions started by Reagan administration.

The typical for corporatism union of corporate power and government was in case of the USA transformed into a unique mix of corporatism and totalitarism which Sheldon Wolin called "inverted totalitarianism". Which is just another nickname for neoliberalism.  Unlike traditional corporatism of  Nazi Germany, and Italy the American neoliberal system is designed not to mobilize the populace, but to distract it, to encourage a sense of dependency. to achieve this goal a set of policies are instituted which include, but not limited to atomizing the society by cutting solidarity ties,  cultivating fear, calling everything a "war" (claiming that the country is in some permanent, unwinnable war like  "war on terror"  -- the trick borrowed directly from Orwell 1984) as well as encouraging political disengagement (as in Reagan quote: "The nine most terrifying words in the English language are "I'm from the government, and I'm here to help."  or Bush "Go shopping" recommendation after 9/11 .

Those dirty tricks allowed corporate elite to take full political power and kill remnants of trade unions political  power while citizenry showed little interest or concern. In other words it was the powerful corporate interests which were the key promoters of neoliberalism and the key beneficiaries of its spread. They ingeniously used the Cold War as a pretext of dismantling of the New Deal  ( Pt 1-8 Hedges & Wolin Can Capitalism and Democracy Coexist - YouTube):

HEDGES: And the Cold War. So the Cold War arises. And this becomes the kind of moment by which capital, and especially corporate capital, can dismantle the New Deal and free itself from any kind of regulation and constraint to deform and destroy American democracy. Can you talk about that process, what happened during that period?

WOLIN: Well, I think the first thing to be said about it is the success with which the governing groups manage to create a Cold War that was really so total in its spread that it was hard to mount a critical opposition or to take a more detached view of our relationship to the Soviet Union and just what kind of problem it created.

And it also had the effect, of course, of skewing the way we looked at domestic discontents, domestic inequalities, and so on, because it was always easy to tar them with the brush of communism, so that the communism was just more than a regime. It was also a kind of total depiction of what was the threat to -- and complete opposite to our own form of society, our old form of economy and government.

HEDGES: And in Politics and Vision, you talk about because of that ideological clash, therefore any restriction of capitalism which was defined in opposition to communism as a kind of democratic good, if you want to use that word, was lifted in the name of the battle against communism, that it became capitalism that was juxtaposed to communism rather than democracy, and therefore this empowered capital, in a very pernicious way, to dismantle democratic institutions in the name of the war on communism.

WOLIN: Oh, I think there's no question about that, the notion that you first had to, so to speak, unleash the great potential capitalism had for improving everybody's economical lot and the kind of constraints that had been developed not only by the New Deal, but by progressive movements throughout the 19th century and early 20th century in the United States, where it had been increasingly understood that while American economic institutions were a good thing, so to speak, and needed to be nurtured and developed, they also posed a threat.

They posed a threat because they tended to result in concentrations of power, concentrations of economic power that quickly translated themselves into political influence because of the inevitably porous nature of democratic representation and elections and rule, so that the difficulty's been there for a long time, been recognized for a long time, but we go through these periods of sleepwalking where we have to relearn lessons that have been known almost since the birth of the republic, or at least since the birth of Jeffersonian democracy, that capitalism has its virtues, but it has to be carefully, carefully watched, observed, and often controlled.

Later Wendy Brown, professor in Berkley advanced Professor Wolin ideas to a new level  in her book Undoing the Demos: Neoliberalism's Stealth Revolution (Zone Books, 2015). Essentially she viewed neoliberalism as an internal color revolution, kind of coup d'état by part of the elite against New Deal.  Notable quotes from her interview (What Exactly Is Neoliberalism):

"... I treat neoliberalism as a governing rationality through which everything is "economized" and in a very specific way: human beings become market actors and nothing but, every field of activity is seen as a market, and every entity (whether public or private, whether person, business, or state) is governed as a firm. Importantly, this is not simply a matter of extending commodification and monetization everywhere-that's the old Marxist depiction of capital's transformation of everyday life. Neoliberalism construes even non-wealth generating spheres-such as learning, dating, or exercising-in market terms, submits them to market metrics, and governs them with market techniques and practices. Above all, it casts people as human capital who must constantly tend to their own present and future value. ..."

"... The most common criticisms of neoliberalism, regarded solely as economic policy rather than as the broader phenomenon of a governing rationality, are that it generates and legitimates extreme inequalities of wealth and life conditions; that it leads to increasingly precarious and disposable populations; that it produces an unprecedented intimacy between capital (especially finance capital) and states, and thus permits domination of political life by capital; that it generates crass and even unethical commercialization of things rightly protected from markets, for example, babies, human organs, or endangered species or wilderness; that it privatizes public goods and thus eliminates shared and egalitarian access to them; and that it subjects states, societies, and individuals to the volatility and havoc of unregulated financial markets. ..."

"... with the neoliberal revolution that homo politicus is finally vanquished as a fundamental feature of being human and of democracy. Democracy requires that citizens be modestly oriented toward self-rule, not simply value enhancement, and that we understand our freedom as resting in such self-rule, not simply in market conduct. When this dimension of being human is extinguished, it takes with it the necessary energies, practices, and culture of democracy, as well as its very intelligibility. ..."

"... For most Marxists, neoliberalism emerges in the 1970s in response to capitalism's falling rate of profit; the shift of global economic gravity to OPEC, Asia, and other sites outside the West; and the dilution of class power generated by unions, redistributive welfare states, large and lazy corporations, and the expectations generated by educated democracies. From this perspective, neoliberalism is simply capitalism on steroids: a state and IMF-backed consolidation of class power aimed at releasing capital from regulatory and national constraints, and defanging all forms of popular solidarities, especially labor. ..."

"... The grains of truth in this analysis don't get at the fundamental transformation of social, cultural, and individual life brought about by neoliberal reason. They don't get at the ways that public institutions and services have not merely been outsourced but thoroughly recast as private goods for individual investment or consumption. And they don't get at the wholesale remaking of workplaces, schools, social life, and individuals. For that story, one has to track the dissemination of neoliberal economization through neoliberalism as a governing form of reason, not just a power grab by capital. There are many vehicles of this dissemination -- law, culture, and above all, the novel political-administrative form we have come to call governance. It is through governance practices that business models and metrics come to irrigate every crevice of society, circulating from investment banks to schools, from corporations to universities, from public agencies to the individual. It is through the replacement of democratic terms of law, participation, and justice with idioms of benchmarks, objectives, and buy-ins that governance dismantles democratic life while appearing only to instill it with "best practices." ..."

"... Progressives generally disparage Citizens United for having flooded the American electoral process with corporate money on the basis of tortured First Amendment reasoning that treats corporations as persons. However, a careful reading of the majority decision also reveals precisely the thoroughgoing economization of the terms and practices of democracy we have been talking about. In the majority opinion, electoral campaigns are cast as "political marketplaces," just as ideas are cast as freely circulating in a market where the only potential interference arises from restrictions on producers and consumers of ideas-who may speak and who may listen or judge. Thus, Justice Kennedy's insistence on the fundamental neoliberal principle that these marketplaces should be unregulated paves the way for overturning a century of campaign finance law aimed at modestly restricting the power of money in politics. Moreover, in the decision, political speech itself is rendered as a kind of capital right, functioning largely to advance the position of its bearer, whether that bearer is human capital, corporate capital, or finance capital. This understanding of political speech replaces the idea of democratic political speech as a vital (if potentially monopolizable and corruptible) medium for public deliberation and persuasion. ..."

"... My point was that democracy is really reduced to a whisper in the Euro-Atlantic nations today. Even Alan Greenspan says that elections don't much matter much because, "thanks to globalization . . . the world is governed by market forces," not elected representatives. ..."

As I mentioned above an interesting tactical step of the wizards behind the screen of the neoliberal revolution was creating and nurturing the powerful and influential intellectual "fifth column" inside the country. In case of the USA it was done mainly by lavish financial of "appropriate" think tanks as well as bribing the economic departments of the universities (this was the point when salaries of professors of economic shoot up while salaries of professors in other department stagnated).  
 

Extremism of Neoliberalism, Neoconservatives as militant faction of neoliberals


If the outcome is so different from our aims -- if, instead of freedom and prosperity, bondage and misery stares us in the face -- is it not clear that sinister forces must have foiled our intentions, that we are the victims of some evil power which must be conquered before we can resume the road to better things?

Friedrich Hayek, The Road to Serfdom

Neoliberalism is more than a set of  economic policies based on absolutization of the value of the market and attempt to view everything in market categories.  As a form of reason developed into a governing rationality, it converts every aspect of contemporary existence into a market framework.  All human conduct for neoliberalism is a economic behavior, a market conduct. In other words under neoliberal ideology market is the ultimate for of human relations and should encompass all spheres of existence. 

Like was previously the case of Communism/Bolshevism/Trotskyism  a distinguishing feature of neoliberal ideology is establishment of a new "neoliberal rationality" and religious believe in its inevitability with the clincher argument pioneered by Margaret Thatcher: there is no alternative”(TINA).  That makes neoliberal a pretty radical ideology which serves the base of radicalized movement. In some respects this movement can compete not only with the Communist Party of the soviet Union (CPSU) but also with Taliban.

As Lars Cornelissen noted "In this sense Friedrich Hayek’s The Road to Serfdom is today, above all else, a testimony to irony. The book is punctuated with frightening images of lives reduced to unfreedom, people seen the Greek god of satire and irony, himself ordained it, The Road to Serfdom has turned to be the first cobblestone in the rod to neoliberal serfdom. Everything Hayek expected socialism would bring has seemingly come true under a regime he himself helped lay the theoretical foundations for -- a fact all the more ironic because Keynesianism,  for all its flaws, never led to the totalitarian regime Hayek claimed it would."  (criticalstudies.org.uk)

Instead of Communist manifesto neoliberals use so called Washington Consensus and instead of Capital Milton's Friedman book Capitalism as Freedom. They also re-define the meaning of the word "freedom"  (Deconstructing neoliberalism's definition of 'freedom').  Instead Roosevelt classic four freedoms, they put as the cornerstone the corner cult of possessions (see also Ayn Rand and her Objectivism Cult). That makes neoliberalism as powerful extremist ideology as communism, or radical Islam, if you wish ;-). Because of its ideological extremism: it recognizes no competitors, and allows its adherents ignore the possibility of viable alternatives.  The extremist, jingoistic wing of neoliberals in the USA is represented by so called neoconservatives (Paul Wolfowitz, Bush Jr.’s Deputy Secretary of Defense even managed to became the President of the World Bank, confirming the idea that finance is a war by other means) . Since Clinton the position of Secretary of State is occupied by warmongering female neocons, with Hillary Clinton as the most recent example

Neoliberalism and Christianity

For thousand years various religions attempted to suppress the excessive greed in men, as this is a prerequisite for stability and  functioning of society. In this respect neoliberalism is really Devil Creed as it consider greed to be a virtue ("greed is good"). In other words from the point of view of Christian theology neoliberalism is nothing but a flavor of Satanism (Wikipedia):

Its core beliefs revolves around individualism, egotism, Epicureanism, self-deification and self-preservation, and  propagate a worldview of natural law, materialism, Social Darwinism, Lex Talionis ("eye for an eye"), and mankind as animals"

... ... ...

It is atheistic philosophy which asserts that "each individual is his or her own god and there isno room for any other God. "

Neoliberalism explicitly rejects the key ideas of Christianity -- the idea of ultimate justice for all sinners. The idea that a human being should struggle to create justice in this world while realizing that the ultimate solution is beyond his grasp.

As Reinhold Niebuhr noted a world where there is one center of power and authority (financial oligarchy under neoliberalism) "preponderant and unchallenged... its world rule almost certainly violate basic standard of justice". The same is true about globalization as

"no world government could possibly possess for generations to come, the moral and political authority to redistribute power between nations to the degree in which highly cohesive national communities have accomplished this end in recent centuries". 

He warned that

"Lacking a deep understanding of the complexities of national aspirations and cultural differences, US foreign policy often lingers between two extremes of offering economic advantage to secure cooperation or overcoming intransigence through military force".

The problem with "greed is good" slogan it cultivates cruelty toward other people, As Pope Francis noted "To sustain a lifestyle which excludes others ... a globalization of indifference has developed. Almost without being aware of it, we end up being incapable of feeling compassion ..."

Here are selected quotes from Evangelii Gaudium, Apostolic Exhortation of Pope Francis, 2013 (see also Pope Francis on danger of neoliberalism)

... Such an [neoliberal] economy kills. How can it be that it is not a news item when an elderly homeless person dies of exposure, but it is news when the stock market loses two points? This is a case of exclusion. Can we continue to stand by when food is thrown away while people are starving? This is a case of inequality. Today everything comes under the laws of competition and the survival of the fittest, where the powerful feed upon the powerless. As a consequence, masses of people find themselves excluded and marginalized: without work, without possibilities, without any means of escape.

Human beings are themselves considered consumer goods to be used and then discarded. We have created a “disposable” culture which is now spreading. It is no longer simply about exploitation and oppression, but something new. Exclusion ultimately has to do with what it means to be a part of the society in which we live; those excluded are no longer society’s underside or its fringes or its disenfranchised – they are no longer even a part of it. The excluded are not the “exploited” but the outcast, the “leftovers”.

54. In this context, some people continue to defend trickle-down theories which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world. This opinion, which has never been confirmed by the facts, expresses a crude and naïve trust in the goodness of those wielding economic power and in the sacralized workings of the prevailing economic system. Meanwhile, the excluded are still waiting. To sustain a lifestyle which excludes others, or to sustain enthusiasm for that selfish ideal, a globalization of indifference has developed.

Almost without being aware of it, we end up being incapable of feeling compassion at the outcry of the poor, weeping for other people’s pain, and feeling a need to help them, as though all this were someone else’s responsibility and not our own. The culture of prosperity deadens us; we are thrilled if the market offers us something new to purchase; and in the meantime all those lives stunted for lack of opportunity seem a mere spectacle; they fail to move us.

No to the new idolatry of money

55. One cause of this situation is found in our relationship with money, since we calmly accept its dominion over ourselves and our societies. The current financial crisis can make us overlook the fact that it originated in a profound human crisis: the denial of the primacy of the human person! We have created new idols. The worship of the ancient golden calf (cf. Ex 32:1-35) has returned in a new and ruthless guise in the idolatry of money and the dictatorship of an impersonal economy lacking a truly human purpose. The worldwide crisis affecting finance and the economy lays bare their imbalances and, above all, their lack of real concern for human beings; man is reduced to one of his needs alone: consumption.

56. While the earnings of a minority are growing exponentially, so too is the gap separating the majority from the prosperity enjoyed by those happy few. This imbalance is the result of ideologies which defend the absolute autonomy of the marketplace and financial speculation. Consequently, they reject the right of states, charged with vigilance for the common good, to exercise any form of control. A new tyranny is thus born, invisible and often virtual, which unilaterally and relentlessly imposes its own laws and rules. Debt and the accumulation of interest also make it difficult for countries to realize the potential of their own economies and keep citizens from enjoying their real purchasing power. To all this we can add widespread corruption and self-serving tax evasion, which have taken on worldwide dimensions. The thirst for power and possessions knows no limits. In this system, which tends to devour everything which stands in the way of increased profits, whatever is fragile, like the environment, is defenseless before the interests of a deified market, which become the only rule.

No to a financial system which rules rather than serves

57. Behind this attitude lurks a rejection of ethics and a rejection of God. Ethics has come to be viewed with a certain scornful derision. It is seen as counterproductive, too human, because it makes money and power relative. It is felt to be a threat, since it condemns the manipulation and debasement of the person. In effect, ethics leads to a God who calls for a committed response which is outside of the categories of the marketplace. When these latter are absolutized, God can only be seen as uncontrollable, unmanageable, even dangerous, since he calls human beings to their full realization and to freedom from all forms of enslavement. Ethics – a non-ideological ethics – would make it possible to bring about balance and a more humane social order. With this in mind, I encourage financial experts and political leaders to ponder the words of one of the sages of antiquity: “Not to share one’s wealth with the poor is to steal from them and to take away their livelihood. It is not our own goods which we hold, but theirs”.[55]

58. A financial reform open to such ethical considerations would require a vigorous change of approach on the part of political leaders. I urge them to face this challenge with determination and an eye to the future, while not ignoring, of course, the specifics of each case. Money must serve, not rule! The Pope loves everyone, rich and poor alike, but he is obliged in the name of Christ to remind all that the rich must help, respect and promote the poor. I exhort you to generous solidarity and a return of economics and finance to an ethical approach which favours human beings.

No to the inequality which spawns violence

59. Today in many places we hear a call for greater security. But until exclusion and inequality in society and between peoples is reversed, it will be impossible to eliminate violence. The poor and the poorer peoples are accused of violence, yet without equal opportunities the different forms of aggression and conflict will find a fertile terrain for growth and eventually explode. When a society – whether local, national or global – is willing to leave a part of itself on the fringes, no political programmes or resources spent on law enforcement or surveillance systems can indefinitely guarantee tranquility. This is not the case simply because inequality provokes a violent reaction from those excluded from the system, but because the socioeconomic system is unjust at its root. Just as goodness tends to spread, the toleration of evil, which is injustice, tends to expand its baneful influence and quietly to undermine any political and social system, no matter how solid it may appear. If every action has its consequences, an evil embedded in the structures of a society has a constant potential for disintegration and death. It is evil crystallized in unjust social structures, which cannot be the basis of hope for a better future. We are far from the so-called “end of history”, since the conditions for a sustainable and peaceful development have not yet been adequately articulated and realized.

60. Today’s economic mechanisms promote inordinate consumption, yet it is evident that unbridled consumerism combined with inequality proves doubly damaging to the social fabric. Inequality eventually engenders a violence which recourse to arms cannot and never will be able to resolve. This serves only to offer false hopes to those clamouring for heightened security, even though nowadays we know that weapons and violence, rather than providing solutions, create new and more serious conflicts. Some simply content themselves with blaming the poor and the poorer countries themselves for their troubles; indulging in unwarranted generalizations, they claim that the solution is an “education” that would tranquilize them, making them tame and harmless. All this becomes even more exasperating for the marginalized in the light of the widespread and deeply rooted corruption found in many countries – in their governments, businesses and institutions – whatever the political ideology of their leaders.

Ideology of Financial Elite: how neoliberal lie became hegemonic despite being a lie

"Poverty wants much; but greed wants everything."

Publilius Syrus

Historically neoliberalism emerged as an ideology of the financial elite, specifically as the ideology of financial revanchism.  It was custom made to serve their need and in its origin there is a certain analogy with Marxism, with Mont Pelerin Society serving as a "party" that created and advanced this ideology ( Everything You Need to Know about Laissez-Faire Economics):

DSW: Please give me a thumbnail history of the Mont Pelerin Society and the role it played in advancing economic theory and policy. So this would be Hayek, Friedman and all that.

AK: The great hero of that society was Hayek. He had a different position from Walras & company and he wasn't very consistent in his views. According to Hayek, Walras said that nobody influences prices but take prices as given, and then somebody, not specified, adjusts them until they get to equilibrium. There is some mechanism out there. That was Walras. Hayek said "Not at all!" He said -- actually he was a horrid man.

DSW: Wait a minute! Why was he a horrid man? You can't just glide over that!

AK: The reason I say that is-he had very clever ideas -- but he was extremely bigoted, he was racist. There is a wonderful interview with him that you can find on You Tube, where he says (imitating Hayek's accent) "I am not a racist! People accuse me of being a racist. Now it's true that some of the Indian students at the London School of Economics behave in a very nasty way, typical of Indian people…" and he carries on like this. So that's one reason he is horrid. A second thing is that if you don't believe he is horrid, David, I will send you his book The Road to Serfdom, which said that if there is any planning going on in the economy, it will inevitably lead you to a fascist situation. When he produced that book it had a big success, particularly in the United States, and what is more, he authorized a comic book version of it, which is absolutely dreadful. One Nobel Prize winner, [Ronald] Coase, said "you are carrying on so much against central planning, you forget that a large part of our economy is actually governed by centrally planned institutions, i.e., big firms, and these big firms are doing exactly what you say they can't do. Hayek shrugged that off, but what he did in his book was say that if any planning goes on then eventually you are all going to wind up in a fascist state where you'll be shot if you don't do what you're told to do. At the end of the book there is some poor guy who's being shot because he wants to be a carpenter or a plumber, or something like that. It's terrible! And the irony of the whole situation is that comic book was issued and financed by General Motors, and GM of course is one of those corporations that Hayek didn't see were centrally planned institutions. That's way I say that Hayek was a dreadful person.

Hayek's idea was, there is no way that people could know what was going on and could know what the prices of goods are. Everyone has a little piece of information of their own, and in acting upon it, this news gets out into the market. So, for example I buy something such as a share, and you say "Oh, Kirman bought a share, so something must be going on there, based on information that he had that I didn't have", and so forth. Hayek's idea was that this mechanism-people watching each other and getting information from their acts, would lead you to the equilibrium that would be a socially optimal state. But again, he never specified closely what the mechanism was. He has little examples, such as one about shortage of tin and how people would adjust, but never really specified the mechanism. He believed that people with little information of their own, like ants, would somehow collectively get it right. It was a very different view of the world than Walras.

DSW: So he was a pioneer in two respects. First of all, he grasped the idea of self-organizing and decentralized processes-that the intelligence is in the system, not in any individual, and secondly cultural group selection, that the reason economic systems were like this is because of some past history of better systems replacing worse systems. The wisdom of the system was the product of cultural group selection, as we would put it today, and that we shouldn't question its wisdom by tampering with it. Is that a fair thing to say?

AK: Yes, that's a fair thing to say and I think it is what Hayek believed. He didn't actually show how it would happen but you're absolutely right -- I think that's what he believed and he thought tampering with this system would make it less perfect and work less well, so just leave it alone. I don't think he had in mind, strictly speaking, group-level selection, but that's clearly his idea. A system that works well will eventually come to outstrip other systems. That's why he was advising Thatcher. Just trust the markets and let things go. Get rid of the unions, and so forth. So it's clearly he had in mind that interfering with that system would just lead you to a worse social situation. He was much less naïve than Friedman. Friedman has a primitive natural selection argument that if firms aren't doing better than other firms they'll go bust and just die. That's a summary of Friedman's evolutionary argument! But Hayek is much more sophisticated-you're absolutely right.

DSW: I think Hayek was explicit about cultural group selection, and Friedman -- I've paid quite a bit of attention to his 1953 article on positive economics, in which he makes a very naïve evolutionary argument. Friedman and Hayek didn't see eye to eye at all, as I understand it. Hayek was actually very concerned that Friedman and other mathematical economists took over the Mont Pelerin Society, if I understand it correctly, but now let's put Friedman on center stage, and also the society as a whole and the creation of all the think tanks, which caused the society to become politically influential.

AK: Yes, I think that it coincided very nicely with conservative ideology and people who had really strongly liberal -- not in the Mills sense (you have to make this distinction particularly in the United States where these words have different meanings), but really completely free market "leave-everybody-to-their-own-thing"  libertarian point of view. Those people found it a wonderful place to gather and reinforce themselves. And Hayek was a strong member of that. Another was Gary Becker, but I don't know how directly. Becker had the economics of everything-divorce, whatever. You'd have these simple arguments, but not necessarily selection arguments, often some sort of justification in terms of a superior arrangement. The marginal utility of the woman getting divorced just has to equal the marginal utility of not getting divorced and that would be the price of getting divorced, and that sort of stuff. Adam Smith would have rolled over in this grave because he believed emotions played a strong role in all of this and the emotions that you have during divorce don't tie into these strict calculations.

DSW: This is a tailor-made ideology for powerful interests, powerful people and corporations who simply do want to have their way. Is that a false statement to make?

AK: No, I think that's absolutely right. They can benefit from using that argument to advance their own ends. As someone once said, if you think of saying to firms, we're going to diminish their taxes, no firm in its right mind would argue with that. Even though they might think deep down that there are other things that could be done for society. There are some things which are part of this philosophy which is perfect for firms and powerful interest groups. You're absolutely right. And so they lobby for this all the time, pushing for these positions that are in fact in their own interest.

DSW: So, at the end of the day, "Greed is Good" sounds so simplistic, but what all of this seems to do is to provide some moral justification for individuals or corporations to pursue their own interests with a clear conscience. It's a moral justification for "Greed is Good", despite all of the complexities and all of the mathematics -- that's what it seems to come down to. Am I wrong about that?

AK: I think you're absolutely right. What's interesting is that if you look at various economic situations, like today the first thing that people tell you about the Greeks is that they are horrid ideological people. But the people on the other side have an equally strong ideology, which is being justified by the sort of economic models that we are building. Remember that even though we had this discussion about how this became a real difficulty in theoretical economics, in macroeconomics they simply carried on as if these theoretical difficulties hadn't happened. Macroeconomic models are still all about equilibria, don't worry about how we got them, and their nice efficient properties, and so forth. They are nothing to do with distribution and nothing to do with disequilibrium. Two big strands of thought-Keynes and all the people who work on disequilibrium-they're just out of it. We're still working as if underlying all of this, greed -- we don't want to call it greed, but something like greed -- is good.

DSW: Could I ask about Ayn Rand and what role she played, if any? On the one hand she was not an economist, she was just a philosopher and novelist. On the other hand, she is right up there in the pantheon of free market deities alone with Smith, Hayek and Friedman. Do you ever think about Ayn Rand. Does any economist think about Ayn Rand?

AK: That's an example of my narrowness that I never read Ayn Rand, I just read about her. I think it would be unfair now to make any comments about that because I'd be as uninformed as some people who talk about Adam Smith. What I should do at some point is read some of her work, because she is constantly being cited on both sides as a dark bad figure or as a heroine in the pantheon as you said, with Hayek and everybody else. I just admit my ignorance and I don't know if Rand had a serious position on her own or whether she is being cited as a more popular and easily accessible figure.

DSW: Fine! I'd like to wrap this up with two questions. This has been a wonderful conversation, by the way. Nowadays, you hear all the time about how neoliberal ideology and thought is invading European countries and is undoing forms of governance that are actually working quite well. I work a lot in Norway and Scandinavia and there you hear all the time that Nordic model works and at the same time it is being corrupted by the neoliberal ideology, which is being spread in some sort of cancerous fashion. Please comment on that-Current neoliberalism. What justifies it? Is it spreading? Is that a good thing or a bad thing? Anything you would like to say on that topic.

AK: I think that one obsession that economists have is with efficiency. We're always, always, worrying about efficiency. People like to say that this is efficient or not efficient. The argument is, we know that if you free up markets you get a more efficient allocation of resources. That obsession with efficiency has led us to say that we must remove some of these restraints and restrictions and this sort of social aid that is built into the Scandinavian model. I think that's without thinking carefully about the consequences. Let me tell you my favorite and probably not very funny story about how economists are obsessed with efficiency. There were three people playing golf; a priest, a psychoanalyst, and an economist. The got very upset because the guy in front was playing extremely slowly and he had a caddy to help him. So these guys get very upset and they start to shout and say "Come on, can we play through please! You can't waste all of our afternoon!" They sent the priest up to find out what was going on and he came back absolutely crestfallen and said "You know why that poor guy is laying so slowly? It's because he's blind. I'm so upset because every Sunday I'm preaching to people to be nice to others." He turns to his psychoanalyst friend and say's "Joe, what do you think?" Joe says "I have these guys on my coach every week. I'm trying to help them live with this problem and here I am screaming at this guy. It's horrible!" Then they turn to the economist and say "Fred, what do you think?" Fred says "I think that this situation is totally inefficient. This guy should play at night!" As you can see, this is a very different attitude to how the world works.

I think what has happened is, because of this mythology about totally free markets being efficient, we push for that all the time and in so doing, we started to do things like-for example, we hear all the time that we have to reform labor markets in Europe. Why do we want to reform them? Because then they'll be more competitive. You can reduce unit labor costs, which usually means reducing wages. But that has all sorts of consequences, which are not perceived. In model that is more complex, that sort of arrangement wouldn't necessarily be one that in your terms would be selected for. When you do that, you make many people temporary workers. You have complete ease in hiring and firing so that people are shifting jobs all the time. When they do that, we know that employers then invest nothing in their human capital. When you have a guy who may disappear tomorrow-and we have a lot of these temporary agencies now in Europe–which send you people when you need them and take away people when you don't. Employers don't spend anything on human capital. We're reducing the overall human capital in society by having an arrangement like that. If you're working for Toyota, Toyota knows pretty much that you'll be working all your lifetime, so they probably invest quite a lot in you. They make you work hard for that, but nevertheless it is a much more stable arrangement. Again, the idea that people who are out of work have chosen to be out of work and by giving them a social cushion you induce them to be out of work-that simply doesn't fit with the facts. I think that all the ramification of these measures-the side effects and external effects-all of that gets left out and we have this very simple framework that says "to be competitive, you just have to free everything up." That's what undermining the European system. European and Scandinavian systems work pretty well. Unemployment is not that high in the Scandinavian system. It may be a little bit less efficient but it may also be a society where people are a little bit more at ease with themselves, than they are in a society where they are constantly worrying about what will happen to them next. The last remark I would make is that to say "you've got to get rid of all those rules and regulations you have"-in general, those rules and regulations are there for a reason. Again, to use an evolutionary argument, they didn't just appear, they got selected for. We put them in place because there was some problem, so just to remove them without thinking about why they are there doesn't make a lot of sense.

DSW: Right, but at the same time, a regulation is a like a mutation: for every one that's beneficial there are a hundred that are deleterious. So…

AK: You are an American, deep at heart! You believe that all these regulations are dreadful. Think of regulations about not allowing people to work too near a chain saw that's going full blast, or not being allowed to work with asbestos and so forth. Those rules, I think, have a reason to be there.

DSW: Well of course, but just to make my position clear, the idea of no regulations is absurd. For a system that is basically well adapted to its environment, then most of its regulations are there for a reason, as you say, but one of the things that everyone needs to know about evolution is that a lot of junk accumulates. There is junk DNA and there is junk regulations. Not every regulation has a purpose just because it's there, and when it comes to adapting to the future, that's a matter of new regulations and picking the right one out of many that are wrong. The question would be, how do you create smart regulations? Knowing that you need regulations, how do you create smart ones? That's our challenge and the challenge of someone who appreciates complexity, as you do. How would you respond to that?

AK: I think you're absolutely right. It's absolutely clear that as these regulations accumulate, they weren't developed in harmony with each other, so you often get even contradictory regulations. Every now and then, simplifying them is hugely beneficial. But that doesn't mean getting rid of regulations in general. It means somehow managing to choose between them, and that's not necessarily a natural process. For example, in France when I arrived here it used to take about a day and a half to make my tax return. Now it takes around about 20 minutes, because some sensible guy realized that you could simplify this whole thing and you could put a lot of stuff already into the form which they have received. They have a lot of information from your employer and so forth. They've simplified it to a point where it takes me about 20 minutes a year to do my tax return. It used to take a huge amount of time.

DSW: Nice!

AK: What's interesting is that you have some intelligent person saying "let's look at this and see if we can't make these rules much simpler, and they did. I have conflicting views, like you. These things are usually there for a reason, so you shouldn't just throw them away, but how do you select between them. I don't think that they necessarily select themselves out.

DSW: I would amend what you said. You said that some intelligent person figured out how to make the tax system work better in France. Probably not just a single intelligent person. Probably it was an intelligent process, which included intelligent people, but I think that gets us back to the idea that we need systemic processes to evaluate and select so that we become adaptable systems. But that will be systemic thing, not a smart individual.

AK: You're absolutely right. I shouldn't have said smart individual because what surely happened was that there was a lot of pressure on the people who handle all of these things, and gradually together they realized that this situation was becoming one where their work was becoming almost impossible to achieve in the time available. So there was some collective pressure that led them to form committees and things that thought about this and got it together. So it was a natural process of a system, but it wasn't the rules themselves that selected themselves out, as it were. It was the collectivity that evolved in that way to make it simpler.

DSW: There's no invisible hand to save the day.

AK: (laughs). Joe Stiglitz used to say that we also need a visible hand. The visible hand is sometimes pretty useful. For example in the financial sector I think you really need a visible hand and not an invisible hand.

As David Harvey noted in his book A brief History of Neoliberalism:

Redistributive effects and increasing social inequality have in fact been such a persistent feature of neoliberalization as to be regarded as structural to the whole project. Gérard Duménil and Dominique Lévy, after careful reconstruction of the data, have concluded that neoliberalization was from the very beginning a project to achieve the restoration of class power. (Chapter 1)

It is an ideology completely based on deception.  The set of lies that constitute the fundament of neoliberal ideology were brought to light as a band aid during the crisis of state capitalism in 70th. It also pretended to produce "heaven on earth" (and in this case is similar to communism). the only difference is that neoliberal promise heaven only "chosen" only, and "good life" for everybody else (pretending that it will lead to lifting standard of living for everybody, while making few obscenely rich). This mode of thinking is called supply side economy or "trickle-down economy".  As John Kenneth Galbraith aptly noted  that “Trickle-down theory - the less than elegant metaphor that if one feeds the horse enough oats, some will pass through to the road for the sparrows.”

If socialism absolulitized the power of state, neoliberalism fall into another extreme (and remember that extremes meet). It absolutize the "market" (understood as freedom of financial oligarchy to do what they want) and the law of jungle in competition (which means unconditional surrender of all power to the largest transnationals and first of all banks and rape and plunder of smaller firms and states, probably more fierce then under any form of state capitalism).  But neoliberal pretences of minimizing the state is another deception. They want to minimize only those branches of state that control behaviour of capitalists, while increasing dramatically repressive power of state to prevent any possibility of revolt. In other words neoliberalism logically lead to creation of national security state, the development which we observe in several countries, but first of all in the USA and Great Britain.  In this sense neoliberalism can be viewed as one of the modern flavors of neofascism.

It was a false, misleading and pretty seductive ideology from the very beginning created with a specific goal to deceive by people who can be called intellectual criminals. The most interesting part of neoliberalism is that the whole ideology was custom created for particular political goals of financial elite, which managed to hire stooges like Milton Friedman and others to accomplish the task.

So one of the most interesting features of neoliberalism is that it was custom tailored for restoration of power of  financial elite, or, as they are called after 2008, for banksters. But it proved to be more relevant and long lasting then band aid covering post New Deal financial revanchism of banksters, acquiring a life of its own.

Gradually it became full fledged ideology, much like Marxism before (and it did borrowed a lot from Marxism, especially from Trotskyism, and first of all the idea that politically organized minority can always dictate its will to unorganized majority as well as  "permanent revolution" memo (concertized into 'export democracy"  instead of "liberation from capitalism oppression and in a very slick way replacing uprising of "proletarian" with uprising of fifth column specifically organized and financed to accomplish a  "color revolution".  In both case criminal elements are welcomed (especially in the form of football fanatics). In both cases the preliminary phase was creation or establishing control over the sizable part of MSM (in modern days that included TV  channels, not only newspapers like in classic Marxism). Role of Communist International emissaries was adopted by staff of the US embassies. The goal is also the same in both case -- violent acquisition of power of the new elite by whatever means possible.

Like Marxist political economy, neoliberalism has certain economic postulates (see "Washington Consensus"). As a philosophy is oscillating between atheistic Satanism ("greed is good"), Randism ("cult of entrepreneurships", "Entrepreneurs aka "creative class" as Ubermench")  and post modernism ("rejection of absolute truth").

 In 80th in the USA it essentially became  a new  "secular religion" for the elite, shredding remnants of Christian morality. As foundations of neoliberalism such as neoclassical economy and Trotskyism are disconnected from the reality, both requires from the followers blind, unquestioned  obedience like in high demand cults.  But remuneration under neoliberalism to top echelon of functionaries is much better ;-) While in both case a good money are paid for the top layer of the sect, under neoliberalism the pay acquired obscene levels; that actually includes paid stooges in economic department which were bough "en mass".  Bribes in a form of fees for "lectures" reach a several hundred thousand dollars).

It is difficult to define neoliberalism more precisely but the restoration of unlimited power of financial oligarchy is definitely its one of key features. The same level of unlimited unchecked power it enjoyed at the beginning of XX century and which was destroyed by the Great Depression.

As such the neoliberal project has multiple dimensions all of which are supported by a hypertrophied, intrusive spying apparatus of neoliberal state which reminds the Third Reich with the aggressive, militarized  police. A combination which make protests or, god forbid revolt against neoliberalism much more difficult.

Three principal dimensions of neoliberalism -- political, ideological and cultural

As the latest stage of predatory capitalism, neoliberalism is part of a broader economic and political project of restoring class power and consolidating the rapid concentration of capital, particularly financial capital (Giroux 2008; 2014).  In his article   “Protesting Youth in the Age of Neoliberal Cruelty”, Professor Henry A. Giroux points out that like communism,  neoliberalism can be viewed in three principal dimensions -- political, ideological and cultural.

The real goal of neoliberalism is re-distribution of power and related redistribution of wealth up id a true feudal fashion. That's why neoliberalism also can be called neo-feudalism (which is another similarity with Bolsheviks and USSR)  The neoliberal project is really about weakening the power of middle class and impoverishing everybody other then top 20% of population in favor of maximizing the power of the tiny elite (the top 0.1%). 

As such, neoliberalism  is a broad strategy of economic (and first of all financial), political, cultural and military elites to destroy social-democratic state and to restructure power relationships, institutions, by injecting into the society, like narcotic, an artificial and a priory false ideology (civil religion), which is extremely beneficial for the promotion of interests of the top 0.1% (aka "super-elite", represented mainly by financial oligarchy both in the US and in in other countries; in the latter they represent the fifth column of neoliberal globalization).

Marx famous phase "Religion is the opium of the people" here acquires different and more modern and more menacing context as neoliberal dogma really serve the role of opium.  And the way it is distributed strongly reminds opium wars of British empire.  The full quote from Karl Marx translates as: "Religion is the sigh of the oppressed creature, the heart of a heartless world, and the soul of soulless conditions. It is the opium of the people".

Like communism before, it is an ideology with its own international movement. If the slogan of Communist International (aka Comintern) was "workers of all countries unite" the slogan of neoliberal revolution are both "Elites of all countries unite" and "viva the law of jungles" or "if you see that guy who is ready to fall push him in the back". Of course with the appropriate PR smoke screen about free markets, freedomdemocracy and equal opportunity.

Like Marxism neoliberal ideology is the ideology of class hegemony (just for a different class ;-), which serves multiple roles

Some authors define neoliberalism differently. For example, Robert McChesney, defines neoliberalism as an economic paradigm that leaves a small number of private parties in control and able to maximize their profit at the expense of the other smaller players and the rest of population. It posits that business domination of society proceeds most effectively when there is a representative democracy along with a weak and ineffectual polity typified by high degrees of depoliticization, especially among the poor and working class. He notes that unlike in classic corporatism, which relies on mass mobilization, neoliberalism relies on the opposite trend (along the lines of "inverted totalitarism"): a distracted or apathetic or depoliticized public essentially "goes along" with this, using the dominance of consumerism as a Trojan horse of depolitization and the loss of community spirit("Bread and circuses"). In sum, neoliberalism is the immediate and foremost enemy of genuine participatory democracy, not just in the United States but across the planet, and will be for the foreseeable future. Globalization is the result of powerful governments, especially that of the United States, pushing trade deals and other accords down the throats of the world's people to make it easier for corporations and the wealthy to dominate the economies of nations around the world without having obligations to the peoples of those nations

This stress of depolitization is very important. It proved to be as efficient as mass mobilization of classic corporatism and achieve the same purposes with less violence. This stress of depolitization of population is commonly called Inverted Totalitarism. Indeed, promotion of envy and suppression of any honest and candid debates about neoliberalism in the United States and elsewhere is one of its most striking features suggesting communality with medieval Catholicism. Neoliberalism's loudest message is that there is no alternative to the status quo, "there is no alternative".

Perverted definition of freedom

David Harvey, the author of  A Brief History of Neoliberalism, defines neoliberalism as attempt to undermine power and sovereignty of governments by transnational corporations and establish the regime in which the power of financial oligarchy (aka power of "free market") is dominant in the society using the concept of freedom as a smokescreen.  For this purpose, neoliberal propaganda perverts the definition of 'freedom' in such a way, that it conceals redistribution of wealth up. Unlimited, unrestricted accumulation of money (aka greed") now is equated with human freedom.

Neoliberal state protects capital and at the same time tries to sheds as much social responsibility for the wellbeing of citizenry as possible. That's why neoliberal stat in 2008 bailed out corporate interests from bad decision making them whole, while destroying the safety net for "subprime" homeowners and lower part of the population. That's why neoliberal policies always result in rising inequality, slower economic growth, and drastic redistribution of income toward the upper class.

Neoliberalism has distinct tendency to convert state in national security states, in which as we noted before two distinct modes co-exists: permissive for capital and repressive for labor and social programs.  Here is one Amazon review of the book:

Malvin  on September 28, 2006 

Deconstructing neoliberalism's peculiar definition of 'freedom'

"A Brief History of Neoliberalism" by David Harvey is a concise and razor-sharp deconstruction of the neoliberal movement. Mr. Harvey convincingly demonstrates that neoliberalism is an ideology that has been wielded to enshrine elite privilege at the expense of people and the environment. Assiduously researched and cogently argued, Mr. Harvey offers a jargon-free and readable text that helps readers gain a greater understanding about the political economy of our neoliberal world and what this might hold for us in the future.

 Mr. Harvey explains that neoliberal propaganda has succeeded in fixating the public on a peculiar definition of 'freedom' that has served to conceal a project of upper class wealth accumulation. In practice, the neoliberal state assumes a protective role for capital while it sheds as much responsibility for the citizenry as possible. Mr. Harvey details how neoliberal theory is ignored whenever it comes time to bail out corporate interests from bad decision making while the safety net for the working class has been gradually eviscerated. The author effectively intersperses the text with graphs to illustrate how thirty years of neoliberalist policies has resulted in rising inequality, slower economic growth, higher incomes among the upper class, and other measures that serve to convincingly support and prove his thesis.

Mr. Harvey's history of how neoliberalism has gained ascendancy mostly treads through familiar ground but also highlights some key events that are sometimes overlooked by others. For example, Mr. Harvey relates the well-known stories of how the Chilean coup in 1973 opened the door for Augusto Pinochet to implement the first national experiment in neoliberalism, followed by Margaret Thatcher in Great Britain in 1979 and Ronald Reagan in the U.S. in 1980. However, we also gain greater appreciation about the importance of the New York City bankruptcy in the 1970s. We learn how the city's financial crisis allowed for the imposition of neoliberal reforms in a manner that would prove to be a familiar template around the world: the rollback of labor rights, the privatization of public assets, cuts in public services, and increased policing, surveillance and political repression of a markedly polarized population.

Mr. Harvey surveys neoliberalism around the world to discover connections and to analyze its effects. He finds that the U.S. economy has benefited immensely from its ability to extract tribute from other nations, including the U.S. financial community's probable engineering of crises in developing nations in order to scoop up devalued assets on the cheap. The author discusses how economic restructuring programs imposed on poor countries has benefited U.S. and other foreign investors while it has bolstered or created a small but powerful class of wealthy individuals in Mexico, South Korea, Sweden and elsewhere. In China, Mr. Harvey remarks about the ease with which neoliberalism has found a home in an authoritarian state where the political elite have amassed their fortunes by exploiting a defenseless working class. The author is particularly concerned about the symbiotic relationship that has developed between the U.S. and China and muses about the potentially catastrophic financial situation that the two countries' mounting debts might pose for each other and the world economy.

There are also other definitions. But all-in-all any viable definition need to underline the fact that neoliberalism is about the transnational economic elite taking larger share of resources, income and political power in the society away from middle class. So it always means "class war", as well as blatant enrichment of top 1% at the expense of other 99%.

Those new masters of the universe in expensive suits managed to plunder almost the same number of countries on the globe under the smokescreen of  protection of human rights, as Western powers during acquisition of colonies in XIX century. Any even after creating the most acute economic crisis in 2008 in the USA they still managed to privatize public assets and socialize all the losses. BTW the defense of human right never preclude the alliance with the most odious political regimes on the planet if such an alliance is about cheap hydrocarbons. Recently under the slogan "let us not allow bastards Russian dominate in our beloved Europe, they managed royally "f*ck EU, by cutting it from Russian hydrocarbons,  as Victoria Nuland deftly admitted in her famous remark". After that the U.S. financial oligarchs deftly dropped the Euro to the floor and knocked any attempts of economic integration of EU with Russia.

In this "enrichment of top 1%" (which means first and foremost the US oligarchs and their British counterparts) aspect neoliberalism is based on a strategies of capital accumulation based on the plunder of weaker countries by transnational capital. The integration (or re-integration as is case with the USSR) of most countries in global production and financial system was based of forming a narrow strata of comprador elite (aka fifth column). Transnational fraction of local elites in competition with nationally-oriented fractions won the state power (that's what color revolutions were about). They utilized this acquired power to restructure national economy in the interest of transnational corporation, sell assets to transnationals for pennies on a dollar, put the countries into huge debt (see Ukraine, Greece, almost all Southern Europe) and merge them into the new global manufacturing and finance system with the center at the USA in the role of powerless vassals.

This a new global, transnational corporations based social system emerged by breakdown of First World Keynesian capitalism (welfare states) and Third World "developmentalist" capitalism by abolishing two key features:

Globalization became a new efficient strategy of capital accumulation as it allowed to shake off compromises and concessions that has been imposed by middle class with upper strata or industrial workers on national governments of G7 countries in the preceding epoch, when the USSR exists as a countervailing force and by the mere fact of its existence suppresses appetite of internal financial oligarchy.  With the demolishing of gold standard in 1973 financial capital acquired unprecedented mobility and became able to operate across the borders in a new ways, which allows to eliminate the power of trade unions and state intervention, altering the balance of power in favor of international corporations. Emerging transnational elites instituted polices of deregulation, "supply-side" economics and regressive taxation creating new incentives for capital. Labor force was de-unionized and pushed into deregulated conditions with elimination of full time positions and adoption of "flexible labor" schemes. Via neoliberalism the world has became just a unified playing table for global corporations and states that support them. Material and political obstacles were removed as all states which undergone neoliberal revolutions shifted from post-WWII Keynesian social contract to serving transnational capital and transnational elites.

Neoliberalism also signifies a new historical period in the development of capitalism, the period of dominance of "monopoly-finance capital," and associated "Stagnation-Financialization trap" (SF trap) that drives processes of financial expansion in the economy from one bubble to another due to desperate attempts to stave off the tendency for stagnation of the "real economy" under the neoliberal regime.

While ideological postulates behind neoliberalism (Washington consensus) were discredited after financial crisis of 2008, it now persists in "zombie stage" as there is no viable alternatives and because the ability of transnational elite to find and fund a sufficient part of national elite (compradors) proved to be overwhelming for most states. And it is a quite powerful zombie which still is able to attack and suck blood from other countries which was recently demonstrated in Libya and Ukraine (Maidan).

Since 2007 some Latin American countries got governments that openly oppose neoliberalism. Direct military invasion against them is now more difficult as the threat of communism (which justified such invasions in the past) is off the map. But we can expect attempts to stage color revolutions or classic Coup d'état to reverse those events. One such color revolution (White revolution in Russia in 2011-2012) recently failed. Another (Maidan in Ukraine) is ongoing.

For G7 nations the neoliberalism in zombie stage might have staying power to survive until the end of the period of "abundant hydrocarbons" whether it means the next twenty or the next two hundred years. In any case they, and first of all the USA and GB, bet their prosperity on the viability of neoliberal regime and they now can't abandon it without significant losses.

Still ideological crash of neoliberalism in 2008 has its effects and the rest of the world gradually becoming less and less enthusiastic about neoliberalism, although few dare to openly argue with the USA policies. And for now the USA remains the sole superpower (new Roman Empire) and can economically squeeze or destroy dissident as we are now observing with Russia. 

But it is intellectually bankrupt doctrine, no question about it. Not long ago, the cold war ended with the restoration and triumph of capitalism in the form of neoliberalism on a global scale, and then, less than three decades later, neoliberal form of capitalism is, in turn, became as intellectually bankrupt as communism was in 1990th. By all accounts, the financial catastrophe of 2008 was not only the worst since the Great Depression economic crisis, but a political crisis that somewhat reminds the crisis of Marxist ideology in the USSR in 1960th and 1970th.

As neoliberalism no longer can be sold as the only viable ideological model for other countries, it is now force fed using the strength of American economics and American and NATO bayonets. As well as the strength of transnational elite interested in maintaining status quo (Soros, Rockefellers, Rothschilds, etc)

The vast technological and cultural superiority of the West also matters, although to a lesser extent, as China now became the key factory for the world and as such possesses most of the modern technologies on its factories (which belong to foreign corporation, but still are on China territory).

Another factor that prolongs the life of neoliberalism is that no viable alternative exists, although attempts of partial restoration of the power of national states in a form of state capitalism (Russia, China, USA) and more balanced approach between interests of national population and international corporations are attempted in various forms in various countries (Hungary, many Latin American countries).

Trotskyism for the rich;
Ideology of neoliberalism as the replacement of both Marxism and state capitalism

We can view neoliberalism as Trotskyism for the rich. See  Neoliberalism as Trotskyism for the rich

From political point of view neoliberalism vision is somewhat close to Communists vision. It also relies on state repression (despite demagogy of Washington consensus about "free markets") and generally can't exist without police state (or National Security State as we now call it; Total surveillance is just icing on  the cake). Under neoliberalism the state become more repressive toward lower 80% of population and, especially, labor, but much less repressive toward various forms of capital and, especially, large capital.

In this sense the only difference is the location of the capital: while the USSR was the holy land of communist world and Moscow its global capital, now the holy land of neoliberalism is the USA and the capital is Washington. With the USA government and Washington headquarters of IMF and World Bank making close analogy to Politburo of CPSU. Due to their strong tendency for political dictate US embassies in Eastern Europe and xUSSR space are sometimes called "Washington Obcoms".  As in following post in freerepublic.com

kronos77

Funny how clueless are foreigners about Russian commies. Putin plays tough man for better bargain positions while actually he accepts orders from Washington obcom (regional committee of CPSU). Putin serves to interests of oligarchs and conducts actually liberal anti-Russian policy. He like helps oligarchic vampires to suck out money from Russian economy and invest them in US economy and Western banks what is absolutely unacceptable for Russian commies.

Like with Comminist International, other states are just vassals who implement directions from benevolent "Washington Obcom" and install the leaders recommended by it, or face ostracism (YouTube) or, worse, direct military invasion... Funny, but it was the corrupt communist elite which put the major effort in helping to implement this vision via the dissolution of the USSR.

As Pope Francis noted that like Marxism in the past neoliberalism represents a new philosophy, new kid on the block. He see  principal feature of this new philosophy in what he called the "idolatry of money" and turning inequality into moral imperative (Evangelii Gaudium, Apostolic Exhortation of Pope Francis, 2013):

No to the new idolatry of money

55. One cause of this situation is found in our relationship with money, since we calmly accept its dominion over ourselves and our societies. The current financial crisis can make us overlook the fact that it originated in a profound human crisis: the denial of the primacy of the human person! We have created new idols. The worship of the ancient golden calf (cf. Ex 32:1-35) has returned in a new and ruthless guise in the idolatry of money and the dictatorship of an impersonal economy lacking a truly human purpose. The worldwide crisis affecting finance and the economy lays bare their imbalances and, above all, their lack of real concern for human beings; man is reduced to one of his needs alone: consumption.

56. While the earnings of a minority are growing exponentially, so too is the gap separating the majority from the prosperity enjoyed by those happy few. This imbalance is the result of ideologies which defend the absolute autonomy of the marketplace and financial speculation. Consequently, they reject the right of states, charged with vigilance for the common good, to exercise any form of control. A new tyranny is thus born, invisible and often virtual, which unilaterally and relentlessly imposes its own laws and rules. Debt and the accumulation of interest also make it difficult for countries to realize the potential of their own economies and keep citizens from enjoying their real purchasing power. To all this we can add widespread corruption and self-serving tax evasion, which have taken on worldwide dimensions. The thirst for power and possessions knows no limits. In this system, which tends to devour everything which stands in the way of increased profits, whatever is fragile, like the environment, is defenseless before the interests of a deified market, which become the only rule.

Simultaneously neoliberalism proved to be the most capable ideology to fight and displace Marxism. It actually inherited quite a bit from Trotskyism (see below), so in a way it was "evil twin" of Marxism. And it was relevant and effective not because it was a "better ideology", but because Marxism as ideology self-destructed due to several major problems caused by actual experience with state socialism as implemented in USSR and other countries of Warsaw block:

Neoliberalism as a strategy of class struggle for transnational elite


Bushonomics is the continuous consolidation of money and power into higher, tighter and righter hands

George Bush Sr, November 1992

Neoliberalism is not a collection of theories meant to improve the economy. Instead, it should be understood as a strategy of "class struggle" (in Marxist terms) designed to redistribute wealth upward toward an increasingly narrow fraction of population (top 1%). The essence of neoliberalism is well reflected in the listed above George Bush Sr. quote "...the continuous consolidation of money and power into higher, tighter and righter hands". Kind of revolt of the elite against common people, instead of revolt of proletarians against capitalists. The attempt to redistribute the wealth of nations in favor of the top 1% and especially top 0.01%.

From the very beginning neoliberalism was a project to restore of class power of US corporations owners and first of all financial oligarchy ("financial revanchism" was the major driver of neoliberalism), which was undermined by New Deal.

So it is not surprising the during neoliberal revolution (or more correctly counter-revolution) in the USA all redistributive postwar state capitalism policies that hurt financial elite came under attack. With the demise of the USSR, the necessity of such policies to ensure social peace disappeared and the elite (and first of all financial elite) got a carte blanch for decimating middle class, and redistributing the wealth up. Golden days of the US middle class not ended not exactly with the election of Reagan (remember his decimation of air traffic controller union) but with the election of Mr. Gorbachov. And they became a distant past under Clinton who sold Democratic Party to financial oligarchy and only become worse and worse under Bush II and Obama (who, social policy-wise, is just well-tanned Bush III). And on international arena brutal enforcement of Washington consensus became a norm. So Ukraine got under the same neoliberal steamroller.

Neoliberalism promises of "better future" for population outside top 1% were by and large political scam. In best case no more then top 20% of population can benefit from neoliberal policies. And that's in best case, which is applicable probably only to G7 countries. And the other bottom 80% experience a sharp decline of their standard of living. For "peripheral countries like Ukraine, Iraq, Chili, etc) instead of 80:20 the proportion in probably 90:10.

All-in-all neoliberalism as a social system always lower the average standard of life of people in countries which adopted it, never rise it. That happened even in countries which historically has very low standard of living of middle class such as former USSR republics and Eastern Europe. At the same time it tremendously improved standard of living of upper 10% (20% in case of G7 countries) of population, and, especially, the top 1% - the new aristocracy. And that top 10% has enough political power to keep and consolidate neoliberal counter-revolution and with help of G7 countries to spread it around the globe.

Transnational elite "International" proved be both more viable and durable then "proletarian International" envisioned by Marx and his followers. That does not mean that elites from other countries are treated as equal partners. No they are treated as "villagers that came to the city" but still they are given a chance to "merge" with local "aristocracy of wealth".

The USA is the center on neoliberal order, its capital. Neoliberalism is supported by projection of the USA military power and the use of US capital. It forces global economic integration on US terms at whatever costs to others. But with those reservations it is as close to "oligarchy of all countries unite" as one can get.

In a way Marx probably is turning in his grave, as his ideas were hijacked and implemented by the part of population he considered to be doomed. In other words Marxist idea of "class struggle" was turned to its head and converted into pervert "revolt of the elite" (and first of all financial oligarchy), unsatisfied with the piece of the pie it is getting from the society and stimulated by technological revolution (emergence of Internet and cheap mass produced computers). Neoliberal philosophy can be distilled into a single phrase: "Humanity begins at the rank of CEO" or as George Bush Sr, aptly said November 1992 it is "...the continuous consolidation of money and power into higher, tighter and righter hands."

Some authors like Colin Cronch in The Strange Non-death of neoliberalism consider it to be a new ruling class alliance. His basic idea is that at least in USA neoliberalism represents the shift of loyalty of the upper management class: following the Great Depression of 1930 a political alliance emerged between the upper management class and "salaried middle class" (which includes the top layer of blue and white collar workers, including quasi-management, clerical workers, and professionals, and which cannot be reduced to the traditional "working-class"). A severe profitability crisis of the 1970s with its inflationary excesses caused a fracture between upper management and "salaried middle class". From that point upper management allied with owners and financial oligarchy forming a new ruling class.

This neoliberal transformation of the society with the redistribution of wealth to the top 1% (or, more correctly, the top 0.01%) "have and have more" (as unforgettable G.W.Bush quipped) was completed in the USA in late 90th. The rest of population (aka moochers) and organization such as trade unions were undermined and decimated by financial oligarchy with near complete indifference to what happens with the most unprotected lower quintile of the population.

Like Russia in the past under Bolsheviks the USA became occupied country. And much like Bolsheviks in the past, the neoliberal reformers don't care about failures and contradictions of the economic system which drive the majority of country population into abject poverty. No they care about that their action such a blowing out financial bubble like in the USA in 2008 which definitely could move national economics toward the disaster ("off the cliff"). They have somewhat childish, simplistic "greed is good" mentality: they just want to have their (as large as possible) piece of economic pie fast and everything else be damned.

To that extent they have mentality of criminals and neoliberalism is a highly criminogenic creed, but it tried to conceal the racket and plunder it inflicts of the societies under dense smoke screen of "free market" Newspeak. That means that outside the USA and G7 countries which are the major beneficiaries of this "hyper globalization of élites" neoliberalism is an unstable social order, as plunder can't continue indefinitely. and as natural resources become more scarce, the fight for them might give advantages to "Asian" autocratic flavor of state capitalism.

Problems inherent in neoliberal model were also by-and-large masked for two decades by a huge shot in arms Neoliberalism got with the dissolution of the USSR. This particular event (which was just a decision of part on nomenklatura including KGB to join neoliberal counter-revolution) put on the dinner table of neoliberal elites half a billion people and quite a bit of resources to plunder. This gift of a century from Bolsheviks slowed down the process of plunder of G7 own population, especially in the USA. It is interesting to note that, like Bolsheviks in the past, neoliberal elite behaves more like occupiers of the country, then as a traditional, "native" aristocracy; this phenomenon was especially pronounced in Russia (privatization under Yeltsin regime) and other xUSSR countries. And in xUUSR space new neoliberal lords were almost as brutal as German occupiers during WWII.

So later neoliberalism in came under pressure even in G7 countries, including the USA, as slogan on a corner Wall Street cafe "Jump Suckers !" demonstrated so aptly in 2008 and later in Occupy Wall Street Movement (which probably should be named "get rid of Wall Street occupation of the country"). The latter was quickly undermined, dissipated by the emerging National Security State. Total surveillance makes opposition movements practically impossible.

Neoliberalism was also partially reversed in Chile (the first country on which neoliberal counter-revolution was launched), Russia, and several other countries. It was never fully adopted in northern Europe or Asian countries. The model of autocratic state capitalism used in Asian countries actually serves as the only viable and competing with the neoliberalism modern social organization. Move of manufacturing centers to China and other East Asian countries also moves political influence toward this region, away from the USA and G7. Recently China managed slightly push back western global brands in electronics (especially in Eastern European markets), producing competitive smartphones (Huawey, Fly, Lenovo), tablets (Lenovo), PCs and networking equipment such as routers and switches under this own brand names.

Neoliberalism was enforced under dense smoke screen of propaganda. One can see an example of this smoke screen in Thatcher's dictum of neoliberalism: "There is no such thing as society. There are only individuals and families." In foreign policy neoliberalism behaves like brutal imperialism (aka neocolonialism) which subdue countries instead of brute force either by debt slavery or combination of debt slavery with direct military intervention. In neoliberal view the world consist of four concentric cycles which in order of diminishing importance are

  1. Finance
  2. Economics
  3. Society
  4. Planet

In other words, finance and transnational financial institutions are considered to be the most important institutions of the civilization, the institutions which should govern all other spheres of life. It is clear that such one-dimensional view is wrong, but neoliberals like communists before them have a keen sense of mission and after they managed to accomplish its "long march through the institutions" (during which they gradually hijacked them in what is called Quiet coup) they changed the way Americans think (Using the "Four M" strategy -- money, media, marketing, and management)

A well-oiled machine of foundations, lobbies, think-tanks, economic departments of major universities, publications, political cadres, lawyers and activist organizations slowly and strategically took over nation after nation. A broad alliance of neo-liberals, neo-conservatives and the far right (including neo-fascists and religious right) successfully manufactured a new common sense, assaulted Enlightenment values and formed a new elite, the top layer of society, where this "greed is good" culture is created and legitimized.

As Crouch says in his book The Strange Non-death of neoliberalism:

a polity in which economic resources were very unequally shared would be likely to be one in which political power was also concentrated, economic resources being so easily capable of conversion into political ones. (Page 125)

... ... ...

...the state, seen for so long by the left as the source of countervailing power against markets, is today likely to be the committed ally of giant corporations, whatever the ideological origins of the parties governing the state. (Page 145)

Idolatry of money and finance; "Greed is good" as the key ethical principle of neoliberalism

Its key ethical principle of neoliberalism (only for the elite, never for prols or middle class) is "Greed is good" (as Gordon Gekko the personage of Wall Street (1987 film) quipped in the film). This strata of people (which starts on the level of CEO of major corporation) who preach those principle is assumed to be Übermensch. People below are considered to be "under humans", or "inferior humans" (Untermenschen)

According to Wikipedia, the inspiration for the "Greed is good" speech seems to have come from two sources. The first part, where Gekko complains that the company's management owns less than three percent of its stock, and that it has too many vice presidents, is taken from similar speeches and comments made by Carl Icahn about companies he was trying to take over. The defense of greed is a paraphrase of the May 18, 1986, commencement address at the UC Berkeley's School of Business Administration, delivered by arbitrageur Ivan Boesky (who himself was later convicted of insider-trading charges), in which he said, "Greed is all right, by the way. I want you to know that. I think greed is healthy. You can be greedy and still feel good about yourself".

As Pope Francis notes glorification of greed is socially destructive. While in all previous "classic" religions (including such social religion as Marxism) excessive greed was morally condemned, neoliberalism employed a slick trick of adopting "reverse", Nietzschean Ubermench morality. Here is a relevant quote from his Evangelii Gaudium, Apostolic Exhortation of Pope Francis, 2013

One cause of this situation is found in our relationship with money, since we calmly accept its dominion over ourselves and our societies. The current financial crisis can make us overlook the fact that it originated in a profound human crisis: the denial of the primacy of the human person! We have created new idols. The worship of the ancient golden calf (cf. Ex 32:1-35) has returned in a new and ruthless guise in the idolatry of money and the dictatorship of an impersonal economy lacking a truly human purpose. The worldwide crisis affecting finance and the economy lays bare their imbalances and, above all, their lack of real concern for human beings; man is reduced to one of his needs alone: consumption.

56. While the earnings of a minority are growing exponentially, so too is the gap separating the majority from the prosperity enjoyed by those happy few. This imbalance is the result of ideologies which defend the absolute autonomy of the marketplace and financial speculation. Consequently, they reject the right of states, charged with vigilance for the common good, to exercise any form of control. A new tyranny is thus born, invisible and often virtual, which unilaterally and relentlessly imposes its own laws and rules. Debt and the accumulation of interest also make it difficult for countries to realize the potential of their own economies and keep citizens from enjoying their real purchasing power. To all this we can add widespread corruption and self-serving tax evasion, which have taken on worldwide dimensions. The thirst for power and possessions knows no limits. In this system, which tends to devour everything which stands in the way of increased profits, whatever is fragile, like the environment, is defenseless before the interests of a deified market, which become the only rule.

No to a financial system which rules rather than serves

57. Behind this attitude lurks a rejection of ethics and a rejection of God. Ethics has come to be viewed with a certain scornful derision. It is seen as counterproductive, too human, because it makes money and power relative. It is felt to be a threat, since it condemns the manipulation and debasement of the person. In effect, ethics leads to a God who calls for a committed response which is outside of the categories of the marketplace. When these latter are absolutized, God can only be seen as uncontrollable, unmanageable, even dangerous, since he calls human beings to their full realization and to freedom from all forms of enslavement. Ethics – a non-ideological ethics – would make it possible to bring about balance and a more humane social order. With this in mind, I encourage financial experts and political leaders to ponder the words of one of the sages of antiquity: “Not to share one’s wealth with the poor is to steal from them and to take away their livelihood. It is not our own goods which we hold, but theirs”.[55]

Like Bolshevism and National Socialism before neoliberalism needs a huge propaganda machine comparable with the propaganda machines of Bolsheviks and the Third Reich. Neoliberal ethics is pushed through the throat by hundreds of radio stations, cable TV channels (with Fox as the most prominent stooge of neoliberal propaganda), magazines and newspapers (Wall Street Journal, NYT, etc). This ethics is presented as a specific philosophy of Randism which is an ultimate expression of neoliberal ethics.

Here analogy with Bolshevism became even more stark. When you think about the current Republican Party, you can distinguish a small circle of ideologues consisting by-and-large of Ayn Rand followers. In a way it reminds the original Ann Rand circle called "collective", which like Bolshevik's core consisted of Jewish intellectuals, such as Greenspan. And that is not a positive characteristic. Murray Rothbard, a member of Rand's circle for several months in 1958, described the Randroids as “posturing, pretentious, humorless, robotic, nasty, simple-minded....dazzlingly ignorant people.” (Sex, Ayn Rand and the Republican Party)

Like in Marxism the view of other classes (in this case lower classes) by this new alliance is hostile. They are parasites, moochers, etc (exactly like capitalist class in Marxism), all feeding from the state, which in turn deprives "masters of the university" the spoils of their ingenious activity. Neoliberalism professes open and acute hostility to "lower classes", as if modeled on Bolsheviks hatred of "capitalists". This hate (like hate in general) paradoxically gives neoliberalism a driving force: as Irish novelist Elizabeth Bowen quipped: "Some people are molded by their admirations, others by their hostilities."

And this Ubermench feature of neoliberalism attracts young people in the same way they were attracted to national socialism with its hate of racially inferior nations. In a way neoliberalism converted the concept of "Arian race" into the concept of morally and intellectually superior transnational elite.

Neofascism and neoliberalism

One of first experiments in introduction of neoliberal ideology (Pinochet putsch in Chile) has definite neofascist colors.

The worst violence occurred in the first three months of the coup's aftermath, with the number of suspected leftists killed or "disappeared" (desaparecidos) soon reaching into the thousand.[6] In the days immediately following the coup, the Assistant Secretary of State for Inter-American Affairs informed Henry Kissinger, that the National Stadium was being used to hold 5,000 prisoners, and as late as 1975, the CIA was still reporting that up to 3,811 prisoners were still being held in the Stadium.[7] Amnesty International, reported that as many as 7,000 political prisoners in the National Stadium had been counted on 22 September 1973.[8] Nevertheless, it is often quoted in the press, that some 40,000 prisoners were detained in the Stadium.[9] Some of the most famous cases of "desaparecidos" are Charles Horman, a U.S. citizen who was killed during the coup itself,[10] Chilean songwriter Víctor Jara, and the October 1973 Caravan of Death (Caravana de la Muerte) where at least 70 persons were killed.[11] Other operations include Operation Colombo during which hundreds of left-wing activists were murdered and Operation Condor, carried out with the security services of other Latin American dictatorships.
Memorial to victims of the Dirty war in Chile

Following Pinochet's defeat in the 1988 plebiscite, the 1991 Rettig Commission, a multipartisan effort from the Aylwin administration to discover the truth about the human-rights violations, listed a number of torture and detention centers (such as Colonia Dignidad, the ship Esmeralda or Víctor Jara Stadium), and found that at least 3,200 people were killed or disappeared by the regime.

A later report, the Valech Report (published in November 2004), confirmed the figure of 3,200 deaths but dramatically reduced the alleged cases of disappearances. It tells of some 28,000 arrests in which the majority of those detained were incarcerated and in a great many cases tortured.[12] Some 30,000 Chileans were exiled and received abroad,[13][14][15] in particular in Argentina, as political refugees; however, they were followed in their exile by the DINA secret police, in the frame of Operation Condor which linked South-American dictatorships together against political opponents.[16] Some 20,000-40,000 Chilean exiles were holders of passports stamped with the letter "L" (which stood for lista nacional), identifyng them as persona non grata and had to seek permission before entering the country.[17] Nevertheless, Chilean Human Rights groups maintain several hundred thousand were forced into exile.[14]

According to the Latin American Institute on Mental Health and Human Rights (ILAS), "situations of extreme trauma" affected about 200,000 persons; this figure includes individuals killed, tortured (following the UN definition of torture), or exiled and their immediate relatives.[citation needed] While more radical groups such as the Movement of the Revolutionary Left (MIR) were staunch advocates of a Marxist revolution, it is currently accepted that the junta deliberately targeted nonviolent political opponents as well

A court in Chile sentenced, on March 19, 2008, 24 former police officers in cases of kidnapping, torture and murder that happened just after a U.S.-backed coup overthrew President Salvador Allende, a Socialist, on September 11, 1973.[18]

Neofascist putsch in Chile got stamp of approval personally from Milton Friedman, who actually was instrumental in moving Chile into neoliberal orbit (Neoliberalism - Wikipedia, the free encyclopedia):  

In 1955, a select group of Chilean students (later known as the Chicago Boys) were invited to the University of Chicago to pursue postgraduate studies in economics. They worked directly under Friedman and his disciple Arnold Harberger, while also being exposed to Hayek. When they returned to Chile in the 1960s, the Chicago Boys began a concerted effort to spread the philosophy and policy recommendations of the Chicago and Austrian schools, setting up think tanks and publishing in ideologically sympathetic media. Under the military dictatorship headed by Pinochet and severe social repression, the Chicago boys implemented radical economic reform. The latter half of the 1970s witnessed rapid and extensive privatization, deregulation, and reductions in trade barriers. In 1978 policies that would reduce the role of the state and infuse competition and individualism into areas such as labor relations, pensions, health, and education were introduced.[2] These policies resulted in widening inequality as they negatively impacted the wages, benefits and working conditions of Chile's working class.[49][50] According to Chilean economist Alejandro Foxley, by the end of Pinochet's reign around 44% of Chilean families were living below the poverty line.[51] In The Shock Doctrine, Naomi Klein argues that by the late 1980s the economy had stabilized and was growing, but around 45% of the population had fallen into poverty while the wealthiest 10% saw their incomes rise by 83%.[52]

Two decades after it was first used by pro-market intellectuals in the 1960s, the meaning of neoliberalism changed. Those who regularly used the term neoliberalism in the 1980s typically applied it in its present-day, radical sense, denoting market fundamentalism.

In 1990 the military dictatorship ended. Hayek argued that increased economic freedom had put pressure on the dictatorship over time and increased political freedom. Many years earlier, in The Road to Serfdom (1944), Hayek had argued that "economic control is not merely control of a sector of human life which can be separated from the rest; it is the control of the means for all our ends."[53] The Chilean scholars Javier Martínez and Alvaro Díaz reject that argument pointing to the long tradition of democracy in Chile. The return of democracy had required the defeat of the Pinochet regime though it had been fundamental in saving capitalism. The essential contribution came from profound mass rebellions and finally old party elites using old institutional mechanisms to bring back democracy.[54]

The essence of neoliberalism is globalization of corporatism, which previously have distinct national boundaries and some forms of which were rabidly nationalistic (for example German national socialism). Just imagine a single global state with the capital in Washington with the typical for such a superstate flow of people to capital and you essentially catch the essence of the USA elite neoliberal dream -- Pax Americana.  There are also second class cities such as London, Berlin, Tokyo, etc which while not as attractive are much better then the "deep province", such as Prague, Warsaw or Sanct-Petersburg. to say nothing about "countryside" such as Kiev, Tallin, Riga, Vilnus.

So the flow of people and commodities (and first of all oil) has distinct direction from the periphery to the center. To keep each country in the line and this flow of commodities uninterrupted, this "Capitalist International" relies on the part of national capitalist class and elite which is connected to international corporations serving the same role as Communist Parties or Communist International. Such as part is often called Compradors or Fifth Column of Globalization

And this "international elite" is even more responsive to pressure from Washington,  as its fortunes and often families reside if "first class cities" of G7. This way neoliberalism is able to suppress the other part of the elite of particular country which favors "national" development and typically resides inside the country. As a PR smokescreen neoliberalism pay lip service to national development, but in essence it is hostile to it and favor "underdevelopment" of nations outside G7. It's anti-social and has distinct schadenfreude attitude to weak nations: it derives pleasure from seeing the misfortunes of other nations and it try to exploit such moments ("disaster capitalism"). Vae victis as Romans used to say (Victor's justice).

And the winner in neoliberal revolutions is not the middle class and lower strata of population (although they might be sold on it and fight for it, being deceived by propaganda as is the case with the current generation of Americans), but international and local oligarchy represented via international corporations and banks. For bottom 90% population the hangover after the neoliberal revolution comes really quick. This affect was clearly visible after successful color revolution in Serbia, Georgia and Ukraine.

In cases of Georgia and Ukraine the neoliberal leaders lost power after their term and there were efforts to put them in jail for abuse of power and corruption, which were not successful only due to USA pressure (only former Ukrainian Prime Minister Julia Timoshenko, the Joan of Arc of Orange revolution was jailed). In any case popularity of leaders of neoliberal revolutions drops to almost unheard levels with Victor Yushchenko commanding 2% approval rating in Ukraine before the end of his term.

Neoliberalism also has common with fascism "white man burden" syndrome (I cite Neoliberalism is fascism):

One last prefatory remark: I think it is important to recognize that fascism (forms of contemporary conservatism) is a result of neoliberal thought. It is not simply a supplement that aims to save neoliberalism from itself. So, even as forms of religious fundamentalism provide supplements to the extremes of neoliberalism, neoliberalism on its own has horribly conservative effects. The passage below comes from:

TCS Daily - House of Pain: Why Failure Is Important.

Every successful society has devised ways of separating incompetent or systematically unlucky people from the control of valuable resources. (That's why civilized nations provide children and legally incompetent individuals with guardians and trustees.) This is an essential process for all but the most wealthy of nations, e.g., those cursed by great oil wealth. (This windfall wealth situation is the national analogue of individuals winning the lottery; a harbinger of bad things that follow the lack of a need to husband resources.)

A society's economic success is increased if it has sure and quick ways to accomplish this separation, however painful to those who suffer losses. While there will be political pressures to buffer folks from the consequences of economic folly or bad luck, it is socially dangerous to do so. Reality checks should have force, so that those who fail to prudently manage resources will not keep control over them.

Let's identify the problems with the passage. First, failure is a matter of incompetence or bad luck. Although bad luck is qualified with the term 'systemic,' the writer's flip attitude overlooks systemic forms of exclusion like race, sex, or citizenship. It occludes as well the impact of inherited wealth (a form of the systemic protection of the incompetent) and generational poverty. Second, incompetence and bad luck are equated with being civilized. To be unlucky, then, is to be childlike, immature, incompetence, and barbaric (attributes long associated with justifications for colonialism). I'm going to skip the section on oil wealth, although I would think that people with more knowledge of the Middle East and the ways that the Mid East figures in neoliberal rhetoric would have interesting things to add here.

Neoliberalism as an integral part of American Messianism

Neoliberalism is not merely a new pseudo-religious, cult-like version of globalized corporatism. Like national socialism before it is also simultaneously a powerful ideological export product. It is the core of Pax Americana, which the USA tries to impose of the rest of world. As Samuel P. Huntington(1927 – 2008), the author of the concept of  Cleft country expressed this view, the idea of Pax Americana means that:

"a world without US primacy will be a world with more violence and disorder and less democracy and economic growth than a world where the United States continues to have more influence than any other country in shaping global affairs. The sustained international primacy of the United States is central to the welfare and security of Americans and to the future of freedom, democracy, open economies, and international order in the world."

Similar ideas were expressed in 1998 book The Grand Chessboard American Primacy And Its Geostrategic Imperatives by  Zbigniew Brzezinski. From one of Amazon reviews:

And ponder the meaning of these statements in a post-9-11 world:

While this is typically associated with neocon thinking, it is shared belief of the majority of the US elite. In 1992, the US Defense Department, under the leadership of Secretary of Defense Dick Cheney [later to be George Bush Jr.’s VP], had the Pentagon’s Under Secretary of Defense for Policy, Paul Wolfowitz [later to be George Bush Jr.’s Deputy Secretary of Defense and President of the World Bank], write up a defense document to guide American foreign policy in the post-Cold War era, commonly referred to as the “New World Order.”  The Defense Planning Guidance document was leaked in 1992, and revealed that,

“In a broad new policy statement that is in its final drafting phase, the Defense Department asserts that America’s political and military mission in the post-cold-war era will be to ensure that no rival superpower is allowed to emerge in Western Europe, Asia or the territories of the former Soviet Union,” and that, “The classified document makes the case for a world dominated by one superpower whose position can be perpetuated by constructive behavior and sufficient military might to deter any nation or group of nations from challenging American primacy.”

Further, “the new draft sketches a world in which there is one dominant military power whose leaders ‘must maintain the mechanisms for deterring potential competitors from even aspiring to a larger regional or global role’.” 

As  the official state ideology of the USA where it became an integral part of American Messianism it was successfully exported to many countries.  And it now permeates many aspects of social cooperation and culture. Like in the USSR the whole generation of people in the USA had growth being brainwashed by this ideology. It dictates an extremely militant almost jingoistic (does not hesitate to exercise force or overthrows the governments), foreign policy (Trotskyites idea of export of revolution in full swing), it is as deceptive as bolshevism (what Washington means by the "spread of democracy" is actually spread of neoliberalism), missionary (regards itself as a monopolist of the "truth" and protector of "universal values" ) and colonizing (serving simultaneously the ideology behind Neocolonialism). Like Communism it is also messianic as in "the end justifies the means" and does not abstain from using dirty methods including black propaganda and color revolutions for achieving its goals. In the level of hypocrisy and methods used against "natives" it reminds British empire or the USSR (your choice ;-). 

It blackmails antagonists as depraved, primitive, and below par. A good sample of neoliberal blackmail can be extracted from the US press coverage of preparations to Iraq war( US press enlists for war on Iraq) and Libya coup d'état. Another good set of samples provides Guardia press coverage of Putin's Russia and Ukraine EuroMaidan events.  Funny but Russia occupies the middle ground between neoliberalism and resource nationalism, so in principle it coul be an alli of the USA and GB,  but as a large country and possible geopolitical opponent it also was in crosshairs of the US elite.  One of the reasons for Russia's defeat in Chechnya between 1994 and 1996, was an attempt by America in the 1990s, with tremendous help from the comprador part of Russian elite it managed to create, to turn Russia into a standard neoliberal vassal state, whose elites would be subservient to the US foreign policy and would exist to export raw materials to the West and to transfer money to Western bank accounts. That attempt failed with Putin coming to power. So now the level of animosity from the USA and British elites and serving them MSM now goes over the roof .

With the notable exception of the USA itself, neoliberalism is hostile to nationalism. That does not exclude flirting with neo-fascist elements in countries were neoliberalism is under attack from the left or from the resource nationalists. But those forces are viewed more like tactical allies (Ukraine is a good example) and can be thrown under the bus, when they do their dirty job. Inside the USA, the holy city of neoliberal ideology, it to a certain extent merged with American Exceptionalism; the USA is viewed as exemplarity neoliberal country, the shining city on the hill which has right to impose their views and interests on the rest of the globe with impunity, standing outside the law.

Redistribution of income and lowering the standard of living of the bottom 80% of population

While welfare state presuppose redistribution of income down, the "free market capitalism" presupposes even more powerful redistribution of income up, toward the most wealthy part of the population.

Unlike previous revolutions (with the exception of Bolsheviks revolution) the unique feature of neoliberal revolution is drastic lowering the standard of living of middle class and poor, along with dramatic enrichment of top 1% of population and international corporations. Standard of living of top 20% also grow, albeit not so dramatically. In a way it is equivalent to selling of local population into slavery to international corporations by local oligarchy. with the interesting Pareto style 80:20 split. In other words only 20% of population get something from neoliberal revolution with over 50% concentrated at, way, the top 5%, and lion share in top 1%. This "top 20%" of beneficiaries constitute "fifth column of neoliberalism" in the particular state.

Lower 80% of population standard of living typically dramatically drops after neoliberal revolution and never recover.  That does not mean that those capitalists who favor "national" development are considerably less brutal in exploiting lower 80% population, but at least the "spoils" of this exploitation are left by and large in the country and used to improve infrastructure, housing, education  and such while neoliberal model of exploitation often is sucking the vassal states dry. Former Eastern European countries such as Bulgaria, Rumania and Serbia provide especially interesting and educational example of how neoliberalism deforms the economy and impoverish population. Especially Bulgaria, this basket case of Europe.

There are some exceptions like China (which practice not pure neoliberalism bus a mixture of neoliberalism with national development, kind of "neoliberalism with Chinese face" ;-), but even in China this process of dramatic enrichment of top 1% is clearly visible although it is not accompanied with drastic lowering of standards of other 99% of population like happened in Russian, Ukraine and other post Soviet republics. Again in the level of decimation of local middle class and poor neoliberal revolutions have a lot in common with Bolshevik's revolution in Russia of 1917.

Here is a quote from insightful Amazon review by razetheladder of Chalmers Johnson book Blowback The Costs and Consequences of American Empire:

Johnson's strength is in recounting the specificities of US foreign policy; he's much weaker at an overall understanding of imperialism. He seems to think that American policymakers have naively built up the economic strength of their Japanese, Korean, and now Chinese competitors by focusing on maintaining their own military power. This is an old critique, resting on the notion that imperialism hurts the imperialists.

But Johnson is relying on the idea that "America" is a unitary entity, so that the hollowing out of industry hurts "America", not specific social groups within the country. In reality, US foreign policymakers work to advance the interests not of "America", but of those same business elites that have benefited from turning Asia into the world's sweatshop and undermining the unions that built their strength on American industry. American economic imperialism is not a failed conspiracy against the people of Asia, but an alliance between American elites and their Japanese, Korean, Indonesian, and Chinese counterparts - against the potential power of the working majority in all those countries.

But it's more complex than that, too, since the US seeks to prevent the emergence of an independent military challenge (especially China, but also Japan) to its Asia hegemony while seeking to expand the power of American commercial interests in the region, even as it tries to keep Asian elites happy enough with the status quo to prevent their rebellion against it.

Elite and the second and third world countries

Neoliberalism as an ideology can be succinctly defined as "Transnational elites Uber Alles". But it uses the concept of elite on the level of the of the countries too. Neoliberalism distinguishes between to types of countries, and. respectively, there are two forms of neoliberalism, one for G7 countries (elite) where while squeezing middle class it operates with "velvet gloves", and a more brutal practice from "prols" countries outside G7 (vassal countries with local elites as fifth column of globalization). Neoliberalism relies mainly on financial mechanisms and banks and use brute force only as a secondary weapon for subduing people and minor countries (you can get much farther with a kind neoliberal word and cruise missiles, then with just kind neoliberal word alone). In time, it generally coincides with computer and Internet revolution, which made globalization of labor via outsourcing of production and services to poor countries much more attractive.

In principle we can define two distinct types of neoliberalism: one for elite countries and the other every other country:

Actually some elements of the idea of "national superiority" were preserved by reserving for the USA special "shining beacon on the Hill" status (American Exceptionalism) and in a form superiority of "creative class" which includes capitalists, financial oligarchy, and "executives" (top layer of transactional corporate elite) plus narrow social strata of people who are serving them (and that includes most journalists, programmers and IT staff, and such).

In a way, neoliberalism considers this so called "creative class" to be a new Arian race. Everybody else are Untermensch and should be treated as disposables.  In other words it is more like a religion that claim  supremacy of particular ethnic group or a class.  See for example a Guardian reader comment made in 2011 (you need to brose the comments as direct link does not work; recently Guardian screwed its comment system completely):

ITS1789 13 Sep 2011 14:15

I'm not from the left, and I personally do really, really well out of the capitalist system, and enjoy a life of relative luxury, but then I can afford to give half my annual income away to charity and still live very well. I like capitalism, it's been very good to me, and my family for over two centuries, but the ghastly version that's swept the world over the last thirty years is something else.

I think neoliberalism is something close to a malignant cancer growing inside a healthy capitalism, and with equally disastrous consequences. So my criticism comes not from the left, but from the right, for what that's worth.

Neoliberalism is a kind of pseudo-religion, a dogma, which is passionately believed by its disciples, despite the evidence showing that it simply doesn't work in the real world, but like most religious fanatics, the real world doesn't matter much to them. Which is another reason they remind me of Stalinists in the old Soviet system.

... ... ...

For me neoliberalism is a primitive and dangerous delusion about society, economics, and human nature, comparable to extreme forms of socialism, which are equally hairbrained and destructive, and arguably just as bloody.

Thatcherism was classic, class-warfare politics, but launched from the extreme right instead of the left, and it was wildly successful, at least for those it benefitted, a narrow strata at the top of society. Now that the entire charade is collapsing, and taking the welfare state, the middle class, and probably capitalism itself, with it, it's time to pay the bill for this long, illusory, party.

Neoliberalism, cheap hydrocarbons, and economic crisis of 2008

There essence of neoliberalism is not only dominance of finance over other sectors of the economy, but also free movement of goods and people by global corporations without any respect for national borders. And that is the source of increasing efficiency and dropping prices on many categories of goods. An interesting question is how much the rise of neoliberalism was forced on humanity by the short historical period of availability of cheap hydrocarbons.

"Cheap Energy" is important driver of globalization. Even the previous stage of globalization: the creation of colonial empires by Great Britain, France, Germany and Spain was at least partially based on availability of steam power and coal.

Now it is an oil that serves the same role for the global neoliberal empire. The latter allow cheap global transportation, mass air travel and powers huge US military machine which has no equals in the globe and serves as a guarantor of security of neoliberal regimes all over the globe. Out of three major components of globalization -- the US as a sole superpower, cheap international shipping and air travel, and (to lesser extent) global telecommunication networks the first two definitely depends of cheap energy. And, BTW, Google is also not running of holy spirit; it is one of the top consumers of electrical energy in the USA.

While it is unclear to what extent neoliberalism will be affected by rising energy prices, it seems few things arouse more passions these days then "oil plato" (or how it is often, but incorrectly, called the oil peak) and how it affects the civilization and different countries. The key fact is that EROEI (energy return on energy invested) of oil extraction is rising dramatically for the last two decades and it looks like this trend will continue. The current world oil production has EROEI around 40 so you extract forty times as much of energy then you spend for extraction.

New oil discoveries have EROEI around 10 (with bitumen oil sand EROEI in single digits). And EROEI also the source of the current disconnect between the purchasing power of money and the resources available to back that up. Pessimists say that a further increase in fuel prices is inevitable, and sooner or later the world will face a kind of "offshoring apocalypse". That's unlikely as important part of neoliberal regime is the new level of global communications and this part will be by-and-large intact. But transportation costs will affect the globalization in a negative way without any dount. For example with EROEI in single digits mass air travel will come to a screeching halt.

At the same time the end of cheap hydrocarbons era might marks the start of fuel wars, which, as such, will be a drastic reversal of globalization, playing the same role as WWI. When each state will try to pull the energy blanket, globalization trends will definitely suffer.

Rise of cost of energy makes both offshoring of manufacturing and outsourcing of service jobs to other countries less viable. A growing number of American companies are moving their manufacturing back to the United States. This emerging "re-shoring movement" has to be kept in proportion. Most of the multinationals involved are bringing back only some tiny fraction of their production destined for the American market. Much of what they had moved over the past few decades remains overseas. Moreover some firms like Caterpillar decided to move research and development facilities in China as split between manufacturing and research badly affects both research and the quality of final products.

But re-shoring tendencies can't be easily dismissed. They are driven by powerful forces which might only get stronger with time. Boston Consulting Group (BCG) in April 2012, notes that 37% of those with annual sales above $1 billion are planning shifting production facilities from China to America. Of the very biggest firms, with sales above $10 billion, the number reached 48%. Among reason sites are rising Chinese labor costs and transportation costs. Many shipping companies slowed the speed of their ship (increasing the delivery time) in order to fight rising oil prices. As Economist, the flagship of neoliberal establishment thought in GB, noted (Reshoring manufacturing):

The Massachusetts Institute of Technology looked at 108 American manufacturing firms with multinational operations last summer. It found that 14% of them had firm plans to bring some manufacturing back to America and one-third were actively considering such a move. A study last year by the Hackett Group, a Florida-based firm that advises companies on offshoring and outsourcing, produced similar results. It expects the outflow of manufacturing from high- to low-cost countries to slow over the next two years and the reshoring to double over the previous two years. “The offshoring of manufacturing is now rapidly moving towards equilibrium [zero net offshoring],” says Michel Janssen, the firm’s head of research.

By contrast, pay and benefits for the average Chinese factory worker rose by 10% a year between 2000 and 2005 and speeded up to 19% a year between 2005 and 2010, according to BCG. The Chinese government has set a target for annual increases in the minimum wage of 13% until 2015. Strikes are becoming more frequent, and when they happen, says one executive, the government often tells the plant manager to meet workers’ demands immediately. Following labour unrest, wages at some factories have gone up steeply. Honda, a Japanese carmaker, gave its Chinese workers a 47% pay rise after strikes in 2010. Foxconn Technology Group, a subsidiary of Hon Hai Precision Industries, a Taiwanese firm that does a lot of manufacturing for Apple and other big technology firms, doubled pay at its factory complex in Shenzhen after a series of suicides. Its labour troubles are still continuing.

...As soon as 2015, says Hal Sirkin, a consultant at the firm, it will cost about the same to manufacture goods for the American market in certain parts of America as in China in many industries, including computers and electronics, machinery, appliances, electrical equipment and furniture. That calculation takes into account a wide variety of direct costs, including labour, property and transport, as well as indirect ones such as supply-chain risk.

...“Pay for senior management in several emerging markets, such as China, Turkey and Brazil, now either matches or exceeds pay in America and Europe”

So while production and service outsourcing overseas or offshoring can still provide substantial cost savings for many companies, the question arise whether those cost savings are sustainable (Can outsourcing overseas provide sustainable cost savings).

Crisis of 2008 undermined the legitimacy of neoliberalism much like WWII undermined the legitimacy of communism. But alternatives did not exits and instead of wreaking neoliberalism it converted it is aggressive, bloodthirsty zombie stage, which is the current stage of neoliberalism development (see below). It is interesting to note that  three competing perspectives on the crisis do not include the role cheap hydrocarbons in development of neoliberalism and the crisis of 2008 (Palley, 2012, cited via thomaspalley.com): 

US neoliberal empire and the stages of development of neoliberalism

See American Imperialism, Transnational Capitalist Class and Globalization of Capitalism

Market fundamentalism as an ideology of neoliberalism; Washington Consensus

Market fundamentalism is an ideology of neoliberalism and represents a pseudo-scientific approach to economic and social policy based on neoclassical theories of economics that absolutized the role of the private business sector in determining the political and economic priorities of the state and consider privatization as the ultimate solution of all problems in the society.

Like social theories behind Italian and German versions of corporatism ideology of neoliberalism is pretty eclectic. It is discussed at some additional length at pages related to the topic Casino Capitalism on this site.

We need to note, there the neoliberal ideology adoption and implementation patterns varies from country to country, like it was actually with the classic corporatism as well. In the USA this form of corporatism emerged in most radical form. Another center of neoliberalism was GB in which it also has had a more radical form then, say, in Spain or Italy.

And we called the US version of neoliberalism radical, it is not a metaphor: corporatism under General Franco is a pale shadow of corporatism under Bush-Obama regime.

This new stage of capitalism development is often called "corporate socialism" of "socialism for rich" or "socialism for banks". The latter name is applicable because the key component of transnational elite is financial oligarchy. All of those terms reflect the key fact that at this stage of capitalism development it is the transnational elite and first of all financial oligarchy which completely dominates power structures of the society. Due to the role of financial oligarchy in this new elite this social system was also nicknamed Casino Capitalism.

Neoliberalism should probably be viewed as a further development of a form of corporatism that emerged in the USA in late 60th. It came to power in Ronald Reagan administration which was in a way Quiet coup. And it became completely dominant after the collapse of the USSR during Clinton regime during which Democratic Party also adopted neoliberalism as an official platform.

The term itself emerged in the 1970s, when some Latin American economists began using "neoliberalism" to designate their program of market-oriented reforms. It has come into wide use starting with 1973 Chilean coup d'état. After triumph of neoliberalism in Chile under Augusto Pinochet (from 1973) neoliberalism spread to Great Britain under Margaret Thatcher (from 1979) and then to the United States under Ronald Reagan (from 1981). Broadly speaking, neoliberalism seeks to transfer control of the economy from the public to the private sector with the state providing guarantees only to corporations and not to individual citizens like under socialism. That's why is often called "corporate socialism".

After dot-com bust of 2000-2002, however, the term "neoliberalism" had become a pejorative used to denigrate prostitution of economics performed by Milton Friedman and Chicago school . This trend increases after financial crisis of 2008-2012. So it is probably fare to say that right now neoliberalism entered the stage of decline. The last important victory of neoliberalism was probably navigating Russia into joining WTO, which happened in summer of 2012.

It has neoliberal Newspeak that include such terms as "free market", efficiency, consumer choice, transactional thinking and individual autonomy. In essence this is an modernized ideology of merger of state and corporate power that was hallmark of classic corporatism, with an additional twist of emphasizing the Arian style theories of inferiority of lower classes (reflected in promoting the "class of creators", entrepreneurs( Randism), etc) and "ultimate justice" of redistributing wealth to the top 1%.

On state level it tries to abolish social programs and completely shift the risks to individuals (replacing pensions with 401K plan in the USA), while fully providing social protection to corporations, especially financial giants involved in casino style gambling. In other words it socialize private losses and privatize social program that benefits of individual citizens.

Neocolonial aspects of neoliberalism are often called "Washington Consensus", a list of policy proposals that appeared to have gained consensus approval among the Washington-based international economic organizations (like the International Monetary Fund (IMF) and World Bank) and directed on making developing nations "debt slaves" of the industrialized nations. This policy got tremendous impetus with the dissolution of the USSR when the principal foe, which to certain extent limited the level of greed in such deals due to fear of "communist infiltration" if case deal is too one sided, folded.

The concept and name of the Washington Consensus were first presented in 1989 by John Williamson, an economist from the Institute for International Economics, an international economic think tank based in Washington, D.C. The list created by Williamson's included ten points:

  1. Legal security for property rights;
  2. Financialization of capital.
  3. Fiscal policy Governments should not run large deficits that have to be paid back by future citizens, and such deficits can only have a short term effect on the level of employment in the economy. Constant deficits will lead to higher inflation and lower productivity, and should be avoided. Deficits should only be used for occasional stabilization purposes.
  4. Redirection of public spending from subsidies to people to subsidies to corporations (tax breaks, preferred regime, etc). Especially hurt were classic socialist programs, which neoliberal call "indiscriminate subsidies" that neoliberal deem wasteful. They are limited to those what benefit corporations such as primary (but not university) education, primary health care and infrastructure investments. Pensions and other social problems need to be privatized.
  5. Tax reform– broadening the tax base by shifting tax burden to the poor and middle classes and adopting low taxes for corporations and top 1% with the states goal to encourage "innovation and efficiency";
  6. Interest rates that are market determined and positive (but moderate) in real terms;
  7. Floating exchange rates;
  8. Trade liberalization – liberalization of imports, with particular emphasis on elimination of quantitative restrictions (licensing, etc.); any trade protection to be provided by law and relatively uniform tariffs; thus encouraging competition and long term growth. Financial liberalization under the smoke screen of trade liberalization and complete dominance of foreign banks in local financial systems of developing countries.
  9. Liberalization of the "capital account" of the balance of payments, that is, allowing people the opportunity to invest funds overseas and allowing foreign funds to be invested in the home country
  10. Privatization of state enterprises; Promoting market provision of goods and services which the government can not provide as effectively or efficiently, such as telecommunications, where having many service providers promotes choice and competition.
  11. Deregulation – abolition of regulations that impede market entry or restrict competition, except for (G7 only) those justified on safety, environmental and consumer protection grounds, and prudent oversight of financial institutions;

A Decade Long Triumph of Neoliberalism after the Dissolution of the USSR

As we mentioned before, the greatest triumph of neoliberalism was the dissolution of the USSR in 1991. After this event, there was a period of "triumphal march of neoliberalism", which lasted probably till 2005, when each year it claimed as a victory yet another country (Yeltsin neoliberal gang rule in Russia lasted till 2000, all former socialist countries were converted to neoliberal regimes shortly after, Kosovo in 1999; Serbia in 2000; Iraq in May, 2003; Georgia in December 2003; Ukraine in 2004). It also managed to stabilize and improve the situation in the USA. Plunder of Russia and other xUSSR states along with Internet revolution were two factors that influenced relative prosperity of the USA in 1994-2000.

And like Catholicism in Europe in Middle Ages, in 90th neoliberalism looked like an incontestable ideology propagated by "sole superpower" (" anew holy Roman Empire") with the help of vassals and subservient financial institutions such as World Bank and IMF. The dominance on the USA in 1991 looked rock-solid and if somebody told me in 1999 that in less then 20 years the USA would be on ropes both politically and financially I would just laugh. Still after the dissolution of the USSR neoliberalism managed to dissipate most of the gains in approximately 20 years and in 2008 entered the phase of structural crisis. As of 2013 the idea of self-regulating market is dead and even solidarity of international elites, the hallmark of neoliberalism, is under question.

The first cracks in neoliberalism facade were caused by Clinton's attack on Yugoslavia in 1999, the first armed neoliberal crusade attempted under the smoke screen of protecting the right of Kosovo Muslims in Serbia. It failed to implement "regime change" in Serbia and despite overwhelming military superiority of NATO forces has shown that bringing neoliberal regime on the tips of bayonets is a costly and high risk exercise. It took another several years and a color revolution in Serbia to achieve those goals. It did established the second Muslim state in Europe (effectively NATO protectorate), which was a part of the plan.

Color revolution in Serbia started a series of other successful color revolutions in Serbia (Serbia's Bulldozer Revolution in 2000) ,Georgia (Saakashvili regime came to power in November 2003 as a result of "Rose revolution"), Ukraine (Viktor Yushchenko regime came to power in 2004 via Orange Revolution) and several other countries.

After those successes, there were several setback: color revolutions failed in Belorussia and Russia. Results of color revolution in Ukraine were partially reversed by government of Viktor Yanukovych who ousted Yushchenko government defeating Yulia Tymoshenko in 2010 election (with Yutchshenko personally having less the 3% support). They are close to partial reversal in Georgia where Saasaskvily regime is hanging in the air.

Fear of the population and establishment of "National Security State"
to protect the interest of transnational elite

Politically neoliberalism correlates with growth of political power of financial oligarchy and media-military-industrial complex. Growth of political power of financial oligarchy among national elite has led to the dramatic growth of inequality and created growing fear of the top 0.01% (oligarchs) over preserving their power and financial gains.

That naturally leads to the establishment of National Security State" state, militarization of police and introduction of total surveillance over the citizens under the pretext of fighting against terrorists.

In the article GCHQ taps fibre-optic cables for secret access to world's communications by Ewen MacAskill, Julian Borger, Nick Hopkins, Nick Davies and James Ball, the authors describe blanket surveillance regime (21 June 2013, The Guardian) in comparison with which KGB and even STASI looks like complete amatures:

Britain's spy agency GCHQ has secretly gained access to the network of cables which carry the world's phone calls and internet traffic and has started to process vast streams of sensitive personal information which it is sharing with its American partner, the National Security Agency (NSA).

The sheer scale of the agency's ambition is reflected in the titles of its two principal components: Mastering the Internet and Global Telecoms Exploitation, aimed at scooping up as much online and telephone traffic as possible. This is all being carried out without any form of public acknowledgement or debate.

One key innovation has been GCHQ's ability to tap into and store huge volumes of data drawn from fibre-optic cables for up to 30 days so that it can be sifted and analysed. That operation, codenamed Tempora, has been running for some 18 months.

GCHQ and the NSA are consequently able to access and process vast quantities of communications between entirely innocent people, as well as targeted suspects.

This includes recordings of phone calls, the content of email messages, entries on Facebook and the history of any internet user's access to websites – all of which is deemed legal, even though the warrant system was supposed to limit interception to a specified range of targets.

As Glenn Greenwald wrote in his article Are all telephone calls recorded and accessible to the US government? (May 4, 2013, The Guardian):

Every day, collection systems at the National Security Agency intercept and store 1.7 billion e-mails, phone calls and other types of communications.

It would also help explain the revelations of former NSA official William Binney, who resigned from the agency in protest over its systemic spying on the domestic communications of US citizens, that the US government has "assembled on the order of 20 trillion transactions about US citizens with other US citizens" (which counts only communications transactions and not financial and other transactions), and that "the data that's being assembled is about everybody. And from that data, then they can target anyone they want."

Despite the extreme secrecy behind which these surveillance programs operate, there have been periodic reports of serious abuse. Two Democratic Senators, Ron Wyden and Mark Udall, have been warning for years that Americans would be "stunned" to learn what the US government is doing in terms of secret surveillance. Strangely, back in 2002 - when hysteria over the 9/11 attacks (and thus acquiescence to government power) was at its peak - the Pentagon's attempt to implement what it called the "Total Information Awareness" program (TIA) sparked so much public controversy that it had to be official scrapped. But it has been incrementally re-instituted - without the creepy (though honest) name and all-seeing-eye logo - with little controversy or even notice.

In his book "Brave New World Order" (Orbis Books, 1992, paper), Jack Nelson-Pallmeyer identifies seven characteristics of a such a state:

  1. The military is the highest authority. In a National Security State the military not only guarantees the security of the state against all internal and external enemies, it has enough power to determine the overall direction of the society.
  2. Political democracy and democratic elections are viewed with suspicion, contempt, or in terms of political expediency. National Security States often maintain an appearance of democracy. However, ultimate power rests with the military or within a broader National Security Establishment.
  3. The military and related sectors wield substantial political and economic power. They do so in the context of an ideology which stresses that 'freedom" and "development" are possible only when capital is concentrated in the hands of elites.
  4. Obsession with enemies. There are enemies of the state everywhere. Defending against external and/or internal enemies becomes a leading preoccupation of the state, a distorting factor in the economy, and a major source of national identity and purpose.
  5. The working assumption is that the enemies of the state are cunning and ruthless. Therefore, any means used to destroy or control these enemies is justified.
  6. It restricts public debate and limits popular participation through secrecy or intimidation. Authentic democracy depends on participation of the people. National Security States limit such participation in a number of ways: They sow fear and thereby narrow the range of public debate; they restrict and distort information; and they define policies in secret and implement those policies through covert channels and clandestine activities. The state justifies such actions through rhetorical pleas of "higher purpose" and vague appeals to "national security."
  7. The church is expected to mobilize its financial, ideological, and theological resources in service to the National Security State.

You can probably safely replace the term "military" with the term "finance" in the above list to make it more applicable to contemporary neoliberal societies. And if you think about, it finance is a new form of warfare. In any case National Security State is now reality and by-and-large displaced the previous form, called Inverted Totalitarism which existed from late 40th to late 80th.

Criminogenic effects of neoliberalism

The fact the neoliberalism is highly criminogenic is well established. The postulate "greed is good" implicitly assumes that the legal system is perfect. In order to distinguish greed from enlightened self-interest, we will define greed is self-interest taken to an extreme or unseemly degree. A “greedy” market participant that seeks to gain at the expense of others and the society at large. So in essence this is a parasitic behavior. This might be done within the legal framework exploiting loopholes in it, but most commonly it involves a violation of the law that is difficult to enforce and are supported internally by corporate brass (A Troubling Survey on Global Corruption - NYTimes.com):

A new survey of corporate officials and employees in 36 countries — in Europe, Africa and the Middle East, as well as India — indicates that there is plenty of corruption that needs investigating.

Over all, 20 percent of the respondents said they knew of incidents at their own companies within the previous year that could be construed as cooking the books — moves to either understate expenses or overstate revenue. Among senior managers and directors, the figure was 42 percent.

It is typically difficult to determine what the optimal set of laws is; lawmakers must make their best guess, and in most cases they pass laws that are proved to be suboptimal over time. Holes in those laws can be systematically exploited. Also law always lags behind market and technological developments; it is difficult for lawmakers to know how to regulate things like new products or new investment vehicles. That creates another opportunity to engage in destructive for the society as whole behavior without fear of punishment by the law. Neoliberalism also is "sociopath friendly" regime in a sense that sociopathic qualities became a desirable for the top brass. And with sociopathic leadership in place it is difficult to imagine what the improper business is. "Creative destruction" in this case becoming something like a pack of wolves against a sheep.

Wall Street also developed two step combination: first weaken the law, and then engage in criminal behavior that is now decriminalized. In other words, if one argues that it is perfectly acceptable for people to be greedy, the problem is that there is no mechanism to constrain greedy people so that they can do no harm to others. As history demonstrates pretty convincingly (with the 2008 crisis as the most recent example), the legal system typically fails to place the appropriate constraints on such market behavior. That's why additional mechanisms are important for society survival and prosperity, and that's why most world religions consider greed to be a vice. This brings us to works of John Kenneth Galbraith and his discussion of the necessity of countervailing economic forces. Neoliberalism destroyed those countervailing forces over the last several decades.

Since the legal system can not and never in reality guarantee that markets function efficiently, there is a role for other institutions to foster a more enlightened self-interest as a social norm and thus improve efficiency. It's mostly about how self-interest is channeled that makes the difference, since eliminating self-interest seems similarly sociopathic (the USSR is a perfect example here). We would be a lot better off to channel self-interest in financial sector productively, than let it run wild foraging on speculation, arbitrage, and monopolization.

But it is those institutions that can channel self-interest in a more productive way, that neoliberalism systematically tries to weaken. In this sense neoliberalism is not only criminogenic, it is self-destructive. Moreover, unethical behavior is arguably more of the rule of corporate conduct rather than the exception. As such it represents a systemic flaw of neoliberalism as a flavor of corporatism. And the Great Recession of 2008 is a direct manifestation of this systemic flaw. In other words it was not accidental, it was not the first and it is not the last.

Example of Russia neoliberal revolution of 1989-1994 is probably one of the most terrifying examples of this trend. But the situation in the USA after 2008 is structurally even worse as it entails much more sophisticated layers of corruption and first of all almost complete corruption of the government by financial oligarchy (nobody was prosecuted for the financial crisis of 2008). It signified the creation of two separate caste of citizens with the upper caste being above the law, much like it was with Nomenklatura in the USSR.

Neoliberalism also exploits fundamental problem that in any large bureaucracy dealing with huge sums of money people have bad and/or contradictory incentives and lack of accountability creates opportunity for corruption. So in way it is using corruption for the purposes of maintaining the neoliberal regime, which is pretty unique feature. And, despite appearance, all large bureaucracies are prone to corruption.

One of the key mechanisms of corruption that is used under neoliberal regime is so called "the revolving door". It works in both direction: from top corporate seats to government and back.

Typically people who moved to government from private industry are not forgetting your former friends, especially in crisis (Paulson is a very good example here, but any Secretary of Treasury probably is not much worse example either). There are also implicit incentives to help your former employer, when there is an opportunity for a multimillion dollar deal. Also in this variant of "revolving door" regime, those who are coming to the government or to the public service have the incentive structure and morale they acquired in their prior employer -- a large corporation.

When a long time government servant is expecting to join a corporation after leaving the government there is a strong, but implicit incentive not to hurt future friends. Income inequality is probably one of the root causes for this. If incomes in public and private sector were not so much out of balance, few people would be motivated to sell themselves out so shamelessly.

But with the current level on income inequality this mechanism works wonders to emasculate regulatory agencies top brass. The mechanism that efficiently replicates this governance systems and keeps it in place one of the central part of criminality of neoliberalism: the conscious breaking down of institutional capacity of state to regulate business activity. Thus creating the situation of "mafia state", with the oligarchy instead of regular Mafiosi.

The other key mechanism is bribing the press corps to present (often close to criminal) actions favorable to oligarchy (in a words of Margaret Thatcher), as "There Is No Alternative" (TINA). BTW in Russian "tina" is the highly viscosious, amorphous substance on the bottom of the lake or swamp. In the latter case it can swallow people or animals. This effect is the same as for "Neoliberal TINA". Typically "TINA" works by remapping the debate to exclude anything not favorable to the financial elite (Journalists in the service of Pete Peterson Remapping Debate). Here is how stealing from Social Security to preserve recent gains by financial elite was presented during debates on (note the terminology) "curbing the country’s “unsustainable” debt and deficits.":

  • Maria Bartiromo, 2011 (host, CNBC’s “Closing Bell with Maria Bartiromo”)
  • Tom Brokaw, 2012 (former anchor and managing editor, NBC Nightly News)
  • Erin Burnett, 2012 (host of CNN’s “Erin Burnett OutFront”)
  • John F. Harris, 2012 (editor-in-chief of Politico)
  • Gwen Ifill, 2011, 2010 (senior correspondent of “PBS NewsHour”)
  • Ezra Klein, 2011 (columnist, Washington Post)
  • Jon Meacham, 2010 (former editor-in-chief, Newsweek)
  • Bob Schieffer, 2010 (host, CBS “Face the Nation”)
  • Lesley Stahl, 2010 (reporter, CBS “60 Minutes”)
  • George Stephanopoulos, 2012 (host, ABC’s “This Week”)
  • David Wessel, 2012, 2011 (economics editor, Wall Street Journal)
  • George Will, 2011 (columnist, Washington Post)
  • Judy Woodruff, 2012, 2011 (host, “PBS NewsHour”)
Peterson, however, is hardly a disinterested and dispassionate observer of such discussions. In fact, he is now beginning his fourth decade of arguing that there is no alternative to enacting “entitlement reform” (read: cut Social Security and Medicare) and “tax reform” (read: raise regressive taxes and lower progressive ones) in the name of curbing the country’s “unsustainable” debt and deficits.

An essential and successful element of the Peterson strategy is to create an environment where it is widely if not universally believed that there is no alternative to his vision. The conceit is that those with “courage” will see past narrow, partisan concerns and embrace an ideal: a bipartisan consensus that has the strength to demand “shared sacrifice” from a childish and selfish populace. A review of the proceedings of the Fiscal Summits of the last three years makes agonizingly clear that most of the journalists who conducted interviews or moderated panel discussions both reflected and amplified the Peterson worldview...

So, for example, Lesley Stahl, the CBS “60 Minutes” reporter, was fully a part of the Erskine Bowles and Alan Simpson deficit-cutting team during her interview with both men: “You are going to have to raise taxes and cut things, big things, put restrictions on Social Security. Everybody knows that.”

Virtually none of the reporters thought to ask about or suggest an alternative path, such as preserving Social Security benefits and bolstering the system’s reserve by raising the cap of wages subject to Social Security taxes (currently annual wages above approximately $110,000 are not subject to any Social Security tax).

And most questioning proceeded either on the false assumption that deficits were derived from excessive spending on entitlements or as though they had mysteriously, but inevitably, come to pass.

Many journalists fairly shouted their personal desire to see greater cooperation and “compromise,” with groups realizing the importance of submerging their interests to the greater good. Who should do the submerging? In 2012, Tom Brokaw had a suggestion in the form of a question to former President Bill Clinton: after Wisconsin Governor Scott Walker pushed through a bill undermining the right of union members to collectively bargain, shouldn’t those workers have just sat down and negotiated with Walker as, Brokaw said, “has been traditionally done in this country” instead of “gather[ing] outside the capitol”?

There were a couple of exceptions to the rule. In a session moderated by Ezra Klein of the Washington Post in 2011, Klein posed a number of questions that reflected an unwillingness to operate from within the Peterson framework. For example, Klein asked New York Times columnist David Brooks whether, instead of blaming Americans for simply wanting benefits without paying for them, the causes of the debt should be located in the Bush tax cuts, two unfunded wars (Iraq and Afghanistan), and the federal government’s emergency response to the financial crisis.

Judy Woodruff, of the PBS NewsHour, generally asked questions from within the Peterson frame, but, at one point in 2012, posed a question that perhaps all the journalists should have been thinking about as well. She asked Rep. Christopher Van Hollen, Jr. (D-Md.) if “Democrats like you, by participating in forums like this one that is all focused on austerity, on cutting the deficit and the debt…really become also window dressing for a conservative agenda that is anti-jobs and anti-recovery and wrongheaded economics?”

Over the course of the three years of fiscal summits that Remapping Debate examined, the other journalist interviewers and moderators hewed strictly to the conventional Peterson wisdom. What follows are annotated illustrations of this recurring problem.

Neoliberalism as a key contributor to growth of amorality and economic crimes

Although neoliberal regime is not necessarily a kleptocracy (although Yeltsin regime definitely was), the difference is only in a degree. It does use corruption and criminality to stabilize the neoliberal regime and protect it from backlash that follow economic crisis caused by excessive appetite by financial oligarchy (if I am sounding like a communist here it is not accidental; as people of former USSR observed: communism was all wrong about socialism, but it was surprisingly realistic in its views of capitalism). And as for corruption it is pretty ironic that the USA tried to position itself as a leader of anti-corruption crusade, because as Niall Ferguson noted (quoted from Zero Hedge):

“It is corruption when corporations can buy regulation. It is corruption when laws are sponsored by Wall Street.

It is a sad state when the current level of corruption of the U.S. government is what was once only associated with third world countries ruled by dictators. The problem is that corruption of major institutions and first of all regulators is predicament for any country which adopted neoliberal model, and the US in no exception. Niall Ferguson called it "suffering from a third world disease.". In his new book The Great Degeneration he states the central question of the “great degeneration” is whether our institutions, and first of all institution which should uphold the rule of law are degenerating. He thinks that there are four symptoms of degeneration:

Quite frankly, like in the case of international financial capital, the most necessary constituents that define organized crime are in place so the difference in only in degree:

Organized crime or criminal organizations are transnational, national, or local groupings of highly centralized enterprises run for the purpose of engaging in illegal activity, most commonly for monetary profit

Quoting Wikipedia:

In the United States, the Organized Crime Control Act (1970) defines organised crime as "The unlawful activities of [...] a highly organised, disciplined association [...]".[3] Criminal activity as a structured group is referred to as racketeering and such crime is commonly referred to as the work of the Mob. In the UK, police estimate organized crime involves up to 38,000 people operating in 6,000 various groups.[4] In addition, due to the escalating violence of Mexico's drug war, the Mexican drug cartels are considered the "greatest organised crime threat to the United States" according to a report issued by the United States Department of Justice.[5]

By all estimates Mexican grug cartels dwarf the size and wealth of the US financial sector.

If you think that the increasing level of penetration of Mexican mafia into the US is the result of external forces think again. In a way Reagan regime was a clear invitations for any self-respectful international crime syndicate to start operating in the US territory. And the exposition of crime that was a side effect of neoliberal counterrevolution in Russia has a distinct blowback effect in the USA. The same reasoning is applicable to various sophisticated financial crimes including computer related. What you expect unemployed or semi-employed for 300 dollars a month programmers to do to in order to provide a living for themselves and their families.

Neoliberalism and propaganda of amorality

As Will Hutton noted in The Guardian neoliberalism doctrine entail direct propaganda of amorality( Across Europe, political leaders have lost the trust of their people:

There was a time when to live a life virtuously was well understood. It embraced personal integrity, commitment to a purpose that was higher than personal gain, a degree of selflessness and even modesty. Those at the top may have got there through ruthlessness and ambition, but they understood that to lead was to set an example and that involved demonstrating better qualities than simply looking after yourself.

No more. Perhaps the greatest calamity of the conservative counter-revolution has been the energy it invested in arguing that virtue, whatever its private importance, has no public value. The paradox, the new conservatives claim, is only through the pursuit of self-interest can the economy and society work best. Responsibilities to the commonweal are to be avoided.

The retreat of virtue has become the plague of our times. Greed is legitimate; to have riches however obtained, including outrageous bonuses or avoiding tax, is the only game in town. But across the west the consequences are becoming more obvious. Politics, business and finance have become blighted to the point that they are dysfunctional, with a now huge gap in trust between the elite and the people.

In the USA it took more then three decade to eliminate morality and to establish "law of jungle" mentality in the population. In other countries such as Russia this process was much quicker and run deeper. And in no way this newly acquired level of criminally is reflected in incarceration statistics. Most of "neoliberal-style: crimes are financial crimes and as such they are difficult to direct and difficult to procedure. sometimes they are impossible to procedure either because of the political influence of the players or potential effect on the economy if particular persons and institutions are brought to justice. The latter factor was acknowledged by the US justice department.

Neoliberalism propagates criminal behavior by creating acute means-ends discrepancies and due to excessive cultural emphasis on monetary or material success goals ("greed is good" mentality) for members of society. At the same time mobility is restricted and majority of members of the society has no realistic chances to attain those goals. Still media brainwashing incites the desire more than they have. Success stories of going from rags to riches make the American Dream more believable, despite the fact that it is deeply and irrevocably fake. As this cultural meme is internalized it creates a strain, which combined with the culturally induced underemphasize on the proper methods, stimulates deviance of various types. If the deviant solution is successful (i.e., perpetrators are not caught or adequately punished), this adaptation may become normative for others in a similar social context. To the extent that this solution is available to them (demand for illicit goods or services, access to illegitimate opportunity structures), they may adopt this role model -- and may be expected by their significant others to follow this path. This process creates a vicious circle toward higher rates of deviance and widespread anomie under neoliberal regime. Anomie is a withdrawal of allegiance from conventional norms and a weakening of these norms' guiding power on behavior. This is caused by structural contradictions within the neoliberal doctrine and affects deviance in two ways. One is associated with strain, relative deprivation, frustrations, and the almost obsessive focus on goals. This makes deviance thinkable, as conventional norms are regarded as nonbinding, at least temporarily. Rationalizations enable departures from otherwise accepted/internalized social rules, as actors convince themselves that in their particular circumstances an exception is acceptable. Through interactive processes, techniques of neutralization and rationalizations contribute to a context in which newly socialized actors may adopt normative referents and deviant behavior as a matter of course. If "this is the way business is done around here," people may engage in price fixing or misleading advertising or insider trading or running a prostitution ring. While those criminogenic effects of neoliberalism became prominent in the USA as was demonstrated by 2008 financial crisis, when most of financial players involved were engaged is behavior that is deeply and irrevocably asocial and amoral. However, a very similar process is now being reproduced throughout the world. Promises are made that are not fulfilled. People's expectations are exalted at a time when economic and power asymmetries increase and become less justifiable and intolerable in the eyes of the people affected. The logic of the market permeates popular thinking and introduces rationalizations, making the adoption of a criminal or unethical solution more acceptable. This high criminogenic impact of globalization and neoliberal policies is extremely difficult and costly to reverse.

Moral relativism and concept of "Justice for some"

Moral relativism means that anything that helps to achieve the goal is moral. It was actually pioneered by Marxism in context of means to be used to achieve "proletarian revolution". It is a part of Randism as a ersatz version of Nietzschean Philosophy.

Corruption, facilitated by the credibility trap, is the biggest problem facing the West today. That is the real subsidy, the most debilitating entitlement.

It is the belief of the elite that the power of their office is an achievement that rewards them with the right to lie, cheat and steal, both for themselves and their friends.

Although it is most important to understand that they would be shocked and insulted if one uses those words, lie, cheat and steal, to describe what they are doing. They view themselves as exceptionally hard working, as obligated by their natural gifts and superiority.

Through a long indoctrination that starts sometimes in their families, but is most often affirmed in their elite schools and with their circle of privileged friends, they learn to rationalize selective moral behaviour not as immoral but as 'the entitlement of success.' And they are supported by a horde of morally ambivalent enablers who will tell them whatever they wish to hear.

There are one set of rules for themselves and their friends, and another set of rules for the rest.

Few who actually do evil consciously choose to be evil. They rationalize what they do in any number of ways, but the deceit often hinges on their own natural superiority, and the objectification and denigration of the other. We are makers, and they are takers. Although many may work hard, they see their own work as having special value and merit, while the actions of the others are inconsequential and unworthy.

Given enough time, their rationalizations become an ideology, desensitized to the meaning and significance of others outside their own select group. This supremacy of ideology empties their souls, and opens the door to mass privation and even murder, although rarely done by their own hands.

This is what Glenn Greenwald calls 'justice for some.' Or even earlier what George Orwell captured in the slogan, 'Some animals are more equal than others.'

And just to be clear on this, with regard to the Anglo-American political situation, the tragedy is not that just some are corrupted, which is always the case. The tragedy is that the Democrats and the Labor Party learned that they could become as servilely corrupted by Big Money as the Republicans and the Conservative Party, while maintaining the illusion of serving their traditional political base.

And it has rewarded them very well in terms of extraordinarily well-funded political power, and almost unbelievable personal enrichment afterwards.

In such a climate of corruption, political discourse loses the vitality of ideas and compromise for the general good, and take on the character of competing gangs and crime families, engaged in aggressive schemes and protracted turf wars, tottering from one pitched battle and crisis to another.

As Jesse put in his blog Jesse's Café Américain
"A credibility trap is a condition wherein the financial, political and informational functions of a society have been compromised by corruption and fraud, so that the leadership cannot effectively reform, or even honestly address, the problems of that system without impairing and implicating, at least incidentally, a broad swath of the power structure, including themselves.

The status quo tolerates the corruption and the fraud because they have profited at least indirectly from it, and would like to continue to do so. Even the impulse to reform within the power structure is susceptible to various forms of soft blackmail and coercion by the system that maintains and rewards.

And so a failed policy and its support system become self-sustaining, long after it is seen by objective observers to have failed. In its failure it is counterproductive, and an impediment to recovery in the real economy. Admitting failure is not an option for the thought leaders who receive their power from that system.

The continuity of the structural hierarchy must therefore be maintained at all costs, even to the point of becoming a painfully obvious, organized hypocrisy.

The Banks must be restrained, and the financial system reformed, with balance restored to the economy, before there can be any sustainable recovery.

The problem which the modern world has not yet grappled is how to react to the rise of a global elite, which considers itself to be above national restraints, and a law unto themselves.

Their success has been propelled by the dominance of Anglo-American financialization, and the rise of oligarchies in Russia, China, Latin America, and India. Countervailing power has been co-opted and in many cases eliminated. Any opposition has become marginalized and isolated.

The new oligarchs are supported by fiat currencies of respective national goverements, which together the increase of insubstantial 'cashlessness' in wealth. The latter provides much greater ability to reallocate wealth.

Legal arbitrage

Legal arbitrage is a powerful instrument for transnational corporations to press government into compliance. As soon as government tries to impose some restriction on their operations they threaten to leave.

This behavior is by-and-large conditioned by the low price of oil. With price of oil above, say $200 per barrel, transportation costs became big enough to make this behavior less likely

Globalization and deregulation supports selective justice, to the extreme detriment of local legal regimes (outside G7), and individual choice and freedom. The new global elite consider themselves to be a new Arab sheiks, a law unto themselves, above what they consider subhuman restraint. Or using Nietzschean terminology, Übermenschen.

“Our light-speed, globally connected economy has led to the rise of a new super-elite that consists, to a notable degree, of first- and second-generation wealth. Its members are hardworking, highly educated, jet-setting meritocrats who feel they are the deserving winners of a tough, worldwide economic competition—and many of them, as a result, have an ambivalent attitude toward those of us who didn't succeed so spectacularly. Perhaps most noteworthy, they are becoming a transglobal community of peers who have more in common with one another than with their countrymen back home. Whether they maintain primary residences in New York or Hong Kong, Moscow or Mumbai, today's super-rich are increasingly a nation unto themselves...

A multibillion-dollar bailout and Wall Street’s swift, subsequent reinstatement of gargantuan bonuses have inspired a narrative of parasitic bankers and other elites rigging the game for their own benefit. And this, in turn, has led to wider—and not unreasonable—fears that we are living in not merely a plutonomy, but a plutocracy, in which the rich display outsize political influence, narrowly self-interested motives, and a casual indifference to anyone outside their own rarefied economic bubble."

Chrystia Freeland, The Rise of the New Global Elite

The Consequences of Neoliberalism in Third World Countries and xUSSR space: stagnation instead of growth

Being an implementation of the "law of jungles" on international scene with the USA as a 100 pound gorilla, the neoliberal regime has distinct criminogenic character both within the USA (unpunished financial crimes made by top management of leading Wall Street banks and investment firms) and, especially, in "newly liberalized" countries of former USSR ("a New Latin America"). Which is the main "sphere of influence" of international corporations from G7 countries.

Along with internationalization of economies and integration of elites there was internalization of organized crime and growth in sophistication of criminal methods of appropriation of wealth, including those used by international corporations.

In this discussion we will follow key points of the article Global Anomie, Dysnomie, and Economic Crime Hidden Consequences of Neoliberalism and Globalization in Russia and Around the World

Introduction

TRANSNATIONAL CRIME HAS RECENTLY ACQUIRED A PROMINENT PLACE IN PUBLIC debates. It is commonly presented as the most significant Crime problem at the turn of the millennium (Myers, 1995-1996; Shelley, 1995). Many have even suggested that it represents a serious domestic and international security threat (Paine and Cillufo, 1994; Williams, 1994). The argument is also made that a wave of transnational crime undermines policies and the functioning of an increasing number of market economies around the globe (Handelman, 1995; Shelley, 1994). As a consequence, the proposed remedies are often quite drastic and involve undercover operations, privacy-piercing approaches, and the participation of intelligence services in the fight against global crime (Andreas, 1997; Naylor, 1999; Passas and Blum, 1998; Passas and Groskin, 1995).

Yet, little attention and virtually no systematic research has been devoted to understanding the causes, structure, extent, and effects of serious cross-border misconduct (Passas, 1998). The risks it poses may be grossly exaggerated (Naylor, 1995; Lee, 1999). The draconian measures being contemplated and implemented in different countries, therefore, are essentially an exercise in shooting in the dark. Chances are good that the target will be missed and substantial "collateral damage" may be caused by ill-conceived policies in this "war" on crime. This risk is particularly high in countries in transition toward a market democracy. It would be much wiser, thus, to carefully study the problem before taking ineffective and possibly damaging actions.

This article seeks to make a contribution by concentrating on the causes of transnational economic crime. The main argument is that, contrary to conventional wisdom, neoliberalism and globalization contribute to processes leading to global anomie, dysnomie, and, ultimately, economic misconduct. They do so by activating the criminogenic potential of economic, political, legal, and cultural asymmetries, as well as by creating new such asymmetries (Passas, 1999). These asymmetries cause crime by furnishing opportunities for misconduct, by generating motives for actors to take advantage of such opportunities, and by weakening social controls. More specifically, means-ends disjunctions are systematically created, as neoliberal policies foster new needs and desires that are all too often left unfulfilled. Promises of more freedom, prosperity, and happiness for a larger number of people have turned out to be chimerical. Economic and power inequalities have widened within and across countries in the last two decades . The number of poor has reached unprecedented levels, while welfare programs and safety nets are reduced or abolished. Enormous populations have become more vulnerable to exploitation, criminal victimization, and recruitment in illicit enterprises or rebel and fundamentalist groups. Normative standards and control mechanisms are weak or completely absent exactly when they are needed the most.

This article begins with some basic conceptual clarifications and outlines the theoretical framework so far applied to the analysis of U.S. organizational and individual deviance. Then, the main features of globalization and neoliberalism are presented, followed by a contrast of promises made by proponents of neoliberal policies and their actual consequences. Attention then shifts to specific criminogenic effects of these outcomes and the case of Russia, which illustrates the different stages in the processes leading up to serious misconduct and anomie. The chief policy implication of this analysis is that the recently unleashed forces of neoliberalism need to be reined in and held in check, while government policies ought to better shield the least privileged from the adverse effects of globalization.

Some Conceptual Clarifications

Although there is no universally accepted definition of transnational crime, many commentators seem to think of it as a globalized form of the stereotypical "organized crime." This, however, leaves out corporate and governmental crimes, whose effects can be far more harmful than those of "professional" criminals and ethnic groups involved in the business of illegal goods and services. We therefore need a definition that is inclusive enough without becoming too relativistic and subjective. For our purposes, transnational crime refers to cross-border misconduct that entails avoidable and unnecessary harm to society, is serious enough to warrant state intervention, and is similar to other kinds of acts criminalized in the countries concerned or by international law. Crime will be viewed as transnational when the offenders or victims are located in or operate through more than one country (Passas, 1999).

Globalization is another term that is often used without clear definition. In the simplest sense, it refers to a growing interconnectedness and multilateral linkages across national borders. According to Keohane and Nye (2000: 104), globalism is a state of the world involving networks of interdependence at multicontinental distances. The linkages occur through flows and influences of capital and goods, information and ideas, and people and forces, as well as environmentally and biologically relevant substances (such as acid rain or pathogens).

Globalism has several dimensions, such as economic, cultural, environmental, or military, not all of which take place at the same time. So, whenever globalism increases and becomes thicker or more intense, we can speak of globalization. When globalism decreases, we can speak of de-globalization.

Finally, the term "criminogenic asymmetries" refers to structural discrepancies and inequalities in the realms of the economy, law, politics, and culture. Such asymmetries are produced in the course of interactions between unequal actors (individual or organizational) or systems with distinctive features. All asymmetries contain some criminogenic potential. Durkheim argued that crime cannot be eliminated, because we are and always will be different from each other. Even in a society of saints, minor deviations would be considered serious offenses. In modern societies, crimes are those behavioral differences (asymmetries) that have been outlawed by legislative bodies. There is always the opportunity for powerful actors to victimize less privileged ones (economic, political, and power asymmetries). This potential is not always materialized. Criminal opportunities are not necessarily taken advantage of. Mostly this is because actors do not always seek or wish to make use of illegal opportunities. They may not regard such action as appropriate (due to socialization, internalization of norms) or fear adverse consequences. The criminogenic potential is most likely to be activated when opportunities, motives, and weak controls are all present.

For example, a combination of legal/regulatory asymmetries with economic and political asymmetries has given rise to a huge illicit market for toxic waste disposal. Many Third World countries either did not regulate toxic waste or did so much less rigorously than did industrialized states. This provided an opportunity for maximum-profit-seeking companies to getrid of their hazardous waste in areas where rules were lax or nonexistent (Center for Investigative Reporting and Moyers, 1990; Critharis, 1990). Power and economic asymmetries between rich and poor countries have led waste recipients to allow this to go on because of their dependence on foreign investment, the need for cash to service external debt, or the desire to create jobs (Korten, 1995). Economic and knowledge asymmetries also shaped the motivation of local participants in this questionable trade. The decision to go along reflects an incomplete understanding of the extent or nature of the hazard, their desperate need for additional income, an effort to be competitive and attractive to foreign companies (race to the bottom), or corruption.

Anomie and Deviance

Both Durkheim (1983) and Merton (1968) have stressed how high rates of deviance should be expected when social expectations are out of balance with realistic opportunities to reach the desired goals. According to Durkheim, this means-ends discrepancy is caused by society's inability to regulate people's naturally limitless desires. This problem was particularly acute in the commercial and business sector, in which anomie was chronic during the industrial revolution, opening up new horizons and undermining society's ability to contain aspirations. A similar situation can be observed in contemporary societies, where electronic, information, and biological technologies constantly redefine what is possible and break new ground.

According to Merton, unrealistic hopes and expectations are not simply natural, but socially constructed and promoted. Structural problems are at the heart of the means-ends disjunction. The U.S. culture and the ideology of the American Dream encourage lofty expectations, while society fails to provide equal access to legal opportunities. Meanwhile, there is a cultural overemphasis on success goals at the expense of normative behavior (as further elaborated by Messner and Rosenfeld, 1994). Both of these factors make for deviance and anomie.

Without ignoring the differences between the two sociologists, it has been possible to use an elaborated version of their anomie theories to explain corporate crime in the context of capitalist economies (Passas, 1990). Regardless of whether people strive for "more" due to natural drives or because of cultural encouragement, the point is that market economies cannot perform without lofty aspirations, consumerism, emphasis on material/monetary goals, and competition. All this leads to the pursuit of constantly moving targets and systematic sources of frustration. A synthesis of anomie theory with reference group analysis made clear how means-ends discrepancies are socially generated and experienced by people in all social strata. It also showed how this theoretical framework is applicable to the analysis of crime without strain or problems (i.e., anomie theory is not a strain theory) and to "organized crime" even after discrimination or blockage of legitimate opportunities no longer affects minority groups (Passas, 1997).

In brief, the dynamic social process leading to structurally induced strain, anomie, and deviance without strain is as follows. Means-ends discrepancies are caused by a strong cultural emphasis on monetary or material success goals for all members of society, while a good number of them do not have a realistic chance to attain them. Socially distant comparative referents are constantly introduced and sustained through the school, family, politics, workplace, media, advertising, and even religion (Passas, 1994). Regardless of their social background and the social capital available to them, people are urged to desire more than they have. Success stories of going from rags to riches make the American Dream even more believable. As this cultural theme is internalized, competitive forces and consumerism foster normative referents on what is "normal" and appropriate. The widely internalized egalitarian discourse clashes in practice with widespread inequality (power and economic asymmetries). Consequently, those m embers who fail to meet such comparative and normative standards are likely to experience relative deprivation and frustration. This strain, combined with the culturally induced overemphasis on goals and the concomitant under-emphasis on the proper methods, makes for deviance of various types (see Merton's typology). A good part of the deviance is an individual search for a solution to these structural problems. If the deviant solution is successful (i.e., perpetrators are not caught or adequately punished), this adaptation may become normative for others in a similar social context. To the extent that this solution is available to them (demand for illicit goods or services, access to illegitimate opportunity structures), they may adopt this role model -- and may be expected by their significant others to follow this path -- even though the original source of strain has by now been eclipsed. Unless effective control measures are taken, this process continues in a vicious circle toward higher rates of deviance and widespread anomie (for a schematic representation of this process, see Figure 1 at the end of the article).

In the literature, anomie is often conceptually confused with its causes or effects. To keep its explanatory potential, this mistake should be avoided. Anomie is a withdrawal of allegiance from conventional norms and a weakening of these norms' guiding power on behavior. This is caused by structural contradictions and affects deviance in two ways. One is associated with strain, the other is not. The former is caused by relative deprivation, frustrations, and the almost obsessive focus on goals. This makes deviance thinkable, as conventional norms are regarded as nonbinding, at least temporarily. Rationalizations enable departures from otherwise accepted/internalized social rules, as actors convince themselves that in their particular circumstances an exception is acceptable (Aubert, 1968; Sykes and Matza, 1957). Through interactive processes, techniques of neutralization and rationalizations contribute to a context in which newly socialized actors may adopt normative referents and deviant behavior as a matter of course. If "this is the way business is done around here," people may engage in price fixing or misleading advertising without experiencing any prior frustration or problem.

Globalization and Neoliberalism

These structural problems have been most prominent in the USA. However, a very similar process is now being reproduced throughout the world through globalism and neoliberalism. Promises are made that are not fulfilled. People's expectations are exalted at a time when economic and power asymmetries increase and become less justifiable and intolerable in the eyes of the people affected. The logic of the market permeates popular thinking and introduces rationalizations, making the adoption of a criminal or unethical solution more acceptable. The horizontal lines in Figure 1, rather than representing controlling influences, at the global level point to the criminogenic impact of globalization and neoliberal policies.

Nowadays, globalism and neoliberalism seem to be indistinguishable empirically or even conceptually (Cox, 1993; Stewart and Berry, 1999). Nevertheless, I think it is useful to try to separate them analytically. As noted earlier, globalism refers to the degree of interconnectedness and the increase or decrease of linkages. By contrast, neoliberalism refers to an economic and political school of thought on the relations between the state on the one hand, and citizens and the world of trade and commerce on the other. Because it espouses minimal or no state interference in the market and promotes the lifting of barriers to trade and business transactions across regional and national borders, it certainly becomes a motor of globalization.

Globalization in the last two decades shows clear signs of deeper and thicker interconnections that affect many more people than ever before. The effects are now much faster, as shown by the financial crisis in Thailand in 1997. The world has shrunk and become "one place," with global communications and media, transnational corporations, supranational institutions, and integrated markets and financial systems that trade around the clock (McGrew, 1992; Sklair, 1995). The cultural landscape has changed under the influence of mass media. Through their ads, TV programs, movies, and music, they contribute to cultural globalism, target young children, and foster consumerism (e.g., "Image Is Everything," "Just Do It," or "Coke Is It"). Information technology is making for "distant encounters and instant connections" (Yergin and Stanislaw, 1998). Fresh normative and comparative ideals are thus promoted, legitimated, and presented as attainable. Scholars attribute the momentum of this process to the forces of capitalism (Wallerstein, 1983), technology (Rosenau, 1990), the presence of a hegemon (Gilpin, 1987), or a combination of them all (Giddens, 1990).

Neoliberalism, in particular, has made a major contribution to the dynamic and contradictory processes of globalization since the elections of Ronald Reagan, Margaret Thatcher, and Helmut Kohl. During the 1950s and 1960s, the dominant concerns revolved around distributive justice, neocolonialism, and dependency theory. These were displaced in the 1980s and into the 1990s by discourses of "free markets," individualism, and self-help (Woods, 1999). Policies of deregulation, privatization of state assets, and removal of tariffs implemented the doctrine that the state should get out of the way of free enterprise. Unemployment, inequality, and poverty were no longer explained by structural contradictions or constraints. The problems became individualized and blamed on corrupt administrations or on the poor themselves. The proposed medicine was more liberalization of the economy, free competition, privatization of inefficiently managed government agencies, abolition of capital controls, and permitting foreign capital to enter all markets.

The ideological underpinning of globalization, thus, has been the primacy of economic growth, which is thought to be benefiting the whole planet. Consistent with that prime directive, country after country has been persuaded (or forced) to promote "free trade" and consumerism, to reduce government regulation of business, and to adopt the same economic model regardless of local specificities and differences between industrialized and developing countries (Bello, 1999; Mander, 1996).

More specifically, shifts in the North, the East, and the South have been quite remarkable. In the North, the welfare state that used to care for citizens "from cradle to grave" has been replaced by a "pay as you go" social service system. Even public utilities have been privatized and have begun to charge "economic prices," as former subsidization systems were abolished. Further, "industrial interventionism and labour protection have given way to laissez-faire; and tax systems whose major purpose was to correct inequalities have been transformed into systems mainly intended to promote incentives and economic efficiency" (Stewart and Berry, 1999: 151).

In developing countries, similar shifts took place as a result of hegemonic influences from the North. Western-educated Third World "technocrats" returned to their home countries eager to introduce neoliberal policies (Burbach et al., 1997: 86; Newsweek, June 15, 1992). As the bandwagon of liberalization took off, few countries wished to be left out. As a World Bank official warned, "lagging countries risk being left farther behind....For economies that remain inward-looking, the risk of being marginalized is greater than ever" (cited in Klak, 1998: 21).

Yet, the shifts have not always been voluntary. A host of measures and conditions consistent with the neoliberal agenda were imposed on countries through international institutions, such as the International Monetary Fund (IMF), the World Bank, the OECD, the European Union, the G7, etc. Countries drowning in external debt sought additional loans to pay off their older ones -- chiefly to banks from the industrialized world. Billions of dollars were made available to them, but only if they introduced Structural Adjustment Programs (SAPs). Despite important differences among the various economies, SAPs shared the same basic elements: long-term "structural" reforms to deregulate the economy, liberalization of trade, removal of restrictions on foreign investment, promotion of an export orientation of the economy, wage reductions and controls, privatization of state enterprises, and short-term stabilization measures such as cutbacks in government spending, high interest rates, and currency devaluation (Bello, 1996 ; 1999).

Changes along these lines also took place in the East, where the switch from state-managed economies toward "free market" and parliamentary democracy has been quite drastic and swift (Glinkina, 1994; Woods, 1999). The problem is that the introduction of global neoliberalism has brought about enormous economic and political asymmetries, as its promises and theoretical expectations remain unfulfilled.

The Promises of Global Neoliberalism

The supporters of global neoliberalism make a series of claims. For instance, the world is shrinking following greater connectivity (IBM claims to offer "solutions for a smaller planet"). The distinction between core and periphery states is presumed to be getting fuzzier and irrelevant, as there are only winners from now on. Investment, trade, and development opportunities are more widely distributed around the world. There is a marked convergence into one world economy, in which everyone can find a market niche. Media and cultural influences are more widespread and multilateral, as foods, music, and art are imported to the North and integrated into local cultures. Finally, people are more integrated thanks to telecommunication technologies and immigration (Klak, 1998).

To [neoliberal] economists, all these trends are positive, even if short-term hardship is deemed necessary for some parts of the population. Global welfare is expected to be enhanced, as the forces of free competition within and between countries will encourage more efficient resource allocation and bring about higher productivity (Oman, 1999). A more open, trade-creating world should, therefore, benefit everyone, if unevenly. Trickle-down effects of wealth creation would ensure that virtually everyone will participate in this welcome trend (Korten, 1996).

The objective of SAPs was to render developing economies more efficient, drive up growth rates, and provide foreign exchange that could be used to repay debt. Higher growth rates are empirically associated with comparatively more equal income distribution (Alesina and Rodrik, 1994). Hence, neoliberal policies would bring about not only more economic growth, productivity, a better division of labor (multistate production and wider participation), lower unemployment, more wealth and prosperity, but also more democracy, less poverty, and fewer inequalities. Unfortunately, in most countries, these virtuous circles did not occur.

The Consequences of Global Neoliberalism

Throughout the world, the expectations raised by neoliberal theorists have not materialized despite the extensive application of their policy recommendations. Instead, most economies "fell into a hole" of low investment, decreased social spending and consumption, low output, decline and stagnation. Both the World Bank and the IMF retreated from SAPs and acknowledged their failure (Bello, 1999; Katona, 1999; Multinational Monitor, June 2000; Watkins, 1997).

In the North, GDP growth was lower in the 1980 to 1990 period than in the 1950s and 1960s. We also witness a higher volatility in growth (e.g., booms and busts). Lost in all the talk about huge technological advances ushering in the computer and Internet era is the fact that productivity growth now is half that of levels in the 1950s and 1960s. Unemployment in OECD (Organization for Economic Cooperation and Development) countries has risen from eight million in 1970 to 35 million in 1994. In the midst of U.S. prosperity and economic expansion, inequalities increased. The number of people living under the officially defined poverty level grew from 11.4% of the population in 1978 to 13.5% in 1990. Almost one in four new babies in the U.S. are born into poverty, while the top one percent of Americans saw their real income shoot up by 50% (Levy, 1998; Wilterdink, 1995). Also noteworthy is that U.S. and Western European international trade relative to GDP was greater a century ago than in recent years (Hirst and Thompson, 1996).

Neoliberal dreams proved to be even more chimerical in the South. Role models, like South Korea, Malaysia, and Indonesia plunged into crises in the 1990s. Mexico and Brazil, which faced their own scary periods, experienced growth of three percent in the last two decades, whereas that rate was six percent during the dirigiste period of 1950 to 1980. Wage gaps widened. Even in Costa Rica and Chile, models of success in Latin America, the results have been an unmitigated disaster for the lower social classes. The number of Costa Ricans below the poverty line rose from 18.6% in 1987 to 24.4% in 1991, while 42% of all Chileans are also living in poverty (Burbach et al., 1997: 86). Half of the investment flows to developing countries went to just three countries (China, Mexico, and Argentina). In addition, some investments had negative local effects. For instance, as diverse agriculture was converted into monocultures or to export-oriented flower plantations, self-sufficiency was undermined (Clinard, 1990; Klak, 1 998).

Moreover, the core-periphery distinction is as relevant as ever. Its real meaning relates to power, authority, and the accumulation of wealth, where the gaps (asymmetries) are increasing. Although production (of certain items) is more dispersed, the concentration of power, control, and benefits has become more pronounced. In 1991, 81% of the world stock of direct foreign investment was in the core triad of the USA, the European Union, and Japan -- up from 69% in 1967. The appearance of integrated markets also obscures the fact that 80% of all world trade is within the core triad, in which resides less than 20% of the planet's population (Hirst and Thompson, 1996; Klak, 1998).

In Latin America, debt jumped from $230 billion in 1980 to $600 billion in 1997. Capital had been fleeing those countries up to the early 1990s, when net inflows were the result of casino capital -- seeking short-term gains and likely to abandon those countries at the first hint of trouble. Consequently, new debts were created with a new round of borrowing (Robinson, 1998-1999). An important reason why developing countries cannot pay off their debt is that trade protectionism in the North has kept them from penetrating those markets. Trade liberalization has been inconsistent in that rich countries demand more open markets abroad, while continuing to subsidize their own economic sectors, such as agriculture (Andreas, 1999; UNDP, 2000; Watkins, 1997). Compounding these problems, aid to poor countries has been cut back. Whatever assistance is offered comes with strings attached, including the reduction of state intervention, which could have softened the effects for the most vulnerable (Watkins, 1997; Woods, 1 999). These policies further undercut food security, cause poverty, and increase economic and power asymmetries. For instance, the cost of living in the Caribbean and the U.S. is quite comparable. In 1997, however, per capita income in Trinidad and Tobago, the richest Caribbean state, was less than half that of Mississippi, the poorest U.S. state. The gap between skilled and unskilled workers widened even more: Haitian workers made clothing with Disney logos for less than 60 cents per hour, while Disney's CEO made $9,700 per hour (Klak, 1998).

The claim of multilateral and even cultural influences also masks tremendous asymmetries. Even though we listen to reggae in the North, 95% of TV programs in St. Lucia come from the U.S. The most widely read newspaper in the Caribbean is the Miami Herald. Consequently, U.S. affluence and opportunity, often romanticized, is especially well-known, deeply ingrained, and alluring to the Caribbean...[where] people are prone to set their living standard goals in accordance with what the U.S. media ascribe to the United States. And the imbalance in media flows is increasing with the Caribbean's economic crisis and neoliberalism, as local media have been slashed (Klak, 1998: 11).

As dreams of consumption are disseminated, 86% of total private consumption expenditures is accounted for by 20% of the world's people in industrialized countries (UNDP, 1998). For the people who live outside the consumption geographical area, big banks offer credit to only 10% of the people in developing countries, whereas ads for credit cards and consumer items are omnipresent (Barnet and Cavanagh, 1994). Well over one billion people are deprived of basic consumption needs. For hundreds of millions, basic sanitation, clean water, adequate housing, and health services are unattainable luxuries. Two billion people live on less than two dollars a day and 1.3 billion on less than one dollar a day (ICFTU, 2000). Struggling to survive, some decide to sell their body parts to make ends meet, which is the ultimate symbol of commodification (ScheperHughes, 2000).

A negative effect of the Internet is that it alters the relationship between our place of residence and our cultural preferences, experiences, and identities. A spreading global virtual reality disconnects locality from culture, weakens the bonds to particular communities, and estranges people from each other (Minda, 2000). Ladakh, a Himalayan province that prospered for a millennium despite harsh weather conditions, illustrates how (especially cultural) globalization devastated local communities (Norberg-Hodge, 1996). In 1962, isolated Ladakh was linked to the rest of India by an army-built road. The modernization that began in 1975 took about a decade to change the pride Ladakhis felt until then into a collective inferiority complex. Tourism and the media conveyed a picture of wealth, technology, power, and work that was alien and irresistible to them. Village life by comparison began to appear "primitive, silly, and inefficient" (Ibid.: 35). Ladakhis felt ashamed of their culture and strove for consumer items that symbolize modern life, such as sunglasses and Walkinans. As Western educational standards penetrated Ladakh, the intergenerational learning experience that helped them provide for themselves in their rough terrain gave way to schools that used texts imitating Indian and British models that were completely irrelevant to their lives (e.g., figuring out the angle of the Tower of Pisa and learning how to keep a London-like bedroom tidy). There used to be no such thing as a "paying job"; there was no money economy. Gradually, however, unemployment -- previously nonexistent -- became a serious problem, because naturally available resources were abandoned, cheap imports made local farming redundant, and people flocked to the cities to compete for scarce jobs. Radios and TVs chased away the traditions of singing together and group story telling. The points of reference ceased to be real people living nearby, but geographically and socially remote ideals. Consumerism bred new "needs," which could hardly be materialized. Family and other bonds disintegrated and divisions emerged between old and young, Buddhists and Muslims. The result was unprecedented violence, community breakdown, and anomie.

Criminogenic Effects: Systemic Strains and Global Anomie

What makes the ideology of the American Dream unique is a focus on money and material goods, a strong emphasis on "winning" (often, by all means), and success for everyone in a society where many opportunities for material advancement are available and plenty of "rags to riches" stories lend legitimacy and credibility to the egalitarian discourse. Legal opportunities, however, for achieving the lofty goals are inaccessible to most Americans. In such a consumption-driven culture, which highly values competition and individualism, the means-ends disjunction has entailed a significant criminogenic risk, much greater than in the rest of the world. Crime has been the flip side of economic growth, innovation, and better living standards for certain segments of the population. What sheltered other countries from this negative potential were things absent or minimized in the USA, such as rigid social stratification, low rates of social mobility, less materialism and time spent before TV boxes, safety nets for the underprivileged, more emphasis on other priorities (e.g., solidarity), etc.

This made it possible to explain the higher crime rates in the U.S. compared to other developed or developing countries. These protective factors, however, are now being gradually lost. Disjunctions between socially induced goals and legal means are few in societies that do not encourage high social mobility. In such societies, people may not feel that they are lacking anything, even when they are "objectively" deprived. Economic or other asymmetries are unknown or not experienced and perceived as intolerable. Global neoliberalism breaks down societal barriers and encourages new needs, desires, and fashions. It promotes the adoption of non-membership reference groups for comparisons that can be unfavorable and upsetting. New normative reference groups define what is "cool" to do. People's ideals in the South and the East may not be about getting from "a log cabin to the White House." However, they are being systematically driven to abandon old ways and values in order to consume. They do not necessarily think that they can be "like Mike," but they do fancy those pricey athletic shoes. So, fresh normative and comparative models create new "needs," together with the expectation that the fulfillment of such needs is vital and achievable.

Yet, as needs and normative models are "harmonized," people become conscious of economic and power asymmetries, and directly experience their impact. Globalization and neoliberalism heightened this awareness, further widened the asymmetries, and fostered the interpretation of them as unnecessary and changeable. In the end, most people realize that the attainment of their lofty goals and lifestyles is beyond reach, if they are to use legitimate means. The success in spreading neoliberalism has brought about a series of failures: more poverty, bigger economic asymmetries, ecosystem deterioration, slower and unsustainable growth patterns. At the time that societies most needed the shield of the state to cushion these effects, welfare programs, safety nets, and other assistance to the poor (individuals, companies, and states alike) forcibly declined or disappeared. Thus, global neoliberalism systematically causes relative deprivation as well as absolute immiseration of masses of people. In effect, it has generated new sources of criminogenesis and removed existing antidotes to it.

All this provides multiple motivations for criminality, as many would turn left and right for solutions and illicit opportunity structures become more international and accessible. At the same time, many weak states lose their autonomy, come to depend more on international organizations and transnational capital, and are unable to cope with emerging crime threats from criminal enterprises and powerful corporations. So, globalism and neoliberalism replace the "egalitarian discourse" of the American Dream in the scheme represented in Figure 1 in a process occurring in the industrialized world, developing countries, and those in transition from Communism to market democracies. Nowhere are these results more clearly visible than in the former USSR.

The Case of Russia

No one argues that there was no appetite for consumer goods in the years of the USSR or that such goods were widely available. Crime, corruption, illegal markets, and even underground factories could be found behind the official facade of the command system before glasnost and perestroika, although black marketers were not numerous and lived modestly. The government turned a blind eye to these activities, because they served as a safety valve in an inefficient system (Gleason, 1990; Handelman, 1995; Naylor, 1999b). Discontent, enormous structural problems, and an inability to deal with them characterized the pre-transition years. This is particularly true for the 1960s, when Khrushchev pledged that the USSR would overtake the U.S. in the production of industrial goods by the 1980s. Yet, as inefficiencies precluded such progress, demands for more consumer items "from an increasingly educated, by now self-assured, population, started to put pressure on government...as a loyal expression of the citizens' request for the gradual delivery of promised well-being" (Castells. 2000: 25).

In the 1990s, however, the rates of fraud, prostitution, drug trafficking and abuse, alcoholism, smuggling, white-collar crime, violence, and corruption skyrocketed (Castells, 2000; Handelman, 1995; Holmes, 1997; Lee, 1994; Shelley, 1994). To be sure, Russia is unique in the degree of chaos and disintegration that accompanied the transition to a market economy and the implementation of neoliberal reforms. Few countries have experienced the speed and intensity of privatization, deregulation, and the lack of political leadership and administrative skills we witness in Russia. Indeed, it is the closest we can come to a social state of anomie, without a total collapse and anarchy. This does not mean that Russia is atypical. Very similar, albeit less intense, processes have occurred throughout the world (Lee, 1999; Mander and Goldsmith, 1996; van Duyne et al., 2000). Nevertheless, precisely because it is such an extreme case, it illustrates the theoretical points made here and the process toward anomie and economc crime.

Enter Neoliberalism

In the 1985 to 1989 period, reforms took place while the Communist Party was still in control. The Law on Cooperatives (1986) and the Law on Individual Labor Activity (1987) paved the way for further reforms, such as legalization of small businesses in 1989. Between 1990 and 1991, the USSR Supreme Soviet, with Yeltsin as chairman, introduced laws that made state and private enterprises equal, allowed state companies relative independence from government managers, abolished mostrestrictions on property bought by citizens, promoted privatization, and allowed foreign companies to operate in Russia. Such reforms did not take place at the same pace throughout the USSR. This set Russia apart from the Union and Yeltsin from Gorbachev. Legal asymmetries made the task of law enforcers impossible, as they did not know which laws to prioritize and apply (Afanasyef, 1994). Up to the 1991 coup and the collapse of the USSR, reforms were cautious and gradual, and had not challenged the core of the command economy system. F ollowing the failed coup and under Yeltsin, however, this changed dramatically. Demagogy and erroneous judgments on the feasibility of a swift transition to a market democracy compounded the problem. The Russian government was warned of the dire consequences of a speedy transition to a market economy without previous establishment of the necessary institutions and legal infrastructure. The chairman of an international advisory committee, which repeatedly issued warnings in 1992, was told that "forces in the Kremlin" favored a less "regulatory approach that would provide greater freedom of manoeuvre. Gaidar, supported by the IMF, believed firmly in the intrinsic capacity of market forces to remove obstacles by themselves, and people could use their vouchers to acquire shares" (Castells, 2000:188). Prices were liberalized, imports and exports became free, domestic trade restrictions were abolished, government intervention was minimized, and public property was massively privatized. By June 1994, officials were self-congratulatory over the fact that 70% of state assets had passed into private hands (Kuznetsova, 1994).

New Normative and Comparative Referents

The reforms initiated by Andropov and Gorbachev (perestroika and glasnost) allowed some freedom of speech and openness that let globalization and media influences into the USSR. The post-1991 changes, however, offered new hope out of the severe problems people were facing. Russian leaders fostered heightened aspirations by declaring that the country would soon be modernized and join the "civilized world." Authorities in the former Soviet republics made the same promise, arguing that '"since we gotrid of the Russians,' all obstacles to prosperity have been removed and Western standards are within reach" (Burbach et al., 1997: 118). There were forceful and impressive presentations of consumerist lifestyles as "desirable," "modern," and feasible. Distant comparative and normative referents were thus promoted by the media and advertising. Indeed, the yearning for Western lifestyles and consumption items made the initial acceptance of neoliberalism by the population much easier (Ibid.). Neoliberalism strengthened that desire and made consumerist dreams appear realistic. Even young Russians now would like to be like Mike and wear the same type of shoes or eat the same breakfast. As Glinkina (1994: 385) put it, an important factor contributing to the criminalization of the economy has been "a drastic stratification of the population's standard of living with a simultaneous loss, in a considerable part (especially among the youth), of socially important goals --replacing them with consumption ideals...."

It must be noted that the normative shift was far more radical in the former USSR and Eastern Europe than it was in Third World countries. The transition from socialism to capitalism by overzealous authorities espousing the new dogma of neoliberalism has had its own direct anomic effects, as will be seen below.

The Consequence: Means-Ends Discrepancies

The worldwide consequences of neoliberal policies were replicated in Russia. However, the effects have been far more disastrous than elsewhere: lower productivity, high unemployment, much steeper inequalities, increased levels of absolute poverty, disappearance of familiar safety nets, and administrations paralyzed by ineptness and corruption. The ensuing means-ends discrepancies are far more than a theoretical construct. They are painfully experienced by large numbers of people who realize that they simply cannot attain their goals. Within one year, inflation wiped outmost people's life savings, while the buying power of most wages dropped to the level of the 1950s. In the winter of 1993, funds were often insufficient to heat residential buildings (Burbach et al., 1997; Handelman, 1993).

As a new bourgeoisie emerged from the ashes of the Communist regime, one-third of the population became impoverished. The gap between the rich and the poor opened up suddenly and grew out of proportion. Official data indicate that in 1994 the difference between them was elevenfold. Researchers argue that the difference between the top 10% and the bottom 10% is 28-fold (Kuznetsova, 1994). Even the chair of the Privatization Commission admitted that the process created "pauper-proprietors" who "cannot survive without state protection" (cited in Burbach et al., 1997: 120).

Relative and Absolute Deprivation

The rising expectations of the 1960s led to disenchantment with Communism and paved the way for radical social change. The abandonment of the Soviet conservative model and very rapid implementation of neoliberal policies fueled hopes that a much better future was within reach. Russians rejected rigid stratification and strove for a socially mobile ideal. As has been noted, [the middle classes] believed that capitalism could offer even more. Thus, the modernization that had been promised by the neoliberals was perceived by the majority of the population as the modernization of consumption.... The Western model of consumption has finally triumphed, at least in the main cities. But for the majority of the people, the price is that even the former Soviet way of life has become an unattainable dream (Burbach et al., 1997: 124).

The aspiring yuppies have ended up as "dumpies," while a growing polarization makes them see a few of their compatriots enjoy luxuries attained by looting the remnants of the former USSR.

Thus, the post-Soviet Russian dream turned out to be a nasty nightmare (Handelman, 1995). As happened in many other countries, austerity, belt tightening, and lower (in some cases, no) salaries were imposed as consumerism took hold. The impact of these experiences on personal feelings is much more widespread, intense, and unpleasant due to the higher expectations. Even people who are not objectively deprived now feel relatively deprived. Comparisons between their present and past situations are unfavorable: "Formerly privileged sections of the Russian population, such as teachers, doctors, miners, and workers in the oil and gas industry, went on strike, for they could no longer survive on 50 to 70 dollars per month salaries" (Burbach et al., 1997: 125-126).

East-West political and administrative asymmetries, economic asymmetries, and relative deprivation in the aftermath of the collapse of the USSR and disillusionment with Western policies and capitalism have been clearly criminogenic (Handelman, 1994; Shelley, 1994). Motives for various types of crime became abundant, illegal opportunity structures multiplied, and control systems have been seriously damaged and undermined. The Mertonian category of "conformity" has almost become a rarity, as crime rates increased sharply. Even worse is the problem of economic crime. Recorded economic crimes rose almost 23% during the first seven months of 2000, compared with the same period in 1999 (Radio Free Europe/Radio Liberty, August 17, 2000). Strains and discontent have translated into a range of predatory misconduct, corruption, political violence, a variety of illegal markets, and expressive misconduct.

Search for Solutions and Anomie

In this context, many can be expected to "innovate," to employ illegal methods for survival or the satisfaction of their basic and newly acquired needs. Methods range from petty property crimes and prostitution to criminal enterprises and white-collar crime, depending on the social position of the offender. An electronics engineer, for example, could not live on his three dollars per month and moonlighted as a taxi driver. When his taxi broke down, he turned to selling poppy straw (OGD, 1996). Unpaid and depressed professionals with access to more valuable commodities, such as nuclear material, pose an even more serious threat (Lee, 1999). Consumerist teasing increased demand for goods made unavailable (e.g., cars or electronics) by the economic collapse, fueling smuggling operations, black market networks, and associated illegal enterprises. Shortages of other desired goods are artificially created by quickly adapting entrepreneurs.

Similar conditions outside Russia explain the illegal car trade between Eastern and Western Europe (van Duyne et al., 2000) and the illegal trade in various commodities between China and Hong Kong before unification (Vagg, 1992). In Russia, many took advantage of such supply-demand asymmetries, including the vory v zakonye (commonly described as "thieves in law"), who had been the dominant type of professional offenders in the USSR. Structural changes and globalization, however, brought about more competition from ethnic groups (Armenians, Azeris, Chechens, Georgians, etc.) in drugs and arms trafficking, as well as from loose and ad hoc associations of criminals in certain locations or industries. Unsettling reports assert a symbiotic relationship between criminal groups and active or retired intelligence officials. Deteriorating economic conditions have facilitated recruitment for employees in growing illegal markets. Criminal enterprises, for instance, have "...invested heavily in the opium business, financing much of the new cultivation by hiring peasants and even entire villages to plant and protect the poppy crops" (Lee, 1994: 401).

Another source of criminal opportunities sprang from the disintegration of institutions and the disarray in law enforcement. Legitimate businesses are exposed to blackmail and other criminal victimization, but the authorities are unable to assist them. Consequently, many domestic and foreign companies deal with criminal groups and seek their protection, rather than rely on the government (Lee, 1994). Not surprisingly, the majority of Russian experts consider the strengthening of criminal groups to be a "very significant" social consequence of the market reforms introduced in 1992 (Afanasyef, 1994).

Other illicit opportunities were furnished by the privatization process, such as selling state assets at extremely low prices or driving down the prices of privatized companies so as to cheaply purchase vouchers owned by individuals desperate to make ends meet. Privatization in countries with an existing bourgeoisie and experienced managers and entrepreneurs facilitated certain corporate crimes and abuses of power by respected professionals. In Russia, the mix of offenders was different: former company directors, the nomenklatura, professional criminals, and new entrepreneurs with a black market background (Glinkina, 1994; Kuznetsova, 1994; Shelley, 1994). The attempt of former Communist officials to dominate this field did not prove lasting. Many were not competent to run private businesses and had to sell them or lose control. The main beneficiaries seem to be former black marketers and outsiders to the old order (Naylor, 1999b). The abuse of privatization has had an anomic effect as the impunity of offenders became widely known, to the point that Russians began to refer to privatization (privatizatsiya) as prikhvatizatsiya, which means "grabbing" (Handelman, 1995: 104).

Crime and corruption in the midst of privatization fervor are not unique to Russia. (On other previously Communist states, see Popescu-Birlan, 1994; on Latin America, see Saba and Manzetti, 1996-1997.) As a former World Bank official put it, "everything we did from 1983 onward was based upon our new sense of mission to have the south privatized or die; towards this end we ignominiously created economic bedlam in Latin America and Africa" (cited in Katona, 1999). Another similarity with other parts of the world is the degree of authoritarianism that accompanied neoliberal policies. While stimulating rapid accumulation of private capital, the role of the state is reduced to implementing financial austerity. When people started to oppose such measures, "Yeltsin resorted, with Western support, to establishing a semi-authoritarian regime. Making Russian 'reformers' invincible to political and legal challenges inside the country contributed to further criminalization of the Russian State, which acquired an oligarchic character" (Beare, 2000:6). As similar processes occurred around the world, from Pinochet's Chile to Suharto's Indonesia, one wonders if such reforms would have been possible in a democracy.

Legal organizations also "innovate" by cutting corners and breaking the law due to the environment created by unsystematic legal reforms. Unable to navigate a sea of legal gaps and inconsistencies, "...most managers of private as well as state-owned enterprises cannot run their businesses without committing crimes" (Afanasyef, 1994: 437). Many companies cannot handle the competitive challenges generated by globalism and require state protection. The subsidization of privatized companies, however, introduces further regulatory and price asymmetries that foster the smuggling of goods across newly created borders within the former USSR (see below on nonferrous materials). Enterprises that do not enjoy state intervention are at a disadvantage and may be forced into bankruptcy or crime as a last resort. This is analogous to the situation in all countries that abolish trade barriers, let transnational corporations in, and eliminate preferential treatment for domestic industries.

High-level corruption and banking crimes have become quite common, as the networks of mobsters, financiers, businessmen, and high-level officials extend beyond Eurasia (Beare, 2000). The ongoing investigations into billions of dollars (possibly IMF-provided funds) laundered through the Bank of New York have expanded to include British, Swiss, and Italian entities and actors.

Moreover, pyramid schemes and other frauds have devastated gullible investors, as is the case with other post-Communist countries. Independent Oil, Lenin Trade and Financial Corporation, Aldzher (a security corporation), and other companies defrauded more than a million depositors and investors. Just as the Lincoln Savings and Loan frauds were committed in midst of obsessive deregulation in the U.S. against "the weak, the meek, and the old," Russian pensioners have been the main fraud victims (Glinkina, 1994).

Economic asymmetries among countries produce another set of criminal opportunities, as many become strongly motivated to flee the problem and search for a better future in the West, where the "goodies" are available. However, neoliberalism has promoted the free movement of everything but labor. Quotas and restrictions in promised lands generate demand for illegal services such as the smuggling of humans (Chin, 1999). This leads to opportunities for criminal exploitation, corruption, child/cheap labor, slavery, and forced prostitution.

Women, who are increasingly breadwinners but make up two-thirds of the newly unemployed in Russia, are even more vulnerable in this respect. Economic desperation drives many of them to prostitution or high risk taking. Lack of opportunity makes Russians and East Europeans softer targets for human traffickers. They are more likely to be lured to the West with promises of well-paying, respectable jobs only to end up blackmailed, beaten up, and forced into prostitution (Bruinsma, 1999; Shelley, 1994). The same problems faced by Thai, Mexican, and other women in the U.S. have led to a public hearing before the House Subcommittee on International Operations and Human Rights (September 14, 1999).

Relative deprivation and experience of injustice have a revolutionary potential too. International communications convey the message that injustice and inequality are avoidable. Events in one corner of the earth affect feelings and encourage people elsewhere to rebel against aggression. This may inspire change and foster rebellion. Just as the ideals of the French Revolution led to rebellions in the Balkans against the Ottoman rule (Hovannisian, 1994), the independence of the Baltic states and the U.N. response to Iraq's invasion of Kuwait inspired the East Timorese to fight against the Indonesian autocratic rule (Dunn, 1994). The uprising of Zapatistas in Mexico was deliberately started on January 1, 1994, the day NAFTA went into effect, "as a highly symbolic way to protest neoliberalism and globalisation in Mexico and Latin America" (Robinson, 1998-1999: 123-124).

Repressed nationalism, globalism, and bad times have jointly contributed to several armed conflicts and rebellions in the former USSR (the Caucasus, Moldova, Crimea, Tajikistan, and Chechnya). Rebellion and illegal markets become interconnected, as armed conflicts necessitate training, weapons, intelligence, and financing. The cases of Chechnya, Tajikistan, Afghanistan, and Colombia show how political revolts are associated with corruption, money laundering, the traffic in arms, drugs, and even nuclear material and other crimes that go unpunished (Kuznetsova, 1994: 445; Lee, 1999; Naylor, 1999b; OGD, 1996). Chechnya, which survives thanks to donations from criminal organizations based in other parts of Russia, has become such a paradise for these activities that some depict the war there as "a crusade against a 'mafia republic,'" while others think of it as "a conflict between opposing criminal elites for the control of oil and the financial resources held by the government in Grozny" (Politi, 1998: 44).

Finally, "retreatism" is the only option left to those lacking access to illegal opportunities or who are unwilling to assume the associated risks of violence and arrest. Hence, expressive crimes could be expected. More important, the rates of alcohol and drug abuse (further facilitated by the decriminalization of drug use in Russia in 1991) increased geometrically, especially in the cities, and fueled the demand for things provided in illegal markets (Lee, 1994; OGD, 1996).

Anomie

The transition from a command to a market economy practically legalized large parts of the black market and made legal business dependent on criminals' protection. The dismantling of borders and increased contact among previously isolated ethnic groups contributed to the formation of new, wider networks of illegality (Politi, 1998). The result was that one could hardly tell criminals from businessmen, particularly when some outlaw groups act on instructions from government officials or the police (Handelman, 1993). Given official efforts to ensure that the transition to a market economy would occur before substantial opposition could build and that the changes would be irreversible, too many shady actors were allowed to take advantage of this official shield (Glinkina, 1994; Naylor, 1999b). In this light, common views on government-criminal interfaces and symbiosis are plausible, although difficult to prove. Surveys in 1994 showed that the concern of Russians over organized crime was second only to their fears of triple-digit inflation (Afanasyef, 1994). At the perceptual level, therefore, this interface is real and has real consequences: demoralization and anomie.

The corrupted process of privatization has generated widespread rationalizations, such as, "it is OK to steal from the state" or "everyone is doing the same thing." Taking an example pointing to international security risks, Lee (1999: 21) has noted that, "perhaps the most serious problem is the growth of a privatization mentality within the nuclear complex. Economic reform has meant a license to steal. This has resulted in broad systemic corruption and a variety of insider threats and conspiracies."

An additional sign of anomie is what has been described as a "culture of urgency" among young killers:

For them there is no hope in society, and everything, particularly politics and politicians, is rotten. Life itself has no meaning, and their life has no future.... So, only the moment counts, immediate consumption, good clothing, good life, on the run, together with the satisfaction of inducing fear, of feeling powerful with their guns (Castells, 2000: 210).

Only effective social controls can halt the process toward further deviance and a higher degree of anomie (deviance without strain). Unfortunately, in Russia and elsewhere, a decreased level of autonomy for certain states, the increased power of international organizations and transnational corporations, and dysnomie add to the fuel.

Dependence, Deregulation, and the Race to the Bottom

"Just between you and me, shouldn't the World Bank be encouraging more migration of the dirty industries to the LDCs (lesser developed countries)?" "I think the economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable and we should face up to that.... I've always thought that underpopulated countries in Africa are vastly under-polluted; their air quality is vastly inefficiently low compared to Los Angeles or Mexico City" (1991 memo attributed to World Bank official Lawrence Summers, who later became U.S. Secretary of Treasury; it is widely believed that he did not write it, even though he has accepted responsibility for it. At any rate, this illustrates the neoliberal mindset).

The loss of autonomy and reduced sovereignty of the state relative to capital referred to earlier (Korten, 1996; Watkins, 1997) is particularly acute in the former Communist countries. Speculative capital will quickly flee each country at the first sign trouble or wavering over neoliberal reforms. External debt grew in all former Communist countries, but especially in Russia, which bears the marks of Africa-like dependent capitalism and "colonial subjugation. The country exports fewer and fewer industrial products and more and more raw materials. Meanwhile, it imports low-quality mass consumption goods, obsolete and hence cheap technology, luxury items and radioactive waste" (Burbach et al., 1997: 120-121). An instance of the direct and blatant interference of foreign governments and transnational corporations in domestic matters was when Chase Manhattan urged the Mexican government to crush the Zapatista rebellion to calm down U.S. investors (Silverstein and Cockburn, 1995; see also Clinard, 1990).

Ironically, the higher degree of dependency in the South and East has lowered the accountability of politicians and corporations. They can now blame globalization for the loss of jobs and lower wages, and prescribe more "efficiency," deregulation, short-term austerity, and declining levels of public spending so as to keep capital in place or attract more. Thus, economic and political leaders appear to be protectors of the public interest and a stabilizing force, while they dismantle existing safety nets (economic neoliberalism has also undermined political liberalism; Klak, 1998).

The Russian government's aversion to regulation (Glinkina, 1994) is observable in other countries, where deregulation turned into competitive deregulation and a race to the bottom. Even in the U.S., the savings and loan disaster and the asymmetric regulation of hazardous wastes demonstrate how criminogenic this process has been. This made it possible to dump legally in Pennsylvania what was prohibited in New Jersey, in what has been termed "crimes without law violations" (Passas, 1999). Such crimes are most likely in the global context given the overwhelming influence of TNCs over national laws and macroeconomic policies. This has prompted some to speak of "rationalized corporate colonialism" (Mander, 1996). Such asymmetries of power make for legal norms that allow overseas that which is, for good reason, criminalized in the base country (e.g., toxic waste dumping, testing drugs on humans, bribery, tax evasion, as well as the patenting of life forms by biotechnology companies and other outrageous practices) (see King and Stabinsky, 1998-1999; Shiva, 1997). The legal asymmetries and uneven power of transnational corporations that create or perpetuate these and other asymmetries give rise to crimes without law violations. Thus, entire countries become vulnerable to victimization by TNCs, a significant problem that is often neglected in conventional discussions of transnational crime. The volatile combination of low wages, bad working conditions, tax breaks only for the rich/corporations, lower environmental standards, deregulation, and less corporate and political accountability with the government relegated to the protection of the international free trade system has predictably made for crises (e.g., Korea, Malaysia, Indonesia, Mexico, and Brazil). It also makes for dysnomie.

Dysnomie and Further (Global) Anomie

Dysnomie literally means "difficulty to govern" and obtains when the following three conditions are present: a lack of a global norm-making mechanism, inconsistent enforcement of existing international rules, and the existence of a regulatory patchwork of diverse and conflicting legal traditions and practices. Russia is in this respect a microcosm that reflects what is happening in the entire world.

Since reforms took place at an uneven pace in each Soviet Republic, an asymmetry grew wider following the collapse of the USSR. In addition, this collapse suddenly created thousands of miles of new borders that had to be policed, just as state resources were diminished. This made for porous borders that offered no resistance to smugglers. This is how Estonia became the largest exporter of nonferrous materials, even though it does not produce any (Glinkina, 1994). Extensive legal changes accelerated the transition to a market economy, but they were marked by inconsistencies and lacked the necessary legal and institutional infrastructure (Handelman, 1995). For example, the law against private entrepreneurship and commercial mediations was repealed only on December 5, 1991. The law against black market transactions, which defined them as "the buying up and reselling of goods or other items for profit-making," was first amended in February 1990 to increase penalties for certain offenses, was then officially rein terpreted to refer only to trade in commodities sold at state-fixed prices (October 1990), and was finally repealed in February 1991 (Afanasyef, 1994: 429). Lack of resources made the problem worse, as underpaid, ill-equipped, and outgunned police could not be expected to do an effective job.

Weak controls allow criminals to get away and to regard themselves as successful. Deviant "solutions" came to be seen as keys to "success." Successful deviance then becomes a normative referent, contributing to a wider normative breakdown and overemphasis on goals at the expense of normative means. In the context of massive cultural shifts -- from the criminalizing of private profit and the hiring of labor outside the household to making them central values for a new social order -- the sense of right and wrong became fuzzy. As the deputy minister of Internal Affairs admitted at a 1992 press conference, "even our specialists find it difficult to determine the legal from the illegal -- to determine, for instance, what is profiteering and what is honest trade" (cited in Handelman, 1993). Corruption grew so much that up to 30% of illegal gains are reportedly paid to government officials (Glinkina, 1994; Lee, 1999). In the end, distinctions between white-collar crime, organized crime, corruption, and legitimate business are almost impossible to make. Lawbreaking behavior and success are fused. As a businessman told Handelman (1995: 139), "the truth is, everything you see around you, all our success, is not thanks to our wonderful economic laws. It's thanks to the fact that we do not obey them."

Dysnomic conditions also bring about anomie at the global level. As argued elsewhere (Passas, 1999), international law is more essential now than ever for the maintenance of world order and security. Yet, big powers are reluctant to contribute to the required pooling of sovereignty and have been blocking the development of an international criminal code and specific legislation to restrain their corporations. Dependent on rich countries for its operations, the U.N. has not been overly aggressive in pursuing these aims or in establishing a permanent international criminal tribunal. Globalism has thus run ahead of the creation of a desperately needed normative and enforcement infrastructure.

Existing international laws are applied selectively and never against one of the permanent members of the U.N. Security Counsel. This ad hoc approach and the extraterritorial application of national laws undermine the legitimacy of current laws and procedures. We are left with a legal patchwork of inconsistent and conflicting rules. An example of the effect of such asymmetries is the secrecy and anonymity available in certain jurisdictions that hinder investigative work by covering the tracks and proceeds of global offenders, de facto shielding them against prosecution and punishment. By exploiting the cracks between diverse state rules, companies continually commit crimes without law violation. Globalism also leads to a relativization of norms and facilitates law violations with a clear conscience (rationalizations and techniques of neutralization).

Finally, the border-policing problem in the former USSR is not unique, even if the underlying causes were specific to it and other European countries (Yugoslavia, Czechoslovakia). More generally, borders become porous, as technology and mobility enabled people, money, goods, and ideas to travel quickly and cheaply. Criminals can take advantage of this shrinking world, but law enforcement agencies are constrained by parochial laws and procedures. Though the reasons for the porousness may differ, the process and results are the same.

Conclusion

Tremendous structural strains have overwhelmed even the usually patient and submissive Russians. The economic situation deteriorated further, hopes were dashed, opportunities for criminal gain and for looting the USSR's assets multiplied, and the anomic societal context offered no assistance to anyone seeking to restore some law and order. In Russia and around the world, the neoliberal operation was successful, but the patients are being systematically frustrated, are starving, and subject to exploitation by corporations, criminal enterprises, and corrupt politicians. In short, globalization and neoliberalism spread analytically similar criminogenic processes that were once unique to the U.S. culture of the American Dream in a context of structural inequalities. Just as the world supposedly became freer, wealthier, more democratic, more enjoyable, and more equal, people find themselves poorer, more exploited, and facing increased hardships. Just as the need for strong normative guidance grows, norms break down or lose their legitimacy. Just as effective controls become necessary to slow down or stop the vicious cycle leading to higher rates of crime, a dysnomic regulatory patchwork remains in place largely because of nationalist insistence on sovereignty and states' unwillingness to allow the introduction of common principles and law enforcement mechanisms.

Two main points need to be reiterated here. First, it appears that global neoliberalism and serious crime go hand in hand. However, it would be erroneous to argue that stereotypical organized criminals are giving capitalism a bad name and undermining neoliberal policies. The implication is that, were we to rid ourselves of some very bad apples, everything would be fine. Rather, it appears that serious organizational misconduct is a consequence of such policies. Second, when we discuss transnational crime, we should bear in mind that it is not just the stereotyped ethnics who cause most problems. It may be that the biggest threat emanates from legitimate corporations and other organizations.

Detailed discussion of policy implications is beyond the scope of this article. The horizontal arrows in Figure 1 hint at the points of possible policy intervention. Myriad concrete ideas can be found in the literature, ranging from legal changes to informal controls, grass-roots movements, integration of economic growth with environmental and social protection, relocalization of production and consumption, etc. The most important ray of hope, however, is implicit in the foregoing analysis. Neoliberal policies and globalization are largely the fruit of (some) governments. They affect and are affected by governance. Therefore, governments have the ability to reverse some of these processes and to mitigate their adverse consequences. Otherwise, the current processes of globalization and neoliberalism will prove to be unsustainable and at a huge cost.

Neoliberal globalization as a catalyst for the rise of ultra-nationalism and neo-fascism

In 2014 a lot of people here condemned excesses of Ukraine nationalism, especially the part of Galician nationalism the has clear neo-fascist flavor and that now attempts to colonize South and Eastern Ukraine in a kind of replay of Drang nach Osten.

But rise of nationalism is a pan-European phenomenon now. And it is observable in almost any county, including but not limited to France, Germany, Poland, Hungary, Greece, and even UK.

Is not this is a (somewhat pervert) reaction to excesses of neoliberalism and neoliberal globalization? In other words is not the key side effects of neoliberal globalization is the rise of ultra nationalist and neo-fascist movements all over the world?  Many researchers think that yes (Globalization, ethnic conflict and nationalism Daniele Conversi - Academia.edu):

The force of nationalism has spread well over the nineteenth century into the age of globalization. There are thus parallels between modernization and globalization as sti-mulating factors for nationalism and ethnic conflict. Although the reach of globalizationis historically unprecedented, some of its features accompanied the rise of modernity andthe advent of the modern nation state. In particular, both resulted in the demise of older boundaries and the construction of new ones. Whereas industrialization destroyed localand regional boundaries by superimposing national boundaries on them, globalizationdestroyed national boundaries by superimposing a plethora of supra-national and corpo-rate networks on them, including mafias, organized crime, and multi-national corpora-tions (MNCs), none of which are as easily identifiable on a political map as sovereign, countries still are. The adoption of planetary rules to comply with the standards set by the International Monetary Fund (IMF) and the World Bank has unsurprisingly resulted in global disempowerment, at least according to the perception of influential NGOs activists (Korten 2001).

Has all this also led to a decline in national identities? Not at all. Partly because nationalcultures have been seriously damaged or reshaped by globalization, we have seen a global intensification of ethnic belligerence. Moreover, the formation of new elites and the spread of capitalist wealth have led to nationalist self-assertion, while cultural impoverishment spurred a generalized need for compensatory ethnic assertiveness.

... ... ...

If nationalism cannot be explained independently from the onset of modernity andmodern state-making, both are enmeshed in the expansion of warfare. Nationalism manifested itself in an era of inter-state competition, the collapse of boundaries, economic expansion, mass migration, general insecurity, political centralization, obsessivelaw-making, societal policing, and drastic militarization, finally leading to war. In them eanwhile, the Pax Britannica ensuing Waterloo provided the impetus for colonialexpansion while fomenting inter-imperial rivalries and competition (Conversi 2007).Thus, just as Europe was accumulating wealth, power, and armaments in anticipation of the unprecedented conflagration, its global economic reach affected broader and broader areas of the world. Economic competition and destructive warfare were just beingexported beyond European borders. Linda Colley notes:

the profit and the price of this hundred-year partial European peace was unprecedented Western, and especially British, freedom to concentrate on global empire. In 1800, the European powers, together with Russia and the United States, laid claim to some 35 percent of the globe’s total land area. By 1914 [their] proportion of the globe … had risen to 84 percent (Colley 2002:311).

By 1914, the West had also accumulated enough economic wealth and weapons of mass destruction to unleash the greatest manslaughter in human history. The totalitarian era following the First World War has been described as the culmination of a pattern of mass dislocation founded on modernity (Arendt 1958; Bauman 1989). As we shall see later, the emergence of totalitarianism in Europe coincided with the first wave of deep Americanization, including the triumph of Hollywood, cigarette consumption, the car culture, and other US products meant for mass distribution.

... ... ...

The expansion of nationalism throughout the globe is hence the spreading out of aWestern idea. In other words, nationalism is an essential component of Westernization.As I have argued, nationalism cannot be understood outside the devastating impact of modernity, particularly industrialization, with its demise of traditional lifestyles, skills,cultures, and communities (Gellner 2006). Such a devastation was suciently all-pervasiveto argue that the victory of nationalism represented the victory of a surrogate sense of community, which for some was a colossal
‘ fraud’ (Gellner 2006) or an invented tradition (Hobsbawm 1983). Thus, for Gellner the nationalists spoke in defence of a hypo-thetical Gemeinschaft, but actually practiced the construction of a novel Gesellschaft, the two being largely incompatible. For both Gellner and Hobsbawm nationalism was not much less than a form of cultural
brainwashing. For others, the whole process was not only counterfeit, it was based on the conspiracy of emerging rapacious economic and political elites, which used selected elements of popular tradition while invoking nationhood, just as populists often invoke the defence of the people. For instance, the role of secret societies like the Italian carbonari is a widely known and omni-present feature of nineteenth-century century mobilization. Secret paramilitary groups of patriots played a pivotal role in the spread of most nationalist movements. Karl Marx’s characterization of nationalism as a form of false consciousness manipulated by the bourgeoisie is a well-known example of this conspiracy approach. Traditionalist, anarchical, conservative, and even liberal approaches often share similar views of nationalism as a strategy of elites. The broader trend is often known as instrumentalism(Smith 1998),because it emphasizes the mere instrumentality of nationhood. Nations do no exist assuch; they are simply cultural tools in the hands of elites or proto-elites who seek to mobilize the masses on the basis of an emotional appeal to a common but fictitious nationality.

As we shall see, in its current shape cultural globalization is often understood as a one-way importation of standardized cultural items and icons from a single country, the United States of America, to the rest of the world regardless of the fact that most of theitems are actually made in China. For many, globalization is synonymous with Westernization (la Branche 2003, 2005, Latouche 1996) or, more accurately, Americanization.The international consequence of Americanization is a widespread sense of cultural insecurity vis-à-vis an unfathomable force that nobody seems capable of containing(Amin 2004). Because this perception has been so far unable to produce organized, rational and universal responses, it tends to express itself through visceral, rudimentary,and unpredictable forms of anti-Americanism (Barber 1995).

Former Secretary of State Madeleine Albright showed insights about the US full-spectrum dominance cultural policy when she said that Cultural factors play a pivotalrole in many of the international challenges we face
our cultural programs are central -- and I underline that —  central to the success of American foreign policy
(Albright2000). Once out of office, she adopted a more cautious position, considering the risks and damages infl
icted by extreme forms of Americanization. For Bacevich (2002), the economic openness implicit in neoliberalism produces a form of globalization that is inevitably synonymous with Americanization, since it is predicated on a national security approach founded on global dominance.

Conclusions

Situation with neoliberalism in the USA now is an almost perfect illustration of the credibility trap. One cannot allow the illusion to falter, even a little, to the bitter end. And as the fraud fades, the force intensifies, becoming almost rabid in its deflection. Because that illusion has become the center of a hollowed people's being, their raison d'être, a mythological justification for their existence. Chris Hedges made an apt analogy with The Fall of Berlin 1945

I came across a nice, compact interview with Chris Hedges which illuminates his thesis of the decline of the American Empire and the illusions and the end of rational thinking that accompanies it. Empires seem to give off quite a bit of flash in their latter stages, rather like the last gasp of a dying star.

The interviewer, Allan Gregg, does a particularly nice job of drawing Hedges out.

I would like to add an observation I came to in thinking further about the Sophie Scholl piece which I put up earlier today. Perhaps there is something about gardening that focuses the mind.

The almost frenetic preoccupation and adherence to the Nazi ideology in the latter stages of the war, when it was obvious to any rational observer that they could not win, is remarkable. I had been particularly struck in my reading some time ago with the 'wolf packs' of Nazis who had raged through Berlin, rounding up old men and even boys who had not joined the Volkssturm, and hanging them, even while the Russians were shelling the Reichstag. It never made sense to me until today.

"The radio announced that Hitler had come out of his safe bomb-proof bunker to talk with the fourteen to sixteen year old boys who had 'volunteered' for the 'honor' to be accepted into the SS and to die for their Fuhrer in the defense of Berlin. What a cruel lie! These boys did not volunteer, but had no choice, because boys who were found hiding were hanged as traitors by the SS as a warning that, 'he who was not brave enough to fight had to die.'

When trees were not available, people were strung up on lamp posts. They were hanging everywhere, military and civilian, men and women, ordinary citizens who had been executed by a small group of fanatics. It appeared that the Nazis did not want the people to survive because a lost war, by their rationale, was obviously the fault of all of us. We had not sacrificed enough and therefore, we had forfeited our right to live, as only the government was without guilt."

Dorothea von Schwanenfluegel, Eyewitness account, Fall of Berlin 1945

I was reminded of this phenomenon by the trial of Sophie Scholl, and her words to the judge Roland Freisler, as he ranted his virulent condemnations at them. 'Soon you will be in our place,' she said to him. He did escape the hangman's noose at Nuremburg, but only by virtue of an Allied bomb in 1945. When his body was brought to hospital an orderly remarked, 'It was God's verdict.' He was buried in an unmarked grave, without ceremony and unmourned. Much like his beloved Fuhrer.

This is an almost perfect illustration of the credibility trap. One cannot allow the illusion to falter, even a little, to the bitter end. And as the fraud fades, the force intensifies, becoming almost rabid in its deflection. Because that illusion has become the center of a hollowed people's being, their raison d'être, a mythological justification for their existence.

If the ideology had been a lie, then they are not heroes and gods on earth, but monsters and criminals, and their life has been self-serving and meaningless, without significance and honor. And that is the credibility trap.

And this is the US financial system today.

So the legitimacy of neoliberalism is gone since events of 2008 and consequences of this epochal event are still unclear. As chances that the USA will get rid of neoliberalism voluntarily are slim, we might be present in a crush of yet another empire. That might mirror the destiny of the USSR which fell when its ideology became delegitimized. With the key difference that the USA elite is much more aggressive and ready to use whatever means possible to preserve its status when it is under threat.


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[Apr 29, 2016] Star Trek or The Matrix? Varoufakiss Challenge to Neoliberalism

Notable quotes:
"... Shorter Heilbroner: capitalism requires that non-capitalists sell their labor as a condition of survival. The capitalist can exert power by denying access to work, hence income, hence survival. The state has "brute force" when capitalists control resources (recall that a lot of what is now private, such as common pasturelands, were once communal property) and in modern times, when social safety nets are weak. This is not a given under capitalism, but it is certainly the preferred order among Western elites. ..."
"... For Varoufakis, the encounter with Schäuble signaled that neoliberal economic managers no longer even pretended to support the principle of democracy. As a result, he argued, Greece was facing dogmatic enforcement of an austerity program whose effects would likely preclude it recovering sufficiently to repay its debts. And more broadly, the future of European capitalism was in growing jeopardy amid rising electoral discontent. ..."
"... *Varoufakis's new book, "And the Weak Suffer What They Must? Europe's Crisis and America's Future" was released on April 12. ..."
"... "It is the brute force of the state that ensures compliance with the rules of capitalism." In fact, it is the hidden coercion of the market that forces compliance, which is why neoliberals fetishize markets. ..."
"... I think we're talking about complementary, cycling phases in the exertion of power. Once the market is set up, its rules are coercive. But setting up the market - e.g. foreclosing land >>> peasants become free labor - require state coercion (+ various assorted ideological sanctifications, some of which may refer to the market). And, keeping players operating by the rules, while at the same time bending them in favor of some players, requires the state. ..."
"... In response to the dogged, stupid insistence on the part of the Right to insist that the state is a freestanding leviathan screwing up the market utopia, it's important to point to ways in which the state is an instrument of capital. This gets into trudging through arguments about who's controlling what, the independence of bureaucracies and such. But that's better than the gobsmacking naivite that the Right, always shouting about unfettering us from the state that they in fact rely on, would have us fall into. ..."
"... "The Athenians offer the Melians an ultimatum: surrender and pay tribute to Athens, or be destroyed. The Athenians do not wish to argue over the morality of the situation, because in practice might makes right (or, in their own words, "the strong do what they can and the weak suffer what they must"[3]). ..."
"... "The Melians argue that they are a neutral city and not an enemy, so Athens has no need to conquer them. The Athenians counter that if they accept Melos' neutrality and independence, they would look weak: people would think they spared Melos because they were not strong enough to conquer it. ..."
"... "The Melians argue that an invasion will alarm the other neutral Greek states, who will become hostile to Athens for fear of being invaded themselves. The Athenians counter that the Greek states on the mainland are unlikely to act this way. It is the independent island states and the disgruntled subjects that Athens has already conquered that are more likely to take up arms against Athens. ..."
"... "The Melians argue that it would be shameful and cowardly of them to submit without a fight. The Athenians counter that the stakes are too high for the Melians to worry about shame." ..."
"... Now, the Mytilenian situation is not a perfect parallel–real historical events never are–but they saw with rather clear eyes the true nature of these broadly based alliances, namely that there is actually someone in charge, and that someone will use their position to benefit themselves at others' expense. As the Myt. ambassador shows, it is incumbent upon the lesser parties to recognize the position they are in and antagonize where needed. ..."
"... I like how the word democracy is used over and over without the obvious necessity of coupling a mechanism for power with democracy. That mechanism, for starters, is voting. There is no democracy without the decision making process that has been developed since the ancient Greeks called voting. And the accepted final decision is when a majority of the people deciding is achieved. The rules of the decision making process, written laws prescribing the limits of acceptable policy making, are the founding principles, the constituting formulas for running the social order with the voice of the people provided with input into the governing of the social order. ..."
"... In Australia, voting is a duty, not a right. It's mandatory and you are fined if you don't vote. I found the caliber of political discourse way higher at my local Aussie pub (which has a vey wide cross section of people) than at any Manhattan gathering of supposedly highly educated professionals. ..."
"... But he [Varoufakis ] didn't begin to have the runway to persuade his opponents, and he thought the threat of a Grexit gave him far more bargaining leverage than he had. ..."
"... Varoufakis's big problem is that he can't let go of the dream of EU as the big European social understanding project. Frankly that has never existed beyond the minds of the academic elite that all talk virtually fluent english, and can do their thing anywhere with a net connection and a credit card terminal. The vast majority of the population of the European nations are tied to their place of living. Either by work, by language, by family, or a combination of the above. ..."
"... But nowadays in the neo-liberal era, that liberalism has been inverted. Not only have states been weakened by globalization, but the current neo-liberal doctrine makes the only legitimate function of the state the enforcement if the dictates of the "market", even to the point of creating markets in areas where there previously were none. The imperative is to privatize everything, including the very idea of the public sphere itself. ..."
"... Classical economics is no longer taught as its teachings would go directly against current ideas, they are hidden and forgotten on purpose. As Michael Hudson points out in "Killing The Host" the world would be a much better place if we remembered the classical economists distinction between "earned" and "unearned" income. ..."
April 28, 2016 nakedcapitalism.com

Yves here. I've reframed this recap of a talk by Yanis Varoufakis at NYU as a challenge to neoliberalism, not a challenge to economics, since its theme is the tension between modern economics (and indeed many forms of capitalism) and democracy.

There are some points he made that he made that I quibble with. He says he was shocked when he learned, early in his negotiations with the Wolfgang Schauble, that his counterparts took the position that the will of the Greek people counted for very little. I know some readers may take umbrage, but this was a fundamental failure on behalf of the Syriza side, not just Varoufakis, of what they were up against. In fact, the Eurozone treaties that Greece has signed had the government explicitly ceding certain aspects of national sovereignity to the Eurozone. In addition, as we pointed out at the time, the ECB had the power to bring the Greek economy to its knees by cutting off liquidity support to the Greek banks, and if anything, was predisposed to do so. From the ECB's perspective, it had already stretched the rules of its supposedly temporary liquidity facilities to the breaking point.

Mind you, I'm not saying the Trokia position was right or sound. Varoufakis clearly had the better economic argument. But he didn't begin to have the runway to persuade his opponents, and he thought the threat of a Grexit gave him far more bargaining leverage than he had. But Varoufakis' past writings showed he was firmly convinced that this path would do Greece great harm, and Syriza didn't have public support for that course of action either. Greece did have some bargaining chips, in that the Eurocrats were keen to have Greece improve tax collections and the operations of government generally, but it was clear given how the negotiations were framed that the two sides would remain at loggerheads, eventually giving the Troika what it though was an adequate excuse to use brute force.

A second point Varoufakis made where I beg to differ is, as reported by Lynn Parramore, "It is the brute force of the state that ensures compliance with the rules of capitalism." In fact, it is the hidden coercion of the market that forces compliance, which is why neoliberals fetishize markets. A major focus of the Robert Heilbroner book, Behind the Veil of Economics, is the contrast between the source of discipline under feudalism versus under capitalism. Heilbroner argues it was the bailiff and the lash, that lord would incarcerate and beat serf who didn't pull their weight. But the lord had obligations to his serfs too, so this relationship was not as one-sided as it might seem. By contrast, Heilbroner argues that the power structure under capitalism is far less obvious:

This negative form of power contrasts sharply with with that of the privileged elites in precapitalist social formations. In these imperial kingdoms or feudal holdings, disciplinary power is exercised by the direct use or display of coercive power. The social power of capital is of a different kind….The capitalist may deny others access to his resources, but he may not force them to work with him. Clearly, such power requires circumstances that make the withholding of access of critical consequence. These circumstances can only arise if the general populace is unable to secure a living unless it can gain access to privately owned resources or wealth…

The organization of production is generally regarded as a wholly "economic" activity, ignoring the political function served by the wage-labor relationships in lieu of baliffs and senechals. In a like fashion, the discharge of political authority is regarded as essentially separable from the operation of the economic realm, ignoring the provision of the legal, military, and material contributions without which the private sphere could not function properly or even exist. In this way, the presence of the two realms, each responsible for part of the activities necessary for the maintenance of the social formation, not only gives capitalism a structure entirely different from that of any precapitalist society, but also establishes the basis for a problem that uniquely preoccupies capitalism, namely, the appropriate role of the state vis-a-vis the sphere of production and distribution.

Shorter Heilbroner: capitalism requires that non-capitalists sell their labor as a condition of survival. The capitalist can exert power by denying access to work, hence income, hence survival. The state has "brute force" when capitalists control resources (recall that a lot of what is now private, such as common pasturelands, were once communal property) and in modern times, when social safety nets are weak. This is not a given under capitalism, but it is certainly the preferred order among Western elites.

By Lynn Parramore. Originally published at the Institute for New Economic Thinking website

Yanis Varoufakis' first meeting with the Troika of Greece's creditors revealed what he believes is a perilous disdain among top economic decision-makers for the democratic process. The then-Finance Minister arrived armed with tables and graphs to make what he believed was a self-evident case that the austerity program imposed on Athens was untenable and unsustainable, and would therefore not produce desirable results for Greece or for its creditors. As the representative of a leftist government elected on a promise to restructure the austerity program, Varoufakis was aware of the need for a moderate tone to alleviate fears that he was a wild-eyed radical, and he readily acknowledged the need for continuity with terms agreed by the previous Greek administration. But he hoped to persuade the Troika to balance those obligations with the desire of the Greek electorate for a sustainable plan that offered them more than permanent penury.

According to Varoufakis, Wolfgang Schäuble, the formidable German finance minister, abruptly interrupted his presentation, declaring, "Elections cannot be allowed to change the economic policies applied to Greece."

For Varoufakis, the encounter with Schäuble signaled that neoliberal economic managers no longer even pretended to support the principle of democracy. As a result, he argued, Greece was facing dogmatic enforcement of an austerity program whose effects would likely preclude it recovering sufficiently to repay its debts. And more broadly, the future of European capitalism was in growing jeopardy amid rising electoral discontent.

Speaking Monday at New York City's New School on the future of capitalism and democracy, Varoufakis distinguished between ancient Athenian democracy - which gave equal weight to the views expressed by (admittedly only male) citizens regardless of the wealth they possessed - and its modern form. The latter, he said, had historically been shaped by systems of economic inequality. The Magna Carta, he noted, negotiated the rights of the barons to prevent the king from poaching their serfs - "a social contract between lords and the monarch."

Eventually, those lords were replaced by merchants and industrialists, and later still, organized labor demanded its own say. "The modern state emerged as a mechanism for regulation class conflict," he said. "That is liberal democracy."

The assumption that capitalism is innately linked to liberal democracy is of recent vintage, Varoufakis contended. He noted that classical economic thinkers - Smith, Ricardo, Marx, and Schumpeter - all focused on the process of the commoditization of everything, including human beings, a notion that he suggested did not bode well for democratic practices. The ideological cover for this concept, today, was "the illusion of apolitical, ahistorical, mathematized economics."

Economists see themselves as scientists who have no need for history - after all, aren't past scientific models full of errors? But economics is not a science, Varoufakis explained. Unlike in physics, where the latest textbook offers knowledge more advanced than its predecessors did, economists seem to have a knack for ignoring past truths, a phenomenon particularly apparent in treatments of capitalism.

Today's economic models not only can't deal with democracy, but they have become embedded in economic behavior, influencing economic actors, policy makers, and elected officials. He warned that policies derived from the impulse of orthodox economics to reduce human beings into elastic, mechanized inputs threatened capitalism's future: It destroys human creativity and freedom, which (among other things) generates new ideas and technologies that drive productivity and creates profits for capital.

Paradoxes abound: the more capitalism succeeds in commodifying human beings, the worse things become for capitalism - powerless and poor, their buying power is degraded, and with it, aggregate demand.

And the failure to respond to human need expressed through democratic politics - as he experienced in his dealings with the Troika - threatens to spur citizen rebellions against the system.

Varoufakis cited economist Kenneth Arrow - whose impossibility theorem (also known as social-choice theory) shows the impossibility of fully determining a common will while using a set of fair and democratic procedures- to argue that democracy, messy it may be, remains the best path. Edicts from technocrats, no matter how smart and well-meaning, will not reflect the interests of the people. "Democracy is dialectic," explained Varoufakis, "a system for people who are not sure about what they think. They are not sure about what is good for society." They argue, debate, and take from each other's positions to modify their own.

But capitalism hasn't always worked well with democracy. Just as the notion of hell was essential to achieving obedience to the tenets of Christianity in the middle ages, quipped Varoufakis, so it is the brute force of the state that ensures compliance with the rules of capitalism.

The United States Constitution, he argued, was designed to keep the poor away from the levers of power, while legitimizing the system through their participation. "Democracy was to be used in name in order to be breached in substance," he said, and served to keep capitalism out of crisis without having to really give the poor much power.

Crises came anyway. The Great Depression sufficiently shocked elites into creating the Bretton Woods system, an international financial system predicated on an imperial American role that, together with the Marshall Plan, laid the foundation of postwar capitalist expansion. But the golden era of capitalism didn't last. As U.S. hegemony declined, cracks in the system appeared and widened. Global financial markets became imbalanced and storms of mounting amplitude followed. Eventually, deregulation and financialization turned corporations like GM into "financial companies that produce a few cars on the side." The Great Recession, as Varoufakis saw it, has signaled citizens that their economies are not functioning, and neither are their political systems.

"The world we live in is rudderless, in a slow-burning recession," he said, referring what some have called 'secular stagnation.' Varoufakis rejected further lending to Greece if the current austerity program cannot be modified or reversed. Continued austerity makes it impossible for Greece to grow, which means that paying off new debts would only be possible through further austerity and cuts in public budgets, which will drive the economy deeper into recession. For Varoufakis, this counterproductive policy ignores lessons from Europe's recovery after World War II, including forgiving German debt in 1953.

The Eurozone remains dominated by policies that make debt repayment, rather than growth, the central focus of policy makers. For Varoufakis, this underscores the bankrupt nature of much current economic thinking, ignoring alternative analyses of the crisis and alternative ideas for addressing it, including both debt relief and fiscal stimulus rather than austerity.

Varoufakis argued that blocking of sensible economic policy feeds the electoral success of new, left parties in Greece and Spain, but also the rise of authoritarian right-wing movements in a worrisome echo of the 1930s. This polarization also can be seen in the United States, with the electoral success of Bernie Sanders but also Donald Trump. And if decision-making power continues to moves into "democracy-free zones" such as the European Union or private corporations, the more polarized the political future appears, with attendant opportunities and risks.

In a burst of pop culture flair, Varoufakis predicted that when machines have passed the Turing Test, when you can no longer tell if the person on the phone is a human or a computer, and when 3-D printers can spit out whatever object you need, the logic of capitalism will break down. "At this stage," he warned, "humanity will face a juncture." Either we end up with a Star Trek-like utopia where we harness technology and use its wealth-producing capacity for the common good, or we get The Matrix, a dystopia in which the miserable masses have their energy sucked out of them by unseen forces and are fed illusions to keep them quiet. Eventually even the elites will become servants to the machine.

The antidote to that outcome, Varoufakis argued, is a robust democracy in the Athenian vein, one that reflects the voices of and serves all the people, whether they have money or not.

*Varoufakis's new book, "And the Weak Suffer What They Must? Europe's Crisis and America's Future" was released on April 12.

Disturbed Voter, April 28, 2016 at 7:20 am

As long as sociopaths are allowed to infiltrate the leadership of societies bigger than ancient Athens … there will be no common good. As Varoufakis points out, there has to be a dialectic between leaders and citizens, so that the leaders can embody the common good. Sociopaths have no desire to accomplish that goal. This is why in ancient times, Athens was weakened by Spartan opposition (with Persian assistance) and supplanted by Macedon, and eventually Rome. Small scale societies of any type, Athenian or Spartan, couldn't compete ultimately with large monarchies. Rome was undone by its own success, and had to revert to a monarchy in everything but name. Large scale society tends toward monarchy and autocracy.

The US federal republic, with functioning states, counties and municipalities is an attempt to get the best of all scales. And representative election is an attempt at this dialectic. Direct democracy is not an option even with the Internet … it would be mob rule.

Jim, April 28, 2016 at 3:11 pm

It can be argued that the Athenians were quite attentive to the danger of elite/sometimes sociopathic leadership.

They seem to have mastered the politics of using the knowledge of experts without turning over the management of their city-state to these same individuals.

Unfortunately the modern left in the U.S. seems quite content with turning the power of the national state over to salaried intellectuals who rule in the name of actual citizens.

The left has no political theory of the State which they could offer as an alternative democratic political system– because of their apparent irrational ideological fear of a decentralization which could potentially culminate in more direct democratic rule.

Is the basis of such fear the fact the much of the salaried left(an influential part of the top 20%) is not interested in genuine democratic rule(they distrust the proles as much as the right)– but only their rule?

Moneta , April 28, 2016 at 7:24 am

When you've got a big rock stuck in your garden and you want to get rid of it, you need to loosen it first. That means digging and pushing it many times. At first, nothing moves, then it wiggles and finally rolls.

I saw Varoufakis as the one giving the first push that shows no progress. I was hoping to see a little bit of wiggling. Unfortunately, he did not get there. That rock is really entrenched.

It would seem that he saw himself as the one getting the rock out. I'm not surprised. Most men who get to those positions of power have to believe in their aptitudes to get there. If not, they would not make it there.

norm de plume , April 28, 2016 at 7:52 am

Varoufakis in conversation with Chomsky at the NYPL a couple of days ago.

Hansrudolf Suter , April 28, 2016 at 3:53 pm

many thanks

Kris , April 28, 2016 at 8:12 pm

Thank you for the link! Worth seeing.

mike , April 28, 2016 at 8:30 pm

Varoufakis in discussion with Amy Goodman on DemocracyNOW

http://www.democracynow.org/2016/4/28/former_greek_finance_minister_massive_imf

hemeantwell , April 28, 2016 at 8:28 am

"It is the brute force of the state that ensures compliance with the rules of capitalism." In fact, it is the hidden coercion of the market that forces compliance, which is why neoliberals fetishize markets.

I think we're talking about complementary, cycling phases in the exertion of power. Once the market is set up, its rules are coercive. But setting up the market - e.g. foreclosing land >>> peasants become free labor - require state coercion (+ various assorted ideological sanctifications, some of which may refer to the market). And, keeping players operating by the rules, while at the same time bending them in favor of some players, requires the state.

In response to the dogged, stupid insistence on the part of the Right to insist that the state is a freestanding leviathan screwing up the market utopia, it's important to point to ways in which the state is an instrument of capital. This gets into trudging through arguments about who's controlling what, the independence of bureaucracies and such. But that's better than the gobsmacking naivite that the Right, always shouting about unfettering us from the state that they in fact rely on, would have us fall into.

What was Varoufakis facing? He's talking with gummint reps who try to integrate oodles of biz interests, with the banks interests coming first since they are most directly vulnerable. But in turn the banks, while selfstanding in the sense that they worry about their loans, also reflect interests that are not only strictly financial, but also the financialized representation of other sectors' interests.

Haralambos , April 28, 2016 at 8:31 am

*Varoufakis's new book, "And the Weak Suffer What They Must? Europe's Crisis and America's Future" was released on April 12.

This quote is a translation of what is referred to as "The Melian Dialogue" from Thucydides. Thucydides might have invented the quote for dramatic effect. I recall thinking and commenting to several folks as the "negotiations" were ongoing that Varoufakis must have chosen to ignore it, since he would have studied this in secondary school. https://en.wikipedia.org/wiki/Melian_Dialogue

I fear the Melians' interpretation is proving all too true as we look at the debate over a Brexit.

"The Athenians offer the Melians an ultimatum: surrender and pay tribute to Athens, or be destroyed. The Athenians do not wish to argue over the morality of the situation, because in practice might makes right (or, in their own words, "the strong do what they can and the weak suffer what they must"[3]).

"The Melians argue that they are a neutral city and not an enemy, so Athens has no need to conquer them. The Athenians counter that if they accept Melos' neutrality and independence, they would look weak: people would think they spared Melos because they were not strong enough to conquer it.

"The Melians argue that an invasion will alarm the other neutral Greek states, who will become hostile to Athens for fear of being invaded themselves. The Athenians counter that the Greek states on the mainland are unlikely to act this way. It is the independent island states and the disgruntled subjects that Athens has already conquered that are more likely to take up arms against Athens.

"The Melians argue that it would be shameful and cowardly of them to submit without a fight. The Athenians counter that the stakes are too high for the Melians to worry about shame."

uahsenaa , April 28, 2016 at 10:40 am

Then I would suggest to Yanis (and others) to read Thucydides' own parallel to the Melian situation, namely the earlier revolt of Mytilene. The language of the Melian dialogue borrows directly from (and in many cases inverts) the language of the intercourse between the Mytilenians and the Spartans and the later debate at Athens over what to do about the revolt. It's also worth noting that Thuc.'s typical pattern is to first present the ideal or better course of action then in a later parallel show how things degenerate, so what happens with Mytilene is, to my mind, meant to be more instructive. From bk. 3 par. 11, the Mytilenian ambassador to the Spartans, complaining about the imbalance of power:

If we [i.e. the city states involved in the Persian Wars] had all still been independent, we could have had more confidence in their [the Athenians'] not altering the state of affairs. But with most of their allies subjected to them [c.f. the EU] and us being treated as equals, it was natural for them to object to a situation where the majority had already given in and we alone stood independent – all the more so since they were becoming stronger and stronger [recall Germany prospered while southern Europe suffered] and we were losing whatever support we had before. And in an alliance the only safe guarantee is an equality of mutual fear [! – Grexit has to be a real threat, perhaps?]; for then the party that wants to break faith is deterred by the thought that the odds will not be on his side.

Now, the Mytilenian situation is not a perfect parallel–real historical events never are–but they saw with rather clear eyes the true nature of these broadly based alliances, namely that there is actually someone in charge, and that someone will use their position to benefit themselves at others' expense. As the Myt. ambassador shows, it is incumbent upon the lesser parties to recognize the position they are in and antagonize where needed.

Paul Tioxon , April 28, 2016 at 8:44 am

I like how the word democracy is used over and over without the obvious necessity of coupling a mechanism for power with democracy. That mechanism, for starters, is voting. There is no democracy without the decision making process that has been developed since the ancient Greeks called voting. And the accepted final decision is when a majority of the people deciding is achieved. The rules of the decision making process, written laws prescribing the limits of acceptable policy making, are the founding principles, the constituting formulas for running the social order with the voice of the people provided with input into the governing of the social order.

Voluntary abandonment of voting due to frustration over relative powerlessness does not provide a solution to providing for democracy. There is no democracy without voting. Just as there is no market without money. Or there is no money without debt. Voting is providing your individual say so, your input which constitutes what we call democracy. You can't talk about democracy without talking about elections. Varis is pointing out this self evident truth. If the elected officials or an unelected Troika deny the need for the results of elections, placing a political party into the offices of state power, by demanding that only the rules of economic power be observed and the results of democractic elections be rendered useless in the face of the need to pay back loans, we have a problem much larger than huge swathes of the citizenry abandoning electoral participation.

While voter apathy is one thing, the people who remain faithful to the rule of democracy are betrayed when they participate in sustaining the social order by carrying out the ritual of voting, the mechanism of democracy. With contempt after being elected displayed by the newly installed political party in Greece or anywhere else for the citizenry who chose them, this is truly unsustainable, politically and of course with the exact opposite outcome for the Troika's desired out comes. Austerity will be a long term prospect if successful at all and more likely bring higher costs due to societal disintegration, than the debt austerity is implemented to collect in the first place.

The modern liberal state requires operating an actual faithful and regular democratic mechanism, to ensure all of the other aspects of the social order, including the market or private sector of the economy. To strip the citizenry of its citizenship and replacing it with no other other purpose than to sell yourself for a price in order to survive and replace social relationships with financial debts to the exclusion of all other claims, other social debts to family, community, to strongly held personal religious beliefs that place you meaningfully into the larger universe, leaves no reason to live but the enrichment of a faceless other, the wealthy ruling class. Of course, this is nothing but an impossible life, and unsustainable policy, ticking like a real time bomb because as a human being, there is only so much stress and pressure that can be endured.

Yves Smith Post author , April 28, 2016 at 2:56 pm

In Australia, voting is a duty, not a right. It's mandatory and you are fined if you don't vote. I found the caliber of political discourse way higher at my local Aussie pub (which has a vey wide cross section of people) than at any Manhattan gathering of supposedly highly educated professionals.

Paul Tioxon , April 28, 2016 at 5:19 pm

Didn't they also outlaw all kinds of rifles, assault, long guns, hunters scoped bolt action, anything, to amazing effect? You have to vote and you can't be armed to the teeth! Participation in democracy mitigates the need for arming yourself against a potential tyranny. People don't need to be heavily armed, they need political power. We can't be heading for civil war in America whenever our country is facing an unresolvable political or economic crisis.

Ray Phenicie , April 28, 2016 at 8:45 pm

there is only so much stress and pressure that can be endured.

Every 'four score and seven' or thereabouts, our country has hitched up its britches, looked back at the previous eighty years and rewrote the algorithms for law making. Each period or basic law rewriting had a prelude of great turbulence. The major pillars of a History of the United States that anyone would care to write, would need to delineate Founding, Reconstruction, New Deal and in a movement that arrived too early (or too late as it should have been part of the new Deal) the Civil Rights movement. Each time the earth shaking prelude occurred, the rebuilding after the earthquake caused reactions that were as hidebound and cruel as the Spanish Inquisition. Founding left the nation with slavery, Reconstruction fostered Jim Crowism and The New Deal fostered neoliberalism couched in the rhetoric of the epic journeys of the Cold Warrior as a reaction against attempts to regulate the capitalist engine.

Taking a closer look at the New Deal what this observer sees is a Congress that was too lazy to write laws and instead passed those duties over to the Executive branch. The Supreme Court objected and well, the rest is history. Mind you, I am not in aligning myself with the archaic views of justices who attempted to write laws based on the principles of Neo-Darwinistic social evolutionary theory espoused by Herbert Spencer. However, I am saying those same justices, whatever their theories were on evolution, did know how to read the Constitution of the United States and clearly found that document forbade Congress to delegate powers to the executive branch merely to play a politicized version of kick the can-down-the-street. Congress was merely attempting-during the New Deal especially but ever after as well, to avoid controversy (a perennial favorite), shirk its duty in writing laws that specify a problem and outline specific solutions (another favorite pastime) and engage in 'sit down, sit down, you're rockin' the boat.'

The emergent, counter-revolutionary forces of the 'new' liberalism are ascendant everywhere and we find our government, at the municipal, county, state and national level captured by a Naked Capitalism that is tribal in its outlook, hell bent on confiscating all financial transactions, all property, and forcing a review before itself, like the tyrants of ancient Greece, of every attempt to finally renew a fresh purpose to law making. No spring revolution, no occupy resurgence, no cries for reason, justice, or a drive for a restoration of the Bill of Rights, will be allowed to survive. Any attempts to renew the dying flame of the original revolution (as in Martin Luther King's passionate and powerful rhetoric) will be dealt with swiftly and concretely.

Prepare for the long winter of the New History of the United States of America.

Ulysses , April 28, 2016 at 9:26 am

"The modern liberal state requires operating an actual faithful and regular democratic mechanism, to ensure all of the other aspects of the social order, including the market or private sector of the economy. To strip the citizenry of its citizenship and replacing it with no other other purpose than to sell yourself for a price in order to survive and replace social relationships with financial debts to the exclusion of all other claims, other social debts to family, community, to strongly held personal religious beliefs that place you meaningfully into the larger universe, leaves no reason to live but the enrichment of a faceless other, the wealthy ruling class. Of course, this is nothing but an impossible life, and unsustainable policy, ticking like a real time bomb because as a human being, there is only so much stress and pressure that can be endured."

Very well said!

We are seeing this disintegration here in the U.S. in the early 21st century. The assassinations of the 1960s, the police-state violence at Kent State, etc., were shocking indeed. Yet, during those turbulent times the illusion was maintained that we had an "actual democratic mechanism."

The Florida fiasco of 2000, where our unelected Supreme Court determined that the actual votes cast, of actual citizens, was no longer the deciding factor in who would take over the highest office in the U.S., killed this illusion. The carelessness of our sociopathic elites today, who barely attempt to conceal how they are suppressing the rights of actual citizens to actually vote, reveals the lesson they think they learned from Bush v. Gore in 2000.

I feel the elites are wrong on this: people didn't revolt in 2000, and they may not revolt in 2016, but there is a breaking point somewhere and our sociopathic elites are pushing us closer to that line every day.

Paul Tioxon , April 28, 2016 at 10:46 am

https://www.youtube.com/watch?v=SYqDpL0YCvI

The Wasteland of The Free by Iris Dement

youtube has songs by all kinds of singers, some more famous than others but so many that portray the bullshit people have to live with everyday, from the Black Ghettos to the Appalachian Ghettos and every nook and cranny of humanity, and everyone knows this is nowhere and no way to live. We are held back by people with more power than we currently have that keep us living below the standards of a decent, healthy, happy life.

Brooklin Bridge , April 28, 2016 at 9:50 am

But he [Varoufakis ] didn't begin to have the runway to persuade his opponents, and he thought the threat of a Grexit gave him far more bargaining leverage than he had.

Didn't Varoufakis, not just Tsipras, but Varoufakis say – and repeat over and over – that Grexit was absolutely off the table at the beginning of negotiations? If he was counting on the threat of a Grexit for bargaining power, he sure went about it in a strange way.

Yves Smith Post author , April 28, 2016 at 3:00 pm

Yes, I didn't get into the details, but that didn't help. But the strategy was widely described as chicken, which implies what people in the market called "accidental" Grexit. So it looked as if Varoufakis was playing as if Grexit were an option but Syriza would be able to tell voters (from whom they had no mandate) that it was the other side's fault. It really did look like they thought they could force the other side to make concessions. But they kept agreeing to stuff in Brussels or Berlin (not just made up but the Trokia, this was remarks by Tsipras or Varoufakis in public) and then within 24 hours they'd reverse themselves in public in Greece. This made everyone increasing furious with them, particularly since the negotiations were becoming time consuming and physically taxing.

Brooklin Bridge , April 28, 2016 at 5:48 pm

Thanks, that brings it back exactly. When ever I read something about or particularly by Varoufakis, I am a little leery since that painful episode.

lindaj , April 28, 2016 at 3:09 pm

'zactly!

dots , April 28, 2016 at 10:00 am

This is a far deeper argument here than the last one I encountered! In a macroeconomics course about 4-5 years ago, I found myself in the middle of a fervently-argued dialog on the 'Greek problem.'

The textbook, written from the voice of the IMF, presented the position of Germany and the Eurozone. They needed (not wanted but needed), to get Greece to accept austerity and whatever terms the Eurozone asked of them. Greece was threatening the German livelihood. This was simply good, solid, basic macroeconomic theory.

Student-after-student wrote page-after-page on the unfairness of the Greek position and how they simply need to be brought around. I was alone in challenging that explaining even with the Eurozone agreements, a democratic nation still couldn't simply overrule the sovereign will of another democratic nation.

But wait, what? This was baffling! What did I mean by 'sovereignty'? Surely, that didn't have anything to do with the issue at stake here. The Greeks owed money and the money was due. For Greece to balk on the agreement threatened the stronger Eurozone nations who had followed the rules and had done what they were supposed to do.

I asked, "If there is no sovereignty issue, then why are the citizens of Greece protesting in the streets right now?"

I went on to explain (because apparently there is some confusion as to the fundamental nature of the EU itself) that t's not analogous to our United States. As a united nation-state, our individual states have individual state's rights, but (as clarified in our civil war) these states are all still subject to a single centralized Federal government. The European Union, on the other hand, is not a single unified nation-state. The model is closer to that of a financial cooperative . These financial agreements and trade treaties (including Schengen) produce claims against them, but they don't determine domestic policy (nor should they).

While my instructor understood and appreciated my criticism, it clearly wasn't a mainstream perception over here at that time.

Take that with a grain of salt though because I've also sat through discussions in favor of resurrecting Adjustable Rate Mortgages as a way to pump new life into our economy. Fun stuff!

Haralambos , April 28, 2016 at 11:12 am

A bit more background is needed I believe. The bailouts of Greece in the form of loans forestalled a default by Greece. In return for new loans to pay off foreign (Mostly French and German) banks, the money borrowed from the IMF supplemented by EU and ECB monies was used to pay off these obligations. There was a fair bit of kicking the can down the road until the loans to foreign banks were paid off, then the memoranda started kicking in. The old loans from banks were contracted under sovereign Greek law, while the new ones were contracted under UK law if I recall correctly. UK law is much more strict. Both PASOK and New Democracy were filled with cronies, and patronage was rampant along with theft and and tax evasion. This had been the case for much of the period from 1974 until SYRIZA was elected last year. Two useful books on the situation are

https://www.amazon.co.uk/Greeces-Odious-Debt-Political-Investment/dp/0857287710/ref=sr_1_1?s=books&ie=UTF8&qid=1461855628&sr=1-1&keywords=GREECE%27S+ODIOUS+DEBT

and https://www.amazon.co.uk/s/ref=nb_sb_noss?url=search-alias%3Dstripbooks&field-keywords=Bust%3AGreece%2C+the+Euro%2C+and+the+Sovereign+Debt+Crisis+

Despite my handle, I am not Greek, but I have lived in Europe for the past 38 years, the bulk of it in Greece. I recall seeing ads in bank offices here in 2006-2007 offering mortgages at 3.95% in Swiss Francs instead of the 7%+ that was the rate for mortgages denominated in Euros. I warned everyone I knew that they should not opt for the lower rate unless they had a steady, secure revenue stream in SFr.

reslez , April 28, 2016 at 1:14 pm

Capitalists use force to make people labor for them all the time. In the South through the 30s it was common for capitalists to pay sheriffs to round up black men, sentence them to hard labor, and essentially sell them to the local boss as laborers. This was part of the reason for the great migration to northern cities. When workers form unions, historically capitalists have had no compunction about sending in skull-crackers to break strikes. And of course people who have "no alternative" but to sell their labor only lack the alternative of theft because the police stand by guaranteeing the "property rights" of absentee owners and wealth hoarders. Peasant farmers were pushed off the commons and their historical lands (where they could support themselves) by force. Overseas markets were only expanded through military force and colonialism. This was the explicit aim of the first corporations.

Force underlies everything capitalists do.

lindaj , April 28, 2016 at 3:12 pm

'zactly

Tim , April 28, 2016 at 3:19 pm

I am not sure the Star Trek analogy is a good one. The later spinoff years had some fairly mean captains like Janeway and Sisko who tended to prefer to blow things to get there way instead of negotiating. Overall I find Star Trek to be quite violent for a utopia(in it's later years). There are all sorts of arms dealers, smugglers, warlords, the "Maquis" Movement, and all around bad people like Michael Eddington, Luther Sloan, and Doc Zimmerman.

https://www.youtube.com/watch?v=-iNq3325Emo

digi_owl , April 28, 2016 at 4:59 pm

Varoufakis's big problem is that he can't let go of the dream of EU as the big European social understanding project. Frankly that has never existed beyond the minds of the academic elite that all talk virtually fluent english, and can do their thing anywhere with a net connection and a credit card terminal. The vast majority of the population of the European nations are tied to their place of living. Either by work, by language, by family, or a combination of the above.

Haralambos , April 28, 2016 at 9:10 pm

I am not in a position to dispute your point beyond my anecdotal take from here in Greece over the past 40 years. Many parents we have are unhappy about seeing their children go abroad to study or work, and many students are keen to do so. The parents, nonetheless, pay us to help their children jump through the hoops to get there at both the undergraduate level and graduate level. Virtually all of them have at least three languages and often more at a high level of proficiency.

Many get full scholarships to top-tier US universities or fellowships at graduate schools in the US and EU. Admittedly, my data are anecdotal.

Several former French students from many years ago are working for MSF and other aid organizations.
Others from Greece are working for the EU.

I would welcome your data on your observation.

john c. halasz , April 28, 2016 at 5:35 pm

The Heilbroner quote is conventional and rather dated. Yes, capitalism depends on "free" labor. But it emerged historically in tandem with the formation of the modern sovereign state, at first in its absolutist form and later in its constitutional form. Yes, there is institutional differentiation in modern capitalist societies between state and economy, but the two systems are thoroughly cross-implicated, and capitalism would never have emerged without state backing. Polanyi covered this in his classic book, refuting the 19th century classical liberal ideology that Heilbroner repeats. But nowadays in the neo-liberal era, that liberalism has been inverted. Not only have states been weakened by globalization, but the current neo-liberal doctrine makes the only legitimate function of the state the enforcement if the dictates of the "market", even to the point of creating markets in areas where there previously were none. The imperative is to privatize everything, including the very idea of the public sphere itself.

Keith , April 28, 2016 at 5:42 pm

Classical economics is no longer taught as its teachings would go directly against current ideas, they are hidden and forgotten on purpose. As Michael Hudson points out in "Killing The Host" the world would be a much better place if we remembered the classical economists distinction between "earned" and "unearned" income.

[Apr 29, 2016] A Conversation With Joseph Stiglitz

Notable quotes:
"... Alternative theories would have led to very different policies. For instance, the tax cut in 2001 and 2003 under President Bush. Economists that are very widely respected were cutting taxes at the top, increasing inequality in our society when what we needed was just the opposite. Most of the models used by economists ignored inequality. They pretended that macroeconomy was unaffected by inequality. I think that was totally wrong. The strange thing about the economics profession over the last 35 year is that there has been two strands: One very strongly focusing on the limitations of the market, and then another saying how wonderful markets were. Unfortunately too much attention was being paid to that second strand. ..."
"... ditto...everyone from Tyler Cohen to Mark Perry of the AEI does daily posts about the markets working for everything...a daily "Market Failure in Everything" would provide a useful alternative to that point of view... ..."
"... Nobel-prize winner Joseph Stiglitz said monetary policies have exacerbated inequality and need to be redirected to better target getting money flowing into economies and helping small and medium-size businesses. ..."
"... policies such as quantitative easing were a "version of trickle-down economics" and the subsequent increase in asset prices only affected the wealthiest in society ..."
"... "The key problem is the access of credit to small and medium-size enterprises, is getting that flow of money into the real economy," Stiglitz said. It's "nice to have a stock market bubble if you have a lot of stock. But if you are in the bottom 80 percent of America, you have a little stock and you can feel a little good about the stock going up. But let's face it, the overwhelming bulk of our stock market is owned by the 1 percent." ..."
"... Oh my god. He lumps in Bernanke with Greenspan. What are the Fed worshippers going to do now? Their deity is under attack from Stiglitz. Of course it is nothing but fact that bernanke denied that bubbles in real estate were possible OR that a bubble could become s problem for the economy. Hats off to Stiglitz. ..."
"... How much more evidence do we need that the current trickle down monetary policy has failed? "The weak growth for the quarter puts this recovery even further behind any prior recovery at the same stage. After eight and a quarter years, the economy is only 10.1 percent larger than its pre-recession level of output. A more typical recovery would have seen at least twice as much growth." ..."
April 28, 2016 | economistsview.typepad.com
From an interview of Joe Stiglitz :
...White: ... To what extent do you feel economist and economic theory is culpable for the crisis? What is the role of an economist going forward?
Stiglitz: The prevalent ideology-when I say prevalent it's not all economists- held that markets were basically efficient, that they were stable. You had people like Greenspan and Bernanke saying things like "markets don't generate bubbles." They had precise models that were precisely wrong and gave them confidence in theories that led to the policies that were responsible for the crisis, and responsible for the growth in inequality. Alternative theories would have led to very different policies. For instance, the tax cut in 2001 and 2003 under President Bush. Economists that are very widely respected were cutting taxes at the top, increasing inequality in our society when what we needed was just the opposite. Most of the models used by economists ignored inequality. They pretended that macroeconomy was unaffected by inequality. I think that was totally wrong. The strange thing about the economics profession over the last 35 year is that there has been two strands: One very strongly focusing on the limitations of the market, and then another saying how wonderful markets were. Unfortunately too much attention was being paid to that second strand.
What can we do about it? We've had this very strong strand that is focused on the limitations and market imperfections. A very large fraction of the younger people, this is what they want to work on. It's very hard to persuade a young person who has seen the Great Recession, who has seen all the problems with inequality, to tell them inequality is not important and that markets are always efficient. They'd think you're crazy. ...

When I first started blogging, I used to do posts with the title "Market Failure in Everything." as a counter to "the prevalent ideology." Maybe I should revive something similar.

teve Bannister : , Thursday, April 28, 2016 at 07:03 AM

Agreed.
rjs -> Steve Bannister... , Thursday, April 28, 2016 at 02:14 PM
ditto...everyone from Tyler Cohen to Mark Perry of the AEI does daily posts about the markets working for everything...a daily "Market Failure in Everything" would provide a useful alternative to that point of view...
Paul Mathis, Thursday, April 28, 2016 at 07:11 AM
Nothing about Ricardian Equivalence or RBC fallacies.

While inequality is certainly important for consumption demand, PCE has not been a significant problem in the recovery. OTOH, reduction of the federal budget deficit explains virtually all of the deficient demand we have experienced. Obama and the Dems bought into RE and are paying the price now.

JohnH, Thursday, April 28, 2016 at 07:31 AM
Another interview with Stiglitz:

"Nobel-prize winner Joseph Stiglitz said monetary policies have exacerbated inequality and need to be redirected to better target getting money flowing into economies and helping small and medium-size businesses.

In a Bloomberg Television interview Tuesday with Francine Lacqua and Michael McKee in New York, he said policies such as quantitative easing were a "version of trickle-down economics" and the subsequent increase in asset prices only affected the wealthiest in society.

"The key problem is the access of credit to small and medium-size enterprises, is getting that flow of money into the real economy," Stiglitz said. It's "nice to have a stock market bubble if you have a lot of stock. But if you are in the bottom 80 percent of America, you have a little stock and you can feel a little good about the stock going up. But let's face it, the overwhelming bulk of our stock market is owned by the 1 percent."

Stiglitz's comments come as some central banks around the world are being forced to delve deeper into their policy tools to help support their economies. As policy makers struggle to find a way out of the economic malaise, some have even raised the idea of helicopter money, which aims to direct cash straight to consumers.

The Columbia University professor, who said the Federal Reserve can do more to "channel" money to small companies and the economy, was also critical of negative rates. This is partly because of their potential impact on lending.

"The dangers of negative interest rates -- if you don't manage it extraordinarily well; some countries are doing it reasonably well, some are not -- is that it actually weakens the banking system," he said. "If it weakens the banking system, the banks are going to provide even less credit. While it might have some effect on financial markets, in terms of what we really should be concerned about, which is the flow of credit to businesses, that's not working."
http://www.bloomberg.com/news/articles/2016-04-26/stiglitz-says-misdirected-monetary-policies-increased-inequality

What's the point of low interest rates, if they only serve the interests of Wall Street banks and their wealthy clientele? Oh, right! That IS the point. And most economists are just fine with that.

BenIsNotYoda, Thursday, April 28, 2016 at 07:59 AM
Oh my god. He lumps in Bernanke with Greenspan. What are the Fed worshippers going to do now? Their deity is under attack from Stiglitz. Of course it is nothing but fact that bernanke denied that bubbles in real estate were possible OR that a bubble could become s problem for the economy. Hats off to Stiglitz.
anne, Thursday, April 28, 2016 at 08:17 AM
http://cepr.net/data-bytes/gdp-bytes/gdp-2016-04

April 28, 2016

Falling Investment and Rising Trade Deficit Lead to Weak First Quarter
By Dean Baker

Health care costs remain well-contained, barely growing as a share of GDP.

GDP grew at just a 0.5 percent annual rate in the first quarter. This weak quarter, combined with the 1.4 percent growth rate in the 4th quarter, gave the weakest two quarter performance since the 3rd and 4th quarters of 2012 when the economy grew at just a 0.3 percent annual rate.

Growth was held down by both a sharp drop in non-residential investment and a further rise in the trade deficit. Equipment investment fell at an 8.6 percent annual rate, while construction investment dropped at a 10.7 percent annual rate. The latter is not a surprise, given the overbuilding in many areas of the country. The drop in equipment investment was undoubtedly in part driven by the worsening trade situation, as many factories curtailed investment plans as U.S.-made products lost out to foreign competition, weakening demand growth. There was also a drop in information processing equipment, indicating that those who are expecting that robots will replace us all will have to wait a bit longer.

The rise in the trade deficit was due to a 2.6 percent drop in exports, as imports were nearly flat for the quarter. Trade subtracted 0.34 percentage points from growth for the quarter.

Consumption continued to grow at a modest 1.9 percent annual rate, adding 1.27 percentage points to growth. Consumption growth was held down in part by weaker demand for new cars, which subtracted 0.33 percentage points from growth for the quarter. This was the second consecutive decline in the sector. It is likely that car purchases will be up somewhat in future quarters.

The savings rate for the quarter was 5.2 percent, which is up slightly from the 5.0 percent from the prior three quarters and the 4.8 percent rates from 2013 and 2014, before people started saving their oil dividends. But seriously, there may be some modest room for this rate to decline, but for the most part consumption growth will depend on income growth going forward.

Health care services added 0.26 percentage points to growth, its smallest contribution since a reported decline in the first quarter of 2014. Spending in the sector remains well contained, growing at just a 3.8 percent annual rate over the last quarter and by 4.4 percent over the last year in nominal spending.

Housing grew at a 14.8 percent annual rate, adding 0.49 percentage points to growth. Housing has being growing at a double digit rate since the fourth quarter of 2014. While the sector is likely to continue to grow in subsequent quarters, the pace is almost certain to slow.

The government sector was a modest positive in the quarter, growing at a 1.2 percent rate. State and local spending increased at a 2.9 percent annual rate, more than offsetting a 1.6 percent drop in federal spending, all of it on the military side. Future quarters are likely to show comparable growth, although the composition may be somewhat different.

A slower rate of inventory accumulation reduced growth by 0.33 percentage points, as final sales of domestic product grew at a 0.9 percent rate. This is the third consecutive quarter in which the pace of inventory accumulation slowed, although the current pace is not especially low. It is likely that inventories will grow somewhat more quickly in the rest of the year, being at least a small positive in the growth story.

The weak growth for the quarter puts this recovery even further behind any prior recovery at the same stage. After eight and a quarter years, the economy is only 10.1 percent larger than its pre-recession level of output. A more typical recovery would have seen at least twice as much growth.

[Graph]

On the whole this is a weak report. The headline 0.5 percent figure probably overstates the weakness somewhat, but it is not a good sign when two consecutive quarters have an average growth rate of less than 1.0 percent. Inflation remains well under control, although there was a modest uptick in the rate of inflation shown by the core personal consumption expenditure deflator to 1.7 percent over the last year. Nonetheless, with an economy barely growing and an inflation rate that remains below target, it is difficult to envision the Federal Reserve raising interest rates further any time soon.

JohnH, Thursday, April 28, 2016 at 08:48 AM
How much more evidence do we need that the current trickle down monetary policy has failed? "The weak growth for the quarter puts this recovery even further behind any prior recovery at the same stage. After eight and a quarter years, the economy is only 10.1 percent larger than its pre-recession level of output. A more typical recovery would have seen at least twice as much growth."
rayward, Thursday, April 28, 2016 at 09:11 AM
Market failures aren't really market failures but market responses to market conditions. They are failures only in the sense that something deemed bad (e.g., falling home prices) is the market response. An extreme example is what's being called secular stagnation, which is just the market response to the shift of an enormous volume of production and income from the U.S. and Europe to China and other like places with much higher levels of inequality and savings. It's a market failure only in the sense that something bad (wage stagnation, slow economic growth) happened in the U.S. and Europe. Those responsible for the shift in production and income to China et al. (i.e., U.S. and European business executives) were either ignorant of the likely market response or didn't care as long as it increased profits (via lower costs). But that's not a market failure, it's an executive failure.
Peter, -1
"I think almost surely both Hillary and Bernie Sanders are very very committed to a pro-equality agenda, and the differences are more in details, more in one's confidence in their ability to execute this in a political context."

Disappointing. I guess we'll find out if he's right. Also his suggestion that the economy would have done just as well with no QEs is very disappointing.

"Stiglitz: I think they were right. They originally said, "When we hit 6 percent that's full employment." Now they know that 4.9 isn't full employment, there's weak labor market. They should have focused more on improving the channel of credit to make sure that money was going to small and medium-sized enterprises They should have said to the bank-like some other countries have done-if you want access to the Fed window you have to be lending to SMEs. "

Which was Bernie's suggestion. Hillary has said nothing.

[Apr 24, 2016] The Great Ponzi Scheme of the Global Economy

www.counterpunch.org
March 25, 2016

CHRIS HEDGES: We're going to be discussing a great Ponzi scheme that not only defines not only the U.S. but the global economy, how we got there and where we're going. And with me to discuss this issue is the economist Michael Hudson, author of Killing the Host: How Financial Parasites and Debt Destroy the Global Economy. A professor of economics who worked for many years on Wall Street, where you don't succeed if you don't grasp Marx's dictum that capitalism is about exploitation. And he is also, I should mention, the godson of Leon Trotsky.

I want to open this discussion by reading a passage from your book, which I admire very much, which I think gets to the core of what you discuss. You write,

"Adam Smith long ago remarked that profits often are highest in nations going fastest to ruin. There are many ways to create economic suicide on a national level. The major way through history has been through indebting the economy. Debt always expands to reach a point where it cannot be paid by a large swathe of the economy. This is the point where austerity is imposed and ownership of wealth polarizes between the One Percent and the 99 Percent. Today is not the first time this has occurred in history. But it is the first time that running into debt has occurred deliberately." Applauded. "As if most debtors can get rich by borrowing, not reduced to a condition of debt peonage."

So let's start with the classical economists, who certainly understood this. They were reacting of course to feudalism. And what happened to the study of economics so that it became gamed by ideologues?

HUDSON: The essence of classical economics was to reform industrial capitalism, to streamline it, and to free the European economies from the legacy of feudalism. The legacy of feudalism was landlords extracting land-rent, and living as a class that took income without producing anything. Also, banks that were not funding industry. The leading industrialists from James Watt, with his steam engine, to the railroads …

HEDGES: From your book you make the point that banks almost never funded industry.

HUDSON: That's the point: They never have. By the time you got to Marx later in the 19th century, you had a discussion, largely in Germany, over how to make banks do something they did not do under feudalism. Right now we're having the economic surplus being drained not by the landlords but also by banks and bondholders.

Adam Smith was very much against colonialism because that lead to wars, and wars led to public debt. He said the solution to prevent this financial class of bondholders burdening the economy by imposing more and more taxes on consumer goods every time they went to war was to finance wars on a pay-as-you-go basis. Instead of borrowing, you'd tax the people. Then, he thought, if everybody felt the burden of war in the form of paying taxes, they'd be against it. Well, it took all of the 19th century to fight for democracy and to extend the vote so that instead of landlords controlling Parliament and its law-making and tax system through the House of Lords, you'd extend the vote to labor, to women and everybody. The theory was that society as a whole would vote in its self-interest. It would vote for the 99 Percent, not for the One Percent.

By the time Marx wrote in the 1870s, he could see what was happening in Germany. German banks were trying to make money in conjunction with the government, by lending to heavy industry, largely to the military-industrial complex.

HEDGES: This was Bismarck's kind of social – I don't know what we'd call it. It was a form of capitalist socialism…

HUDSON: They called it State Capitalism. There was a long discussion by Engels, saying, wait a minute. We're for Socialism. State Capitalism isn't what we mean by socialism. There are two kinds of state-oriented–.

HEDGES: I'm going to interject that there was a kind of brilliance behind Bismarck's policy because he created state pensions, he provided health benefits, and he directed banking toward industry, toward the industrialization of Germany which, as you point out, was very different in Britain and the United States.

HUDSON: German banking was so successful that by the time World War I broke out, there were discussions in English economic journals worrying that Germany and the Axis powers were going to win because their banks were more suited to fund industry. Without industry you can't have really a military. But British banks only lent for foreign trade and for speculation. Their stock market was a hit-and-run operation. They wanted quick in-and-out profits, while German banks didn't insist that their clients pay as much in dividends. German banks owned stocks as well as bonds, and there was much more of a mutual partnership.

That's what most of the 19th century imagined was going to happen – that the world was on the way to socializing banking. And toward moving capitalism beyond the feudal level, getting rid of the landlord class, getting rid of the rent, getting rid of interest. It was going to be labor and capital, profits and wages, with profits being reinvested in more capital. You'd have an expansion of technology. By the early twentieth century most futurists imagined that we'd be living in a leisure economy by now.

HEDGES: Including Karl Marx.

HUDSON: That's right. A ten-hour workweek. To Marx, socialism was to be an outgrowth of the reformed state of capitalism, as seemed likely at the time – if labor organized in its self-interest.

HEDGES: Isn't what happened in large part because of the defeat of Germany in World War I? But also, because we took the understanding of economists like Adam Smith and maybe Keynes. I don't know who you would blame for this, whether Ricardo or others, but we created a fictitious economic theory to praise a rentier or rent-derived, interest-derived capitalism that countered productive forces within the economy. Perhaps you can address that.

HUDSON: Here's what happened. Marx traumatized classical economics by taking the concepts of Adam Smith and John Stuart Mill and others, and pushing them to their logical conclusion. 2KillingTheHost_Cover_ruleProgressive capitalist advocates – Ricardian socialists such as John Stuart Mill – wanted to tax away the land or nationalize it. Marx wanted governments to take over heavy industry and build infrastructure to provide low-cost and ultimately free basic services. This was traumatizing the landlord class and the One Percent. And they fought back. They wanted to make everything part of "the market," which functioned on credit supplied by them and paid rent to them.

None of the classical economists imagined how the feudal interests – these great vested interests that had all the land and money – actually would fight back and succeed. They thought that the future was going to belong to capital and labor. But by the late 19th century, certainly in America, people like John Bates Clark came out with a completely different theory, rejecting the classical economics of Adam Smith, the Physiocrats and John Stuart Mill.

HEDGES: Physiocrats are, you've tried to explain, the enlightened French economists.

HUDSON: The common denominator among all these classical economists was the distinction between earned income and unearned income. Unearned income was rent and interest. Earned incomes were wages and profits. But John Bates Clark came and said that there's no such thing as unearned income. He said that the landlord actually earns his rent by taking the effort to provide a house and land to renters, while banks provide credit to earn their interest. Every kind of income is thus "earned," and everybody earns their income. So everybody who accumulates wealth, by definition, according to his formulas, get rich by adding to what is now called Gross Domestic Product (GDP).

HEDGES: One of the points you make in Killing the Host which I liked was that in almost all cases, those who had the capacity to make money parasitically off interest and rent had either – if you go back to the origins – looted and seized the land by force, or inherited it.

HUDSON: That's correct. In other words, their income is unearned. The result of this anti-classical revolution you had just before World War I was that today, almost all the economic growth in the last decade has gone to the One Percent. It's gone to Wall Street, to real estate …

HEDGES: But you blame this on what you call Junk Economics.

HUDSON: Junk Economics is the anti-classical reaction.

HEDGES: Explain a little bit how, in essence, it's a fictitious form of measuring the economy.

HUDSON: Well, some time ago I went to a bank, a block away from here – a Chase Manhattan bank – and I took out money from the teller. As I turned around and took a few steps, there were two pickpockets. One pushed me over and the other grabbed the money and ran out. The guard stood there and saw it. So I asked for the money back. I said, look, I was robbed in your bank, right inside. And they said, "Well, we don't arm our guards because if they shot someone, the thief could sue us and we don't want that." They gave me an equivalent amount of money back.

Well, imagine if you count all this crime, all the money that's taken, as an addition to GDP. Because now the crook has provided the service of not stabbing me. Or suppose somebody's held up at an ATM machine and the robber says, "Your money or your life." You say, "Okay, here's my money." The crook has given you the choice of your life. In a way that's how the Gross National Product accounts are put up. It's not so different from how Wall Street extracts money from the economy. Then also you have landlords extracting …

HEDGES: Let's go back. They're extracting money from the economy by debt peonage. By raising …

HUDSON: By not playing a productive role, basically.

HEDGES: Right. So it's credit card interest, mortgage interest, car loans, student loans. That's how they make their funds.

HUDSON: That's right. Money is not a factor of production. But in order to have access to credit, in order to get money, in order to get an education, you have to pay the banks. At New York University here, for instance, they have Citibank. I think Citibank people were on the board of directors at NYU. You get the students, when they come here, to start at the local bank. And once you are in a bank and have monthly funds taken out of your account for electric utilities, or whatever, it's very cumbersome to change.

So basically you have what the classical economists called the rentier class. The class that lives on economic rents. Landlords, monopolists charging more, and the banks. If you have a pharmaceutical company that raises the price of a drug from $12 a shot to $200 all of a sudden, their profits go up. Their increased price for the drug is counted in the national income accounts as if the economy is producing more. So all this presumed economic growth that has all been taken by the One Percent in the last ten years, and people say the economy is growing. But the economy isn't growing …

HEDGES: Because it's not reinvested.

HUDSON: That's right. It's not production, it's not consumption. The wealth of the One Percent is obtained essentially by lending money to the 99 Percent and then charging interest on it, and recycling this interest at an exponentially growing rate.

HEDGES: And why is it important, as I think you point out in your book, that economic theory counts this rentier income as productive income? Explain why that's important.

HUDSON: If you're a rentier, you want to say that you earned your income by …

HEDGES: We're talking about Goldman Sachs, by the way.

HUDSON: Yes, Goldman Sachs. The head of Goldman Sachs came out and said that Goldman Sachs workers are the most productive in the world. That's why they're paid what they are. The concept of productivity in America is income divided by labor. So if you're Goldman Sachs and you pay yourself $20 million a year in salary and bonuses, you're considered to have added $20 million to GDP, and that's enormously productive. So we're talking in a tautology. We're talking with circular reasoning here.

So the issue is whether Goldman Sachs, Wall Street and predatory pharmaceutical firms, actually add "product" or whether they're just exploiting other people. That's why I used the word parasitism in my book's title. People think of a parasite as simply taking money, taking blood out of a host or taking money out of the economy. But in nature it's much more complicated. The parasite can't simply come in and take something. First of all, it needs to numb the host. It has an enzyme so that the host doesn't realize the parasite's there. And then the parasites have another enzyme that takes over the host's brain. It makes the host imagine that the parasite is part of its own body, actually part of itself and hence to be protected.

That's basically what Wall Street has done. It depicts itself as part of the economy. Not as a wrapping around it, not as external to it, but actually the part that's helping the body grow, and that actually is responsible for most of the growth. But in fact it's the parasite that is taking over the growth.

The result is an inversion of classical economics. It turns Adam Smith upside down. It says what the classical economists said was unproductive – parasitism – actually is the real economy. And that the parasites are labor and industry that get in the way of what the parasite wants – which is to reproduce itself, not help the host, that is, labor and capital.

HEDGES: And then the classical economists like Adam Smith were quite clear that unless that rentier income, you know, the money made by things like hedge funds, was heavily taxed and put back into the economy, the economy would ultimately go into a kind of tailspin. And I think the example of that, which you point out in your book, is what's happened in terms of large corporations with stock dividends and buybacks. And maybe you can explain that.

HUDSON: There's an idea in superficial textbooks and the public media that if companies make a large profit, they make it by being productive. And with …

HEDGES: Which is still in textbooks, isn't it?

HUDSON: Yes. And also that if a stock price goes up, you're just capitalizing the profits – and the stock price reflects the productive role of the company. But that's not what's been happening in the last ten years. Just in the last two years, 92 percent of corporate profits in America have been spent either on buying back their own stock, or paid out as dividends to raise the price of the stock.

HEDGES: Explain why they do this.

HUDSON: About 15 years ago at Harvard, Professor Jensen said that the way to ensure that corporations are run most efficiently is to make the managers increase the price of the stock. So if you give the managers stock options, and you pay them not according to how much they're producing or making the company bigger, or expanding production, but the price of the stock, then you'll have the corporation run efficiently, financial style.

So the corporate managers find there are two ways that they can increase the price of the stock. The first thing is to cut back long-term investment, and use the money instead to buy back their own stock. But when you buy your own stock, that means you're not putting the money into capital formation. You're not building new factories. You're not hiring more labor. You can actually increase the stock price by firing labor.

HEDGES: That strategy only works temporarily.

HUDSON: Temporarily. By using the income from past investments just to buy back stock, fire the labor force if you can, and work it more intensively. Pay it out as dividends. That basically is the corporate raider's model. You use the money to pay off the junk bond holders at high interest. And of course, this gets the company in trouble after a while, because there is no new investment.

So markets shrink. You then go to the labor unions and say, gee, this company's near bankruptcy, and we don't want to have to fire you. The way that you can keep your job is if we downgrade your pensions. Instead of giving you what we promised, the defined benefit pension, we'll turn it into a defined contribution plan. You know what you pay every month, but you don't know what's going to come out. Or, you wipe out the pension fund, push it on to the government's Pension Benefit Guarantee Corporation, and use the money that you were going to pay for pensions to pay stock dividends. By then the whole economy is turning down. It's hollowed out. It shrinks and collapses. But by that time the managers will have left the company. They will have taken their bonuses and salaries and run.

HEDGES: I want to read this quote from your book, written by David Harvey, in A Brief History of Neoliberalism, and have you comment on it.

"The main substantive achievement of neoliberalism has been to redistribute rather than to generate wealth and income. [By] 'accumulation by dispossession' I mean … the commodification and privatization of land, and the forceful expulsion of peasant populations; conversion of various forms of property rights (common collective state, etc.) into exclusive private property rights; suppression of rights to the commons; … colonial, neocolonial, and the imperial processes of appropriation of assets (including natural resources); … and usury, the national debt and, most devastating at all, the use of the credit system as a radical means of accumulation by dispossession. … To this list of mechanisms, we may now add a raft of techniques such as the extraction of rents from patents, and intellectual property rights (such as the diminution or erasure of various forms of common property rights, such as state pensions, paid vacations, and access to education, health care) one through a generation or more of class struggle. The proposal to privatize all state pension rights, pioneered in Chile under the dictatorship is, for example, one of the cherished objectives of the Republicans in the US."

This explains the denouement. The final end result you speak about in your book is, in essence, allowing what you call the rentier or the speculative class to cannibalize the entire society until it collapses.

HUDSON: A property right is not a factor of production. Look at what happened in Chicago, the city where I grew up. Chicago didn't want to raise taxes on real estate, especially on its expensive commercial real estate. So its budget ran a deficit. They needed money to pay the bondholders, so they sold off the parking rights to have meters – you know, along the curbs. The result is that they sold to Goldman Sachs 75 years of the right to put up parking meters. So now the cost of living and doing business in Chicago is raised by having to pay the parking meters. If Chicago is going to have a parade and block off traffic, it has to pay Goldman Sachs what the firm would have made if the streets wouldn't have been closed off for a parade. All of a sudden it's much more expensive to live in Chicago because of this.

But this added expense of having to pay parking rights to Goldman Sachs – to pay out interest to its bondholders – is counted as an increase in GDP, because you've created more product simply by charging more. If you sell off a road, a government or local road, and you put up a toll booth and make it into a toll road, all of a sudden GDP goes up.

If you go to war abroad, and you spend more money on the military-industrial complex, all this is counted as increased production. None of this is really part of the production system of the capital and labor building more factories and producing more things that people need to live and do business. All of this is overhead. But there's no distinction between wealth and overhead.

Failing to draw that distinction means that the host doesn't realize that there is a parasite there. The host economy, the industrial economy, doesn't realize what the industrialists realized in the 19th century: If you want to be an efficient economy and be low-priced and under-sell competitors, you have to cut your prices by having the public sector provide roads freely. Medical care freely. Education freely.

If you charge for all of these, you get to the point that the U.S. economy is in today. What if American factory workers were to get all of their consumer goods for nothing. All their food, transportation, clothing, furniture, everything for nothing. They still couldn't compete with Asians or other producers, because they have to pay up to 43% of their income for rent or mortgage interest, 10% or more of their income for student loans, credit card debt. 15% of their paycheck is automatic withholding to pay Social Security, to cut taxes on the rich or to pay for medical care.

So Americans built into the economy all this overhead. There's no distinction between growth and overhead. It's all made America so high-priced that we're priced out of the market, regardless of what trade policy we have.

HEDGES: We should add that under this predatory form of economics, you game the system. So you privatize pension funds, you force them into the stock market, an overinflated stock market. But because of the way companies go public, it's the hedge fund managers who profit. And it's those citizens whose retirement savings are tied to the stock market who lose. Maybe we can just conclude by talking about how the system is fixed, not only in terms of burdening the citizen with debt peonage, but by forcing them into the market to fleece them again.

HUDSON: Well, we talk about an innovation economy as if that makes money. Suppose you have an innovation and a company goes public. They go to Goldman Sachs and other Wall Street investment banks to underwrite the stock to issue it at $40 a share. What's considered a successful float is when, immediately, Goldman and the others will go to their insiders and tell them to buy this stock and make a quick killing. A "successful" flotation doubles the price in one day, so that at the end of the day the stock's selling for $80.

HEDGES: They have the option to buy it before anyone else, knowing that by the end of the day it'll be inflated, and then they sell it off.

HUDSON: That's exactly right.

HEDGES: So the pension funds come in and buy it at an inflated price, and then it goes back down.

HUDSON: It may go back down, or it may be that the company just was shortchanged from the very beginning. The important thing is that the Wall Street underwriting firm, and the speculators it rounds up, get more in a single day than all the years it took to put the company together. The company gets $40. And the banks and their crony speculators also get $40.

So basically you have the financial sector ending up with much more of the gains. The name of the game if you're on Wall Street isn't profits. It's capital gains. And that's something that wasn't even part of classical economics. They didn't anticipate that the price of assets would go up for any other reason than earning more money and capitalizing on income. But what you have had in the last 50 years – really since World War II – has been asset-price inflation. Most middle-class families have gotten the wealth that they've got since 1945 not really by saving what they've earned by working, but by the price of their house going up. They've benefited by the price of the house. And they think that that's made them rich and the whole economy rich.

The reason the price of housing has gone up is that a house is worth whatever a bank is going to lend against it. If banks made easier and easier credit, lower down payments, then you're going to have a financial bubble. And now, you have real estate having gone up as high as it can. I don't think it can take more than 43% of somebody's income to buy it. But now, imagine if you're joining the labor force. You're not going to be able to buy a house at today's prices, putting down a little bit of your money, and then somehow end up getting rich just on the house investment. All of this money you pay the bank is now going to be subtracted from the amount of money that you have available to spend on goods and services.

So we've turned the post-war economy that made America prosperous and rich inside out. Somehow most people believed they could get rich by going into debt to borrow assets that were going to rise in price. But you can't get rich, ultimately, by going into debt. In the end the creditors always win. That's why every society since Sumer and Babylonia have had to either cancel the debts, or you come to a society like Rome that didn't cancel the debts, and then you have a dark age. Everything collapses.

[Apr 24, 2016] The End of Neoliberalism

Notable quotes:
"... ...In many ways, it is remarkable that candidates who speak against free trade the way Sanders and Trump have have had significant traction this primary election season. But the signs have been there over the past few years. Wendy Brown, a political scientist at the University of California, notes that the Occupy movement was among the first to point out the dangers of the neoliberal economic system. ..."
"... I expect there will be a struggle between the free market fundamentalists and a broader, vastly more numerous base spanning both blue and white collar working and middle classes. Inequality will be one driver but there will be others. We have to shake 18th century economics, 19th century industrialism and 20th century geopolitics - the forces that spawned globalism. These modes of organization are antiquated and no longer retain much utility. They were conceived during and designed for a much different world with a far smaller overall population, a surfeit of cheap resources and a far lower rate of consumption. ..."
The Disaffected Lib

Fortune magazine ponders whether neoliberalism in its home country - the United States - can survive the November elections.

Neoliberalism ...is an economic principle. It refers to the belief that markets should be frictionless and unfettered by things like regulation or organized labor. Neoliberalism has its roots in the Chicago School of economics pioneered by Milton Friedman in the 1970s. The concept found its footing in the 1970s and 80s, with champions like Chile's Augusto Pinochet, Ronald Reagan, and Margaret Thatcher. It then evolved into a basic economic outlook for major political parties in much of the Western world. Neoliberalism's stature reached new heights in the 1990s, when President Bill Clinton signed the North American Free Trade Agreement and British Prime Minister Tony Blair created the "New Labour" movement, moving the Labour Party away from its trade union roots.

This is the world that British journalist Paul Mason addresses in his book Postcapitalism: A Guide to Our Future, Mason ...argues that the current iteration of capitalism, neoliberalism - prevalent mostly in western democracies - is sick and dying.

But the go-go 1990s feels like a distant memory today. And in his book, Mason suggests a way forward, drawing on classical Marxist theory that's been updated for the information age.

Mason argues for what he calls a postcapitalist society. Such a system would include universal basic income; a socialized finance system; increased collaborative work; and increased regulation to prevent the growth of low-wage, low-growth jobs. Imagine if we could all enjoy the benefits that sharing economy companies like Uber offer its participants but companies also paid enough taxes to pay for programs that support those workers.

...So, how does all of this tie in to the 2016 presidential election? It starts, of course, with Bernie Sanders and Donald Trump, both of whom have channeled voters' frustration and anger with an economic world that, they feel, has left them behind.

In an interview from London, Mason was quick to dismiss Trump, calling him "a showman and a charlatan and a racist." He claims that the rise of Trump is proof that neoliberalism is broken. With people left as adrift as they are, he says, "it's no surprise that an empty can rises like flotsam."

...In many ways, it is remarkable that candidates who speak against free trade the way Sanders and Trump have have had significant traction this primary election season. But the signs have been there over the past few years. Wendy Brown, a political scientist at the University of California, notes that the Occupy movement was among the first to point out the dangers of the neoliberal economic system.

Republicans, of course, would never go for Mason's suggestions; just this month, John Kasich called for the "Uberization" of the federal government. Uber, with its limited rights and benefits for drivers, is in many ways the poster child for the neoliberal dream.

Mason's book offers a stark portrait of a potential future in which inequality grows to unimaginable heights, leading to social unrest. "I can see within a century the end of the market system as we know it," Mason says.

That may sound a bit extreme. But in a world where more and more people feel like the economy has flat out left them behind, it would be foolish to disregard what should come next.

I expect there will be a struggle between the free market fundamentalists and a broader, vastly more numerous base spanning both blue and white collar working and middle classes. Inequality will be one driver but there will be others. We have to shake 18th century economics, 19th century industrialism and 20th century geopolitics - the forces that spawned globalism. These modes of organization are antiquated and no longer retain much utility. They were conceived during and designed for a much different world with a far smaller overall population, a surfeit of cheap resources and a far lower rate of consumption.

We're running into walls, one after another, and these walls are boxing us in, eliminating or narrowing options and choice. Our obsolete modes of organization, the foundations of neoliberalism and globalism, have no settings to deal with overpopulation, over-consumption or climate change. That much is apparent from the manner in which they're based on perpetual, exponential growth. On a finite biosphere, our Spaceship Earth, the limits of growth are sharply defined and yet, instead of organizing ourselves accordingly, we keep resorting to sleight of hand, parlour tricks, that lead to deforestation, desertification, the collapse of major fisheries, the draining of our groundwater resources - on and on and on.

What I fear most is that the failure of our leadership to acknowledge and respond to these issues will lead to mass unrest and a population that's easy prey for the first charismatic despot to come along and feed off their discontent. The fact is that happens more often than not and it only makes a difficult situation enormously worse.

Kirby Evans said...

Thanks for that good post. I look forward to reading Mason's book. In the UK they have Corbyn, in the US they have Sanders, when are we going to produces a leader who actually talks about redistribution and fair taxation instead of towing the neo-liberal line like Mulcair?

UU4077 said...

I think you might find this an interesting link

http://thereformedbroker.com/2016/03/13/a-tech-powered-disinflationary-world/

Within it is another link "Abundance" - another good read.

Technology may end up speeding-up the destruction of our current form of capitalism. Most don't understand what's happening until it hits them in the face (like Uber and taxi cabs).

A guaranteed minimum income with corporations forced to pay their fair share of taxes is a start. Looking forward to a "Star Trek world".

The Mound of Sound said...

I just looked on Amazon, Kirby, and it's available but seems a bit pricey. You can get the ebook for about $14. I'll wait until it shows up on Abebooks next year.

The Mound of Sound said...

@ UU4077 - I did a post the other day on Galbraith's "The End of Normal" that focused on the chapter dealing with "creative destruction." This expands upon some of the points made in your links. Galbraith writes of, " new ways for the information-processing device to perform tasks that used to be carried out by someone else for money; new ways to kill off activity elsewhere; new ways to devalue somebody else's skill" as the inevitable result of our rampaging technology.

It's almost never mentioned that Adam Smith, in his 1776 "The Wealth of Nations," foresaw that the Ponzi scheme that today's capitalism has become would have a shelf life of about 200-years. Give or take half a century it seems he was right. From Wiki: "A central theme of the book is the desirable consequences of each person pursuing self-interest in the marketplace. He theorized and observed that people trading in open markets leads to production of the right quantities of commodities, division of labor, increasing wages, and an upward spiral of economic growth. But Smith recognized a limit to economic growth. He predicted that in the long run, population growth would push wages down, natural resources would become increasingly scarce, and division of labor would approach the limits of its effectiveness."

After this period, Smith concluded civilization would enter a 'steady state economy' not because it was particularly desirable or superior but because there would be no other option. It seems ridiculous to even argue the point but we live on a finite world and the limits of this world prescribe that the economy must be a subset of that environment. I think we may be on the verge of discovering that immutable law of nature but possibly much too late.

[Apr 24, 2016] What Can Replace Neoliberalism

addisfortune.net
In a popular piece that recently appeared in Foreign Affairs magazine, headlined, "The Future of History", Francis Fukuyama pointed out that, despite widespread anger at Wall Street bailouts, there has been no great upsurge of support for left-wing political parties. Fukuyama attributed this – rightly, I believe – to a failure of ideas.

The 2008 financial crash revealed major flaws in the neoliberal view of capitalism, and an objective view of the last 35 years shows that the neoliberal model has not performed well relative to the previous 30 years. This is in terms of economic growth, financial stability and social justice. But a credible progressive alternative has yet to take shape.

What should be the main outlines of such an alternative?

A progressive political economy must be based on a firm belief in capitalism – that is, on an economic system in which most of the assets are privately owned and markets largely guide production and distribute income. But it must also incorporate three defining progressive beliefs: the crucial role of institutions; the need for state involvement in their design in order to resolve conflicting interests and provide public goods; and social justice, defined as fairness, as an important measure of a country's economic performance.

It was a great mistake of neoclassical economists not to see that capitalism is a socioeconomic system and that institutions are an essential part of it. The recent financial crisis was made far worse by profound institutional failures, such as the high level of leverage that banks were permitted to have.

Empirical research has shown that four sets of institutions have a major impact on the performance of firms and, therefore, on a country's economic growth. These include the institutions underpinning its financial and labour markets, its corporate governance arrangements, its education and training system and its national system of innovation (the network of public and private institutions that initiate and diffuse new technologies).

Another defining belief of progressive thinking is that institutions do not evolve spontaneously, as neoliberals believe. The state must be involved in their design and reform.

In the case of institutions underpinning labour and financial markets, as well as corporate governance, the state must mediate conflicting interests. Likewise, a country's education and training system, and its national system of innovation, are largely public goods, which have to be provided by the state.

It should be clear that the role for the state that I have been describing is an enabling or market-supporting one. It is not the command and control role promoted by traditional socialists or the minimalist role beloved by neoliberals.

The other defining belief of progressive thinking rejects the neoliberal view that a country's economic performance should be assessed solely in terms of gross domestic product (GDP) growth and freedom. If one is concerned with a society's wellbeing, it is not possible to argue that a rich country in which the top one percent holds most of the wealth is performing better than a slightly less wealthy country in which prosperity is more widely shared.

Moreover, fairness is a better measure of social justice than equality. This is because it is difficult to devise practical and effective policies to achieve equality in a market economy.

In addition, there is a real tradeoff between equality and economic growth, and egalitarianism is not a popular policy even for many low-income people. In my experience, trade unions are much more interested in wage differentials than in a simple policy of equal pay for all.

These are the core principles that I believe a new progressive political economy should embrace. I also believe that Western countries that do not adopt this framework and instead cling to a neoliberal political economy, will find it increasingly difficult to innovate and grow.

In the new global economy, which is awash with cheap labour, Western economies will not be able to compete in a "race to the bottom", with firms seeking ever-cheaper labour, land and capital, with governments seeking to attract them by deregulating and shrinking social benefits.

The only way Western economies will be able to compete and improve their standard of living is by seeing themselves as being involved in a race to the top. That is, firms must improve their value added through innovation in existing industries and by developing the capability to compete in new and more sophisticated industries, where value added is generally higher.

Companies will be able to do this only if governments abandon the belief that they have no role to play in the economy. In fact, the state has a key role to play in providing the conditions that enable dynamic companies to innovate and grow.

[Apr 24, 2016] Neoliberalism as the Agent of Capitalist Self-Destruction

Notable quotes:
"... Second, one would have to be extraordinarily naïve to believe that the neoliberal project has been about establishing 'free' markets in the first place, although this myth has been assiduously perpetrated by social democratic parties who, eager to disguise their own capitulation to neoliberalism, emphasize their opposition to the marketisation of all social relationships, even though no-one – except perhaps the followers of Ayn Rand – seriously imagines this is either possible or desirable. ..."
"... There are two foundational aspects of capitalism: the 'horizontal' competition between capitals and the 'vertical' conflict between labour and capital. The role of the capitalist state is to impose a dual social order determined by these two processes: over competing capitals so that market relations do not collapse into 'the war of all against all', and over the conflict between capital and labour so that it continues to be resolved in the interest of the former. Beyond this, states also have to establish 'general conditions of production', which individual competing capitals would be unwilling or unable to provide, including some basic level of technical infrastructure and welfare. These functions are mainly 'internal' to the territory of nation-states, but they must also represent the collective interests of the 'internal' capitalist class 'externally' in relation to other capitalist states and classes, up to and including the conduct of war. ..."
"... Joseph Schumpeter yielded to no-one in his admiration for the heroic entrepreneur, but also noted during the Second World War that, with the possible exception of the United States, the bourgeoisie was so incapable of self-rule that it required a non-bourgeois group as a 'master'. ..."
"... In the case of the UK the regime began, not with Margaret Thatcher's General Election victory in 1979, but around half-way through the preceding Labour Government of 1974–9 and it persists, with variations, to this day, whatever the bleating from Polly Toynbee and others on the liberal left about the supposedly fundamental differences between the two main parties. ..."
"... The answer is in the way in which neoliberalism has reconfigured politics.The necessary distance between the state and capital (or between state managers and capitalists) that Smith, Marx and Schumpeter from their different political perspectives all regarded is being essential for the health of the system, is being minimised. In particular, the regime adoption of timescales associated specifically with the profit-maximising drives of financial capital is important as it indicates the short-termism involved. Three factors are important in producing this tendency. ..."
"... Ironically, one reason for the rise of neoliberalism in the US was a paradoxical outcome of the successful demand for greater democratic accountability during the 1960s and 1970s. This led to the weakening of both congressional committees and party structures, and produced a new breed of 'entrepreneurial politicians' interested in highlighting issues popular with specific audiences which would provide them with a stable following. ..."
"... For all practical purposes then, members of the ruling class in the West are now united in accepting neoliberalism as the only viable way of organising capitalism as an economic system, but they are divided in relation to how capitalism should be organised as a social system. They may all be neoliberals now, but they are not all neoconservatives. ..."
"... Defence of the system is always the principle objective of the bourgeoisie, even at the expense of temporary system malfunction. In a situation where economic desperation was leading to mounting disorder, far-right parties would be brought into play to direct attention from the real source of social anguish onto already-identified scapegoats, no matter what price they exacted in terms of policy. ..."
salvage.zone
Salvage

The neoliberal era can be retrospectively identified as beginning with the economic crisis of 1973, or, more precisely, with the strategic response of state managers and employers to that crisis. Previous eras in the history of capitalism have tended to close with the onset of further period of systemic crisis; 1973, for example, saw the end of the era of state capitalism which began in 1929. The neoliberal era, however, has not only survived the crisis which began in 2007, but its characteristic features are, if anything, being further extended and embedded, rather than reversed.

Yet, although neoliberalism has massively increased the wealth of the global capitalist class, has it also restored the health of the system itself? The crisis which gave rise to neoliberalism was, after all, caused by the end of the unprecedented period of growth which characterised the post-war boom, and the consequent accelerating decline in the rate of profit, unimpeded by the countervailing tendencies – above all arms spending – which had held it in check since the Second World War. These levels of growth were never resumed, but it would be wrong to claim that capitalism experienced no recovery after 1973. The boom from 1982 to 2007 was certainly uneven and punctuated by particularly sharp financial crises and recessions in 1987, 1991, 1997 and 2000; but these were normal expressions of the business cycle and only a misplaced fixation with using the unique and unrepeatable period between 1948 and 1973 as a comparator could justify treating these as symptoms of crisis. When crisis did return in 2007–8, it simply proved that neoliberalism was no more capable of permanently preventing this than any other mode of capitalist regulation.

Neoliberalism does, however, represent a paradox for capitalism. Its relative success as a ruling-class strategy, particularly in weakening the trade union movement and reducing the share of profits going to labour, has helped to disguise that some aspects of this mode of regulation are proving unintentionally detrimental to the system. Serving the interests of the rich is not the same – or at least, not always the same – as serving the interests of capital and may, in certain circumstances, be in contradiction to it. Simply doing what the rich want is unlikely to produce beneficial results for the system as a whole, although it may help increase the wealth of individual capitalists. For not only are capitalists generally uninterested in the broader social interest, which we might expect, but they are also generally incapable of correctly assessing their own overall collective class interests, which might seem more surprising – although as we shall see, it is a long-standing phenomenon, observed by many of the great social theorists from late eighteenth century onwards. As a result, capitalist states – or more precisely, their managers – have traditionally acted to make such an assessment; but in the developed West at least, neoliberal regimes are increasingly displaying an uncritical adherence to the short-term wishes of particular business interests. This is not the only emergent problem: the increasingly narrow parameters of neoliberal politics, where choice is restricted to 'social' rather than 'economic' issues, has encouraged the emergence of far-right parties, usually fixated on questions of migration, which have proved enormously divisive in working-class communities, but whose policies are in other respects by no means in the interests of capital.

The self-destructive nature of neoliberal capitalism has nothing necessarily to do with the removal of restrictions on markets. The rise of neoliberalism made it fashionable to refer to Karl Polanyi's The Great Transformation, the assumption being that neoliberalism is in the process of realising Polanyi's nightmare: reversing the second part of his 'double movement' – the social reaction against markets – and unleashing the mechanisms that he saw as being so destructive of society and nature.

Leaving aside the fact that capitalism was always capable of producing social atomization, collective violence and environmental destruction, even in periods when the state was far more directly involved in the mechanisms of production and exchange then it is now, there are two problems with this position. First, rhetoric apart, capitalists no more favour untrammelled competition today than they did when monopolies and cartels first appeared as aspects of the emerging system in the sixteenth century. Second, one would have to be extraordinarily naïve to believe that the neoliberal project has been about establishing 'free' markets in the first place, although this myth has been assiduously perpetrated by social democratic parties who, eager to disguise their own capitulation to neoliberalism, emphasize their opposition to the marketisation of all social relationships, even though no-one – except perhaps the followers of Ayn Rand – seriously imagines this is either possible or desirable. In what follows I will mainly draw on the experiences of the UK and the US, since these were the first nation-states in which neoliberalism was imposed under democratic conditions – unlike Chile or China, for example – and where it has in many respects gone furthest. To understand the real nature of the difficulties inadvertently caused for capital by neoliberalism we have to begin with the role of capitalist states 'in general'.

How did capitalist states operate before neoliberalism? There are two foundational aspects of capitalism: the 'horizontal' competition between capitals and the 'vertical' conflict between labour and capital. The role of the capitalist state is to impose a dual social order determined by these two processes: over competing capitals so that market relations do not collapse into 'the war of all against all', and over the conflict between capital and labour so that it continues to be resolved in the interest of the former. Beyond this, states also have to establish 'general conditions of production', which individual competing capitals would be unwilling or unable to provide, including some basic level of technical infrastructure and welfare. These functions are mainly 'internal' to the territory of nation-states, but they must also represent the collective interests of the 'internal' capitalist class 'externally' in relation to other capitalist states and classes, up to and including the conduct of war.

In order to maintain links to capital in all its multiple incarnations, the state must partly mirror capital's fragmentation. As this suggests, not every action carried out by the state need necessarily be in the direct collective interest of the ruling class – indeed, if it is to give the appearance of adjudicating between different class and other interests then it is essential that they are not, so long as these actions are ultimately subordinated to ruling class interests. Nevertheless, the capitalist state has nevertheless tended not to be run by capitalists themselves. Why not?

The earliest social theorists to concern themselves with the emergent capitalist system – which they tended to refer to as 'commercial society' – were unambiguous in their assessment of how narrow business interests were. Since Adam Smith is – quite unfairly – treated as the patron saint of neoliberalism is may be worth reminding ourselves of his still-refreshingly candid views about the capacity of business interests for deception and oppression, and their inability to see beyond their own immediate interests. Nearly a century later in the 1860s, Smith's greatest successor, Karl Marx, was able to point in Capital to the example of the British Factory Acts as an example of how the state had to intervene to regulate the activities of capital in the face of initial opposition from the capitalists themselves. Reflecting on the entire legislative episode, Marx noted the way in which it took Parliamentary legislation to force capital to accept regulation of the length of the working day. Indeed, the most irreconcilable positions were expressed not by employers but by their ideologues, the most important of whom was Herbert Spencer, who saw – and here we can detect the genuine ancestry of contemporary neoliberalism – the spectre of socialist slavery in any form of state intervention.

The thesis concerning bourgeois incapacity was not only restricted to critical supporters of capitalism like Smith or opponents like Marx. Joseph Schumpeter yielded to no-one in his admiration for the heroic entrepreneur, but also noted during the Second World War that, with the possible exception of the United States, the bourgeoisie was so incapable of self-rule that it required a non-bourgeois group as a 'master'. Without the kind of constraints provided by this pre-capitalist framework, the more sober instincts of the bourgeois would be overcome by the impulse towards what Schumpeter called 'creative destruction'. The delegation of power to the state therefore exists because of the inaptitude of the capitalist class compared to other ruling classes in history: feudal lords combine an economic and political role; capitalists perform only the former – although the necessity for capitalists to devote their time to the process of accumulation and their own multiple internal divisions also militate against their functioning directly as a governing class.

Schumpeter was, however, too pessimistic: from the First World War in particular, the pre-capitalist classes which had acted as the shepherds of capital were increasingly replaced by state managers: the professional politicians and civil servants respectively responsible for the legislative and executive wings of the state. At the most fundamental level, the common interest between capitalists and state managers stems from their common class position: both are part of the bourgeoisie. If we visualise the bourgeoisie as a series of concentric circles, then the capitalist class as such (actual owners and controllers of capital) occupies the centre and a series of other layers radiates outwards, with those closer to the periphery being progressively less directly connected to the core economic activities of production, exploitation, and competition, and more involved with those of the ideological, administrative, or technical aspects, which are nevertheless essential to the reproduction of capitalism. The incomes that state managers are paid from state revenues ultimately derive from the total social surplus value produced by the working class, as are the profits, interest, and rent received by different types of private capitalist. And this applies not simply to the source of their income but also to its level, since the relatively high levels of remuneration, security, and prestige enjoyed by these officials depend on the continued exploitation of wage labour. At that level the interests of state managers and capitalist are the same.

These groups have a shared ideological commitment to capitalism, but their particular interests arise from distinct regions of the totality of capitalism, in its various national manifestations. A shared background in institutions like schools, universities, and clubs helps to consolidate a class consciousness that articulates these interests, but a more fundamental reason is that the activities of states are subordinated to the accumulation of capital. In the British case, the state may not do this as successfully as the capitalist class might wish, but that is an indication of the problems of managing long-term relative decline, not that the state managers have different goals. Regardless of their class origins, state managers and capitalists are drawn together into a series of mutually supportive relationships. The former need the resources provided by individual national capitals, principally through taxation and loans, in order to attend to the needs of the national capital as a whole; the latter need specific policy initiatives to strengthen the competitive position of their sector of the national capital within the global economy. There have nevertheless always been tensions, above all the fear on the part of capitalists that states – which they regard as Weberian autonomous entities with their own interests – will either restrict or abolish their right to private property. What gives these fears plausibility is precisely the fact that state managers have both to facilitate the process of capital accumulation and ameliorate its effects on the population and environment, returning us to the Factory Acts and capitalist responses to them described by Marx in 1867.

Has the neoliberal era seen the capitalist class finally succeeding in 'binding Leviathan', to quote the title of an early British neoliberal text by William Waldegrave? We need to be clear that it is not the nature of capitalist states themselves that has changed: they still need to perform the core functions described at the beginning of this section. There is no 'neoliberal state', but there are 'neoliberal regimes'. In the case of the UK the regime began, not with Margaret Thatcher's General Election victory in 1979, but around half-way through the preceding Labour Government of 1974–9 and it persists, with variations, to this day, whatever the bleating from Polly Toynbee and others on the liberal left about the supposedly fundamental differences between the two main parties.

What has changed is that the relationship between neoliberal regimes and capital since the 1970s has prevented states from acting effectively in the collective, long-term interest of capitalism. Neoliberal regimes have increasingly abandoned any attempt to arrive at an overarching understanding of what the conditions for growth might be, other than the supposed need for lowering taxation and regulation and raising labour flexibility. Apart from these, the interests of the total national capital is seen as an arithmetical aggregate of the interests of individual businesses, some of which, to be sure, have rather more influence with governments than others. In so far as there is a 'strategic view' it involves avoiding any policies which might incur corporate displeasure, however minor the inconveniences they might involve for the corporations, which of course includes regulation. These developments have, not unexpectedly, led to complete incomprehension among remaining Keynesians of the liberal left such as Ha-Joon Chang and Will Hutton, but they are not beyond explanation. The reason is not simply because of successful lobbying and PR on behalf of individual businesses or industries, pernicious and pervasive though these increasingly sophisticated activities undoubtedly are. But corporations have always done this: why are state managers now so predisposed to respond positively to their efforts? The answer is in the way in which neoliberalism has reconfigured politics.The necessary distance between the state and capital (or between state managers and capitalists) that Smith, Marx and Schumpeter from their different political perspectives all regarded is being essential for the health of the system, is being minimised. In particular, the regime adoption of timescales associated specifically with the profit-maximising drives of financial capital is important as it indicates the short-termism involved. Three factors are important in producing this tendency.

The first is the depoliticization of the political wing of the state managers through the delegation of functions away from the government in office to ostensibly 'non-political' bodies, the introduction ostensibly 'objective' assessments of the effectiveness of policy and imposition of binding 'rules' which restrict the range of actions which politicians can take. In relation to the latter in particular, each successive phase of the neoliberal experiment saw the incremental abandonment of the repertoire of measures through which governments had traditionally influenced economic activity, beginning with Geoffrey Howe's abandonment of exchange controls in 1979 and concluding (to date) with Gordon Brown's transfer of the power to set interest rates from the Treasury to an unelected committee of the Bank of England.

As a consequence of their heightened 'managerial' function, politicians have increasingly become a professional caste whose life-world is increasingly remote from any other form of activity, economic or otherwise, and therefore more autonomous, while simultaneously becoming more committed to capitalist conceptions of the national interest, with business as an exemplar. Consequently, most discussion of politics – in the developed world at least – is devoted to expending more or less informed commentary and speculation on essentially meaningless exchanges within Parliaments and other supposedly representative institutions. Debates therefore have the quality of a shadow play, an empty ritual in which trivial or superficial differences are emphasised in order to give an impression of real alternatives and justify the continuation of party competition. To understand why, we have to focus on the weakening of the labor movement, since one of the inadvertent roles which it historically played was to save capitalism from itself, not least by achieving reforms in relation to education, health and welfare. These benefitted workers, of course, but also ensured that the reproduction of the workforce and the conditions for capital accumulation more generally took place. In this respect social democracy occupied a similar place to the pre-capitalist elites identified by Schumpeter as necessary to rule on behalf of a congenitally incapable capitalist class. But with the weakening of trade union power and the capitulation of social democracy to neoliberalism, there is currently no social force capable of either playing this reformist role directly or by pressurizing non-social democratic state managers into playing it.

The second factor, opposed to the depoliticization of politicians, is the politicization of the non-political wing of the state managers: the civil servants. As the political parties became less distinct from each other, the officials required to implement their increasingly similar policies are required to turn themselves more completely into extensions of the parties themselves. In the US, the politicization of the civil service has always been a more significant factor than in the UK, but even there the neoliberal era saw a heightening of the existing tendency. The permeability and lack of technocracy of the US state bureaucracy compared to the French or British may have some advantages for capital, but generally hinders the separation of policy making from political considerations and leads to the politically motivated choice of budget projections. These tendencies were exacerbated by the Civil Service Reform Act of 1978 which further weakened the autonomous basis of the government bureaucracy. In the UK, following hard on the heels of the United States as always, there has been since 1979, and especially since 1997, a more generalised influx of private-sector appointees into the civil service, to the point where it has been effectively subject to a corporate takeover. But even in relation to the permanent home civil service, the expectation that senior civil servants in particular will not attempt to point out the difficulties involved in governmental policies or even consider alternative ways of delivering policies, but simply present arguments to justify them, regardless of the empirical data.

The third and final factor in producing chronic short-termism in neoliberal regimes is the de-politicization of the electorate. Except it is not so much de-politicization as abstention by sections of the electorate who no longer have any parties for whom to vote. Many of those electors still involved in casting their vote do so – appropriately enough – on a consumer model of political choice, where participation is informed by media-driven perceptions of which result will be to their immediate personal benefit. Unsurprisingly, the numbers prepared to carry out even this minimal level of activity are declining. This can be reversed, as was demonstrated in the popular insurgency for a Yes vote during the 2014 Scottish independence referendum, where 97 percent of population registered to vote and 85 percent actually did; but under 'normal' conditions, those who vote are more likely to belong to the middle-classes, who tend to have a more focused view of their material interests and deploy more interventionist strategies for maintaining them than those bearing the brunt of austerity. Ironically, one reason for the rise of neoliberalism in the US was a paradoxical outcome of the successful demand for greater democratic accountability during the 1960s and 1970s. This led to the weakening of both congressional committees and party structures, and produced a new breed of 'entrepreneurial politicians' interested in highlighting issues popular with specific audiences which would provide them with a stable following.

A model for 'returning power to the people' along these lines was built early on in the neoliberal experiment, in the US. The most fully developed version can be found in California. Since the mid-1970s, politics in the world's fourth biggest economy have been characterised by a combination of falling voter participation among working class and minority groups, and a targeted use of local referendums on 'propositions'. The latter have been designed to defend property values by blocking integrated schooling and urban development, and by preventing progressive taxation. Proposition 13 was passed in 1978 and signalled the commencement of the neoliberal era in the US by capping taxes on property, even though house values were rising. As a result, the burden of taxation fell disproportionately on income tax, even though for most worker's salaries and wages were stagnant or falling – and even increasing income tax requires a two thirds majority in both Houses of the State Legislature.

It is the self-interested behaviour of a mobilised middle-class that has brought California to fiscal crisis in 2009, after which the usual remedies of cutting public services, including child health care, were now being offered as a solution to the structural inability of the state to raise the necessary levels of taxation. The paralysis of California may foreshadow the future of US politics as a whole and, in turn, the US may foreshadow the future of politics in the rest of the world, a development for which there are, unfortunately, historical precedents.

The entire neoliberal project was premised on the irreversibility of the process: the abolition of regulatory mechanisms, dismantling of welfare programs, ratification of international treaties for which there are no formal mechanisms allowing them to be either amended or annulled, and so on – all these could be reversed, but it would require new legal and administrative structures which would in turn require planning and a political will to do so which has not existed since the beginning of the neoliberal era. For all practical purposes then, members of the ruling class in the West are now united in accepting neoliberalism as the only viable way of organising capitalism as an economic system, but they are divided in relation to how capitalism should be organised as a social system. They may all be neoliberals now, but they are not all neoconservatives. In the US both Democrats and Republicans are openly committed to capitalism, but there are also real divisions of opinion between them concerning, for example, gay rights or environmental protection.

Electoral support for the far-right in these circumstances is based on the apparent solutions it offers to what are now two successive waves of crisis, beginning respectively in 1973–4 and 2007–8, which have left the working class in the West increasingly fragmented and disorganised, and susceptible to appeals to blood and nation as the only viable form of collectivism still available, particularly in a context where any systemic alternative to capitalism – however false it may have been – had apparently collapsed in 1989–91. The political implications are ominous. The increasing interchangeability of political parties, discussed above gives the far-right an opening to appeal to voters by positioning themselves as outside the consensus in ways which speak to popular appetites for destruction fostered by capitalism itself.

The potential problem for the stability of the capitalist system is however less the possibility of far-right parties themselves coming to power with a programme destructive to capitalist needs, than their influence over the mainstream parties of the right, when the beliefs of their supporters may inadvertently cause difficulty for the accumulation process. Take an important area of Republican Party support in the US. Since the late sixties Republicans have been increasingly reliant on communities of fundamentalist Christian believers, whose activism allows them to be mobilised for voting purposes. But this religious core vote, or at any rate their leadership, naturally also demand the implementation of policies in return for their support. The problem for the Republicans is not, however, only that the extremism of fundamentalist Christianity may alienate the electoral 'middle-ground' on which the results of American elections increasingly depend. What is perhaps interesting here is less the consciously oppositional elements of right-wing populist ideology, which tend to be directed against the socio-cultural views of one (liberal) wing of the ruling class, and more what I referred to earlier as outcomes which might be unintentionally 'detrimental' to capital. In other words, politicians may be constrained from undertaking policies which may be necessary for American capitalism, or be forced into taking decisions which may harm it.

But it is not only religious belief which can cause difficulties for US capital; so to can overt anti-migrant racism. One concrete example of this is the Tea Party-inspired Beason-Hammon Alabama Taxpayer and Citizen Protection Act – HB56 as it is usually known – which was passed by the State legislature in June 2011, making it illegal not to carry immigration papers and preventing anyone without documents from receiving any provisions from the state, including water supply. The law was intended to prevent and reverse illegal immigration by Hispanics, but the effect was to cause a mass departure from the many of the agricultural businesses which relied on these workers to form the bulk of their labour force. But the effects went deeper. Before the laws introduced it was estimated that 4.2 percent of the workforce or 95,000 people were undocumented but paying $130.3 million in state and local taxes. Their departure from the state or withdrawal to the black economy threatened to reduce the size of the local economy by $40 million. Moreover employers had to spend more money on screening prospective employees, on HR staff to check paperwork, and on insuring for potential legal liabilities from inadvertent breaches of the law. In an earlier era, social democratic reforms were usually intended to enable the system as a whole to function more effectively for capitalists and more equitably for the majority, however irreconcilable these aims may be in reality. But far-right reforms of the type just discussed are not even intended to work in the interests of capitalists, nor do they: they really embody irrational racist beliefs which take precedence over all else.

The British Conservative Party has encountered similar problems to the Republicans in relation to Europe. The imperial nationalism unleashed by the Conservatives before 1997 in relation to 'Europe', was not because the EU was in any sense hostile to neoliberalism, but as an ideological diversion from the failure of neoliberalism to transform the fortunes of British capital. The nationalism invoked for this purpose now places a major obstacle for British politicians and state managers who want to pursue a strategy of greater European integration, however rational that may be from their perspective. A 2013 British Chambers of Commerce poll of 4,387 companies showed only eighteen percent agreeing that full withdrawal from the EU could have a positive impact, while a majority of sixty-four percent supported remaining inside the EU while repatriating some powers: unsurprisingly, the real source of anti-EU feeling is small business. The key beneficiary of the anti-European hysteria has been UKIP and its success has in turn emboldened the right within the Conservative Party, even though the policies associated with both are incoherent. But these contradictions may not matter in terms of the political struggle for power. The narrowly-won Swiss referendum vote in 2014 to introduce quotas on migrants from the EU, passed against the wishes of local capitalists and ruling classes of Europe and potentially bringing retaliation from Brussels, gives a small indication of what might follow.

If I am right that certain aspects of far-right politics are counter-productive in relation to the needs of capital, it does not follow that the increased chaos consequent on the implementation of these policies would necessarily be of benefit, even indirectly, to the left. Defence of the system is always the principle objective of the bourgeoisie, even at the expense of temporary system malfunction. In a situation where economic desperation was leading to mounting disorder, far-right parties would be brought into play to direct attention from the real source of social anguish onto already-identified scapegoats, no matter what price they exacted in terms of policy.

What we see emerging is a symbiotic relationship between one increasingly inadequate regime response to the problems of capital accumulation and another increasingly extreme response to the most irrational desires and prejudices produced by capital accumulation. In Descent, the most recent novel by the Scottish science fiction author, Ken McLeod, the author imagines a situation in the near future where the ruling classes of the world take coordinated legal and military action in a passive revolution ('the Big Deal') to smash the dominance of financial capital, restore that of industrial capital and essentially put an end to the neoliberal era. This aspect of the novel is far more incredible than the alien encounters that occur elsewhere in its pages. Clearly, in situations of absolute, immediate crisis, short-term emergency measures would be introduced in the same way as the effective nationalisation of banks and other financial institutions took place in both the US and UK during 2008. But these were minimal interventions to prevent outright collapse, save the institutions (and the practices which brought them to the point of crisis in the first place) without using them for any coherent strategic end, let alone any broader social purpose; and of course on the basis that they would be re-privatised as soon as possible.

Let me clear what I am not saying. I am not suggesting that it should be the work of socialists to propose solutions to the crisis of capitalism. It is always necessary to argue for reforms, of course, but the idea that the application of Keynesian solutions would restore the Golden Age of the post-war welfare state is simply illusionary and underestimates the extent to which those years were the result of a unique set of circumstances. Booms will continue to occur, as they did between 1982 and 2007, but the beneficiaries will become fewer and fewer. Consequently, I am not predicting that developments discussed here mean that capitalism will simply collapse under the weight of its own internal contradictions either. Scenarios of this type, from those of Rosa Luxemburg onwards, have been proved false in the past and there is no reason to suppose that they will be any more accurate in the future. Indeed, a collapse not brought about by the conscious intervention of the oppressed and exploited would not be to their advantage in any case, but simply a step towards the barbarism to which Marxists from Engels onwards have seen as the consequence of failing to achieve a socialist society. And this is no mere slogan: the condition of central Africa and parts of the Middle East today indicates the presence of actually existing barbarism as the daily reality for millions. Events in the developed world are unlikely to take this form, at least until environmental catastrophe becomes irreversible, but rather involve a gradual and, for all but the very poorest, almost imperceptible worsening and coarsening on their conditions of life.

What I am suggesting is that neoliberalism as a strategy has almost been too successful as a method of capitalist regulation. It has finally brought about the situation that Schumpeter feared, where creative destruction has no limits or boundaries. Both Engels and Benjamin envisaged capitalism as a runaway train heading for destruction. It appeared, within less than a decade of the latter's suicide in 1940, that forces within capitalism itself were capable of 'pulling the hand break'; it now appears that his initial intuition was right and that revolution is all stands in the way of the disaster that otherwise awaits.

Neil Davidson lectures in Sociology with the School of Social and Political Sciences at the University of Glasgow. He is the author of The Origins of Scottish Nationhood (2000), the Deutscher-Prize winning Discovering the Scottish Revolution (2003), How Revolutionary Were the Bourgeois Revolutions? and Holding Fast to an Image of the Past (2014). His latest book, We Cannot Escape History, will be published in July. Davidson has co-edited and contributed to Alasdair MacIntyre's Engagement with Marxism (2008), Neoliberal Scotland (2010) and The Longue Durée of the Far Right (2014). He is in the editorial board of rs21. Davidson is a member of International Socialists Scotland and a supporter of the Scottish Left Project.

[Apr 23, 2016] My support for Obama evaporated as it became apparent that, rather than fighting for civil rights, he was doubling down on Bush/Cheneys totalitarian approach to all issues of security

Notable quotes:
"... This question contains one truly huge assumption: that liberals actually support Obama and Clinton. My support for Obama evaporated as it became apparent that, rather than fighting for civil rights, he was doubling down on Bush/Cheney's totalitarian approach to all issues of security. ..."
"... The only time I've really thought he was fighting for anything was against Hillary during the latter part of his first nominating process. Since then he's been fairly spineless. ..."
"... The Clintons have never been liberal. They're all about taking the safe middle of the road; they'd never take on the corporate interests because they want their donations just like the right wing. ..."
"... If you want to find liberals, find folks like me that are at least interested in Sanders. Or at least initiate political conversations on your own. Educate yourself on the issues that are important to you and start talking with the people around you. ..."
www.quora.com

This question contains one truly huge assumption: that liberals actually support Obama and Clinton. My support for Obama evaporated as it became apparent that, rather than fighting for civil rights, he was doubling down on Bush/Cheney's totalitarian approach to all issues of security. His incessant compromises with GOP on health-care during his first year or two left us with an ACA that is somewhat better than nothing but falls dramatically far short of what it should have been; and the compromises were just tricks, the GOP intended to stonewall it from the beginning.

His FCC's actions on net neutrality were essential but don't outweigh his failings on liberty, privacy, and other issues. His failures to respond to the Bundy family's two armed insurrections are typical of his passive afraid-of-the-backlash approach to just about everything.

His administration is complicity embedded with the Content Ownership industry to eliminate the fair-use exception to copyright law. The only time I've really thought he was fighting for anything was against Hillary during the latter part of his first nominating process. Since then he's been fairly spineless.

Only reason I don't usually air these concerns publicly is the scandalous amount of racism and sheer hatred in the heart of the GOP's nut-job opposition.

The Clintons have never been liberal. They're all about taking the safe middle of the road; they'd never take on the corporate interests because they want their donations just like the right wing.

... ... ... ...

If you want to find liberals, find folks like me that are at least interested in Sanders. Or at least initiate political conversations on your own. Educate yourself on the issues that are important to you and start talking with the people around you.

[Apr 22, 2016] Report

www.theguardian.com
Anarchy4theUK PaulBowes01 , 2016-04-15 20:56:56
That's not what happens in Venezuela, Chavez was the big hero of the left, now look at Venezuela, how's it working out for them?
Osager , 2016-04-15 14:40:50
this is why I read the guardian
amberjack Osager , 2016-04-15 14:56:41

this is why I read the guardian

This is pretty much the only reason why I still read the Guardian.

Monbiot and the quick crossword.

Shanajackson Osager , 2016-04-15 15:07:42
Monbiot is the best journalist the Guardian has, he can actually make a logical fact based argument unlike the majority of Guardian journalist.
TOOmanyWilsons Shanajackson , 2016-04-15 16:36:01
John Harris is wonderful too. The only guy on the staff who can write about the working class with clarity, respect and understanding. But Monbiot is also the biscuit.
qzpmwxonecib , 2016-04-15 14:40:53
Any ideology will cause problems. Right wing and left wing. Pragmatism and compassion are required.
Tad Blarney qzpmwxonecib , 2016-04-15 15:17:22
'The Invisible Hand' is not an ideology or dogma. It's just a metaphor to describe those with problems grasping abstract concepts: when there are a large number of buyers and suppliers for a good, the 'market finds a price' which is effectively the sum of all the intelligence of the participants, their suppliers, customers etc..

The Socialists, who have difficulty grasping this reality, want to 'fix' the price, which abnegates the collective intelligence of the market participants, and causes severe problems.

Capitalism is freedom, Socialism is someone's ideology.

brovis Tad Blarney , 2016-04-15 18:38:35

'The Invisible Hand' is... a metaphor to describe those with problems grasping abstract concepts: when there are a large number of buyers and suppliers for a good, the 'market finds a price' which is effectively the sum of all the intelligence of the participants

You clearly haven't read Wealth of Nations. The only mention of an invisible hand is actually a warning against what we now call neoliberalism. Smith said that the wealthy wouldn't seek to enrich themselves to the detriment of their home communities, because of an innate home bias. Thus, as if by an invisible hand, England would be spared the ravages of economic rationality.
Your understanding of the 'invisible hand' is a falsehood perpetuated by neoliberal think tanks like the Adam Smith institute (no endorsement or connection to the author, despite using his name).

'The Invisible Hand' is not dogma.


You definitely know a lot about dogma (and false dichotomies):

Capitalism is freedom, Socialism is someone's ideology.

Ricochet , 2016-04-15 14:41:16
This is an interesting academic piece but the reality is that we don't have anything like neo-liberalism in this country as defined by Hayek and it has become a term of abuse by people who really ought to know better. The strongest abuse of course is linked to the Blair Government, a period, of course, when, with substantial success, the size and reach of the state increased quite substantially, ie the complete opposite of neo-liberalism.

In fact, suggesting that the UK is neo liberal is not that much different for suggesting that Russia had communism as defined by Marx.

Whether it is a good or bad thing that we don't have neo-liberalism is open to academic debate but is not of much use in real life.

Monbiot suggests that a coherent alternative to the current situation needs to be developed but disappointingly fails to give any clues as to what it might look like except, of course, that it must have some type of environmental context.

Aleocrat Ricochet , 2016-04-15 23:36:22
Maybe it takes more than one man to map out a path to the future.
unheilig , 2016-04-15 14:41:23

A coherent alternative has to be proposed. For Labour, the Democrats and the wider left, the central task should be to develop an economic Apollo programme, a conscious attempt to design a new system, tailored to the demands of the 21st century

All very well, but how? Did anyone hear the screams of rage when Sanders started threatening Hillary, or when Corbyn trounced the Blairites? The dead hand of Bernays and Goebbels controls everything.
Greg_Samsa , 2016-04-15 14:42:35
"Neoliberalism: do you know what it is?"

Yes it is what the G has been purveying wholesale for the last few years.

Luminaire Greg_Samsa , 2016-04-15 14:57:34
Wow, you read the WHOLE title. Well done.
zolotoy Luminaire , 2016-04-15 15:03:52
And yet Greg_Samsa's comment is entirely correct, and yours entirely worthless.
Luminaire zolotoy , 2016-04-15 15:26:59

And yet Greg_Samsa's comment is entirely correct, and yours entirely worthless.

So smug and yet so wrong. Infinite Wisdom is exactly already IN the article. He's not added anything. Which is what I was pointing out.

EricBallinger , 2016-04-15 14:42:51
There is no alternative on offer by the left.
The socialist/trade union package is outmoded.
The failure to describe reality in a way that concurs with what ordinary people experience has driven off much support and reduced credibility.
There is no credible model for investment and wealth creation.
The focus on social mobility upwards rather than on those who do not move has given UK leftism a middle-class snobby air to it.
Those entering leftist politics have a very narrow range of life experience. The opposition to rightist politics is cliched and outmoded.
There is a complete failure to challenge the emerging multi-polar plutocratic oligarchy which runs the planet - the European left just seeks a comfy accommodation.
There is no attempt to develop a post-socialist, holistic worldview and ideology.
oreilly62 EricBallinger , 2016-04-15 14:52:26
The trade union package, gave us meal breaks, holidays, sickness benefits, working hours restrictions, as opposed to the right wing media agenda, that if you aint getting it nobody should, pour poison on the unions, pour poison on the public sector, a fucking media led race to the bottom for workers, and there were enough gullible (poor )mugs around to accept it. You can curse the middle class socialists all you like, but without their support the labour movement would never have got off the ground.
Paidenoughalready oreilly62 , 2016-04-15 14:59:02
Okay, so you've described the 1950's through to the 1980's.

So what have the unions done for us isn the last two decades ?

Why is it all the successful, profitable and productive industries in the Uk have little or no union involvement ?

Why is it that the least effective, highest costs and poorest performing structures are in the public sector and held back by the unions ?

Here's a clue - the unions are operating in the 21st century with a 1950's mentality.

oreilly62 Paidenoughalready , 2016-04-15 15:18:26
During the industrial revolution, profitability and productivity were off the scale because the workforce were just commodities, Unionisation instigated the idea that without the workforce, your entrepreneurs can't do anything on their own, Henry Ford wouldn't have become a millionaire without the help of his workforce. 'Poorest performing structures' Guess what! some of us are human beings not auto- matrons. I hope you dine well on sterling and dollars, cause they're not the most important things in life.
countyboy , 2016-04-15 14:43:30
It's the only way. It's not perfect but it achieves the best ( not ideal ) possible result.

What if in the end there's no where left to go ?

What if the highest possible taxes, zero avoidance / evasion and high employment still equals deficits and increasing national debt ?

What then ?

fumbduck countyboy , 2016-04-15 14:54:56

What if the highest possible taxes, zero avoidance / evasion and high employment still equals deficits and increasing national debt ?

The paragraph written above neatly describes the post WW2 years, where the UK was pretty much in perpetual surplus. High employment does not equate to national debt/deficit. Quite the opposite, the more people in gainful employment the better. Increasing unemployment, driving wages down while simultaneously increasing the cost of living is a recipe for complete economic failure.

This whole economics gig is piss easy, when the general mass of people have cash to spare they spend it, economy thrives. Hoard the cash into the hands of a minority and starve the masses of cash, economy dies. It really is that simple.

makirby countyboy , 2016-04-15 15:23:23
Public deficits exist to match the private surplus created by the rich enriching themselves. To get rid of the deficit therefore we need to get rid of the private wealth of the rich through financial repression and taxation
Aleocrat countyboy , 2016-04-15 23:41:11
Then you're spending it wrong and should be replaced.
CoobyTavern , 2016-04-15 14:43:38
I read, cannot remember where, that with neo liberalism the implementation is all that matters, you do not need to see the results. I suppose because the followers believe when implemented it will work perfectly.
I think it's supporters think it is magic and must work because they believe it does.
dreamer06 CoobyTavern , 2016-04-15 15:20:42
Yes, a high priest of neo-liberalism, Lord Freud, was given only 13 weeks to investigate and reform key elements of the the UK's welfare system, it hasn't worked and Freud is now invisible.
tonyeff , 2016-04-15 14:43:45
Hopeful this is the start for change through identifying issues and avoiding pitfalls.
Failed neoliberalism and not restricting markets that do not benefit the majority are the cause and we stand on the brink of falling further should the Brexiter's have their way. If there's one thing the EU excels at it's legislating against the excesses of business and extremism.
Let's make a start by staying in the EU.

[Apr 22, 2016] MoreNotLess

profile.theguardian.com
7d ago 5 6 Part of the problem is that Neoliberalism isn't as clearly defined as communism. This also means that anything bad that happens in society today can be hung on to neoliberalism whether warranted or not. Zika causes microcephaly? another consequence of neoliberalism to be sure!

So we have two problems now. One like the author points out, there is no coherent alternative from the left (interestingly the Canadian NDP party tried and your much beloved Naomi Klein was part of a group who sabotaged the effort and produced a neo-stalinist proposal instead that went nowhere) and second, since is so diffuse a target it becomes a boogey man rather than actual target to be loathed. Reply | Pick Report vastariner , 2016-04-15 14:38:19

Attempts to limit competition are treated as inimical to liberty.


Are they though? Even ignoring trade subsidies, it's a bit difficult to compete in e.g. politics, the media, the law and many other areas unless you have money behind you. It's more a self-perpetuating protectionist oligarchy. And therefore as much neoliberalism as North Korea is communism.
dreamer06 , 2016-04-15 14:38:54
Another incisive article by George, one area where neo-liberalism is dominant is that of 'welfare reform', a key component of the ideology, In this sphere the lack of interest and action by the left, civil society, etc, has been shameful, I can recall here in the UK that at one weekend during the New Labour reign at a Labour Party Conference 60,000 people protested anti-war issues while only about 80 were there for the Monday event against N/L's nascent Welfare Reform Bill which created the policy architecthure for all the coming changes.. Now there are suicides, misery for milllions, etc, it was left to a few disability groups, a few allies, Unite Community, UkUncut, etc to challenge the behemoth. The Left has a hierarchy of oppression which often means it operates in a bubble aloof from wider concerns.
Owlyrics dreamer06 , 2016-04-15 14:48:54
People have been set up for decades to respond offensively to some words like unions, unemployed, sole parents, Greenies (environmentalists), female leaders, you name it, anyone they don't like. There is white trash, bogans, bludgers like trained pets they repeat the mantra as soon as anyone opposes them and people go against their best interests.
umopapisdn dreamer06 , 2016-04-15 16:45:04
New Labour was a con trick. JC's version will, imho, reverse a lot of the damage done - that's if the Blairites will stop throwing their toys out the pram.
Shelfunit umopapisdn , 2016-04-17 07:46:11

New Labour was a con trick. JC's version will, imho, reverse a lot of the damage done

Yup, no more of this getting elected rubbish. Protests now and forever more.

KellySmith81 , 2016-04-15 14:39:03
neoliberalism is so wide spread that those that are actual neo-liberals don't even know they are. neoliberalism is core of The Conservatives and New Labour , Lid Dem even Green Party could be classed as neo-liberals, so the alternative is the communist party who are actually against staying in the EU or the idiots on the the right like UKIP and so on. We need common sense party instead of the terrible state of politics we have all over the Globe. The rise in the far-left and the far-right the non-platform anti free speech left with their phobia labels or the neanderthals of the far-right like rise of Golden Dawn and the anti-Muslim rhetoric by Trump.
Josh Phillips KellySmith81 , 2016-04-15 14:45:36
Greens are neo-liberals? Mate, we're left of labour even now. We believe economic growth is fundamentally incompatible with a sustainable future, for example
(academic research beyond the faulty national statistics supports this), and the only way to tackle this is a wholesale redistrbutive system. The poor would be hit hardest by radical cuts in consumption and carbon limits. Enough to impoverish millions in this country alone. So we need to be redistributive in a far more radical way than even corbyns labour would be.
Luminaire KellySmith81 , 2016-04-15 14:54:54
Agreed, it feels like there's a HUGE gap in politics that simply isn't being filled at the moment. The false starts for real 'multi-party' politics that were the Lib Dem gains, Green Party and UKIP have all turned out to be more of the same, damp squibs or total mess.

People are sick of politics, they're sick of bizarre single-issue parties and they're sick of even the language of politics. Such opportunity and yet nothing is appearing.

zolotoy Josh Phillips , 2016-04-15 14:59:26
Depends on which Greens. The German Greens, for instance, after some initial party, are now just another corporate-friendly party that will compromise with anyone and anything.
BarbecueAndBullshit , 2016-04-15 14:39:15
Good article apart from the schoolboy error of characterising the USSR as Communist.

No advanced Communist State has yet existed. For clarification of the theory, try reading Etienne Balibar's On the Dictatorship of the Proletariat ( http://www.amazon.co.uk/Dictatorship-Proletariat-Etienne-Balibar/dp/0902308599/ref=la_B000APFJLA_1_16?s=books&ie=UTF8&qid=1460727417&sr=1-16 ) also available online ( http://www.marx2mao.com/Other/ODP77NB.html ).

Kavi Mazumdar BarbecueAndBullshit , 2016-04-15 18:39:26
Oh yes, it will succeed the next time. Or the time after that. Or the time after that...

Always an excuse with commies eh? I understand socialists banging on about non-implementation but commies?

bobthebuilder2017 BarbecueAndBullshit , 2016-04-16 13:56:16
Yes, Lenin's attempt at implementing the abstract theories of Marx (he believed he found a way to short circut the stages of socioevolution by skipping the Capitalist phase by jumping from Feudalism.to Socialism - the goal of the USSR.

The people were the eggs in the theoretical omlet that was made.

The fact that so many were brutally murdered in the persuit of and ends propagandized as 'liberation' can never be a llowed to be forgotten.

The next time will not be different, nor the time after that or the one after that.

NietzscheanChe , 2016-04-15 14:39:15
The world has been written off and fucked into the shite heap to rot.
Pratandwhitney , 2016-04-15 14:39:52
Well said.
But I think we are too far in it and cant see any opposition for this.
Big corpos will try to keep status quo or even push harder their own agenda. They have easy job as they only have to buy (already done this) few politicians.
platopluto , 2016-04-15 14:39:55
We haven't failed to come up with an alternative- we've been shouting it at you. Its name is socialism. Thankfully we have Bernie Sanders, Jeremy Corbyn et al to represent our cause yet still it falls on deaf ears with the press and the political establishment.

Power to the people!

countyboy platopluto , 2016-04-15 14:49:48
Unfortunately power requires money and socialism does not provide it.
zolotoy countyboy , 2016-04-15 15:02:42
Power . . . or guns. And of course the servants and dupes of capitalism have most of the guns.
MoreNotLess platopluto , 2016-04-15 15:11:38
He meant an alternative that has a track record of working.
bithoo , 2016-04-15 14:40:00
In the 20th century more people were killed by their own governments than in war. But to the left the real threat to people comes not from a concentration of power wielded by governments but of concentrations of wealth in private hands.
koichan bithoo , 2016-04-15 14:54:30
The problem is that concentration of wealth leads to the buying of government power.

It's not simple government bad, wealth good or indifferent. It's the wealthy using said wealth to buy government power to further enrich the wealthy.
Government is just a tool, who drives it matters.

septicsceptic bithoo , 2016-04-15 17:52:11
This comment is predicated entirely on the assumption that history repeats itself in identical form.
bobthebuilder2017 septicsceptic , 2016-04-16 14:02:22
No, history doesn't repeat: it rhymes.
Cornus PaulBowes01 , 2016-04-15 18:05:19
In addition to neoliberalism being adopted by the Democrats and Labour, another distinct ideology has the traditional parties of the left tied in knots.

One YouTuber has called it 'Neoprogressivism' - the creed underpinning identity politics.

Above Monbiot describes how neoliberalism was in large part born as Hayek's alternative to the early twentieth century nationalism/communism clash; worryingly it seems a century later our politics is again hamstrung by two pernicious ideologies as the world blindly races towards another disaster.

Whereas neoliberalism is now widely recognised and eviscerated, light is just starting to be shone on 'Neoprogressivism'. I recommend the YouTube video of this title for an account of the second 'rock' around which contemporary politics navigates.

brovis Cornus , 2016-04-15 18:55:17

One YouTuber has called it 'Neoprogressivism'


So we can safely dismiss it as the ramblings of a disgruntled attention seeker who is too dumb to realise that s/he isn't an overlooked genius.
Good.

Whereas neoliberalism is now widely recognised and eviscerated


No, it's not. That's the point.
Anarchy4theUK PaulBowes01 , 2016-04-15 20:56:56
That's not what happens in Venezuela, Chavez was the big hero of the left, now look at Venezuela, how's it working out for them?
Osager , 2016-04-15 14:40:50
this is why I read the guardian
amberjack Osager , 2016-04-15 14:56:41

this is why I read the guardian

This is pretty much the only reason why I still read the Guardian.

Monbiot and the quick crossword.

Shanajackson Osager , 2016-04-15 15:07:42
Monbiot is the best journalist the Guardian has, he can actually make a logical fact based argument unlike the majority of Guardian journalist.
TOOmanyWilsons Shanajackson , 2016-04-15 16:36:01
John Harris is wonderful too. The only guy on the staff who can write about the working class with clarity, respect and understanding. But Monbiot is also the biscuit.
qzpmwxonecib , 2016-04-15 14:40:53
Any ideology will cause problems. Right wing and left wing. Pragmatism and compassion are required.
Tad Blarney qzpmwxonecib , 2016-04-15 15:17:22
'The Invisible Hand' is not an ideology or dogma. It's just a metaphor to describe those with problems grasping abstract concepts: when there are a large number of buyers and suppliers for a good, the 'market finds a price' which is effectively the sum of all the intelligence of the participants, their suppliers, customers etc..

The Socialists, who have difficulty grasping this reality, want to 'fix' the price, which abnegates the collective intelligence of the market participants, and causes severe problems.

Capitalism is freedom, Socialism is someone's ideology.

brovis Tad Blarney , 2016-04-15 18:38:35

'The Invisible Hand' is... a metaphor to describe those with problems grasping abstract concepts: when there are a large number of buyers and suppliers for a good, the 'market finds a price' which is effectively the sum of all the intelligence of the participants

You clearly haven't read Wealth of Nations. The only mention of an invisible hand is actually a warning against what we now call neoliberalism. Smith said that the wealthy wouldn't seek to enrich themselves to the detriment of their home communities, because of an innate home bias. Thus, as if by an invisible hand, England would be spared the ravages of economic rationality.
Your understanding of the 'invisible hand' is a falsehood perpetuated by neoliberal think tanks like the Adam Smith institute (no endorsement or connection to the author, despite using his name).

'The Invisible Hand' is not dogma.


You definitely know a lot about dogma (and false dichotomies):

Capitalism is freedom, Socialism is someone's ideology.

Ricochet , 2016-04-15 14:41:16
This is an interesting academic piece but the reality is that we don't have anything like neo-liberalism in this country as defined by Hayek and it has become a term of abuse by people who really ought to know better. The strongest abuse of course is linked to the Blair Government, a period, of course, when, with substantial success, the size and reach of the state increased quite substantially, ie the complete opposite of neo-liberalism.

In fact, suggesting that the UK is neo liberal is not that much different for suggesting that Russia had communism as defined by Marx.

Whether it is a good or bad thing that we don't have neo-liberalism is open to academic debate but is not of much use in real life.

Monbiot suggests that a coherent alternative to the current situation needs to be developed but disappointingly fails to give any clues as to what it might look like except, of course, that it must have some type of environmental context.

Aleocrat Ricochet , 2016-04-15 23:36:22
Maybe it takes more than one man to map out a path to the future.
unheilig , 2016-04-15 14:41:23

A coherent alternative has to be proposed. For Labour, the Democrats and the wider left, the central task should be to develop an economic Apollo programme, a conscious attempt to design a new system, tailored to the demands of the 21st century

All very well, but how? Did anyone hear the screams of rage when Sanders started threatening Hillary, or when Corbyn trounced the Blairites? The dead hand of Bernays and Goebbels controls everything.
Greg_Samsa , 2016-04-15 14:42:35
"Neoliberalism: do you know what it is?"

Yes it is what the G has been purveying wholesale for the last few years.

Luminaire Greg_Samsa , 2016-04-15 14:57:34
Wow, you read the WHOLE title. Well done.
zolotoy Luminaire , 2016-04-15 15:03:52
And yet Greg_Samsa's comment is entirely correct, and yours entirely worthless.
Luminaire zolotoy , 2016-04-15 15:26:59

And yet Greg_Samsa's comment is entirely correct, and yours entirely worthless.

So smug and yet so wrong. Infinite Wisdom is exactly already IN the article. He's not added anything. Which is what I was pointing out.

EricBallinger , 2016-04-15 14:42:51
There is no alternative on offer by the left.
The socialist/trade union package is outmoded.
The failure to describe reality in a way that concurs with what ordinary people experience has driven off much support and reduced credibility.
There is no credible model for investment and wealth creation.
The focus on social mobility upwards rather than on those who do not move has given UK leftism a middle-class snobby air to it.
Those entering leftist politics have a very narrow range of life experience. The opposition to rightist politics is cliched and outmoded.
There is a complete failure to challenge the emerging multi-polar plutocratic oligarchy which runs the planet - the European left just seeks a comfy accommodation.
There is no attempt to develop a post-socialist, holistic worldview and ideology.
oreilly62 EricBallinger , 2016-04-15 14:52:26
The trade union package, gave us meal breaks, holidays, sickness benefits, working hours restrictions, as opposed to the right wing media agenda, that if you aint getting it nobody should, pour poison on the unions, pour poison on the public sector, a fucking media led race to the bottom for workers, and there were enough gullible (poor )mugs around to accept it. You can curse the middle class socialists all you like, but without their support the labour movement would never have got off the ground.
Paidenoughalready oreilly62 , 2016-04-15 14:59:02
Okay, so you've described the 1950's through to the 1980's.

So what have the unions done for us isn the last two decades ?

Why is it all the successful, profitable and productive industries in the Uk have little or no union involvement ?

Why is it that the least effective, highest costs and poorest performing structures are in the public sector and held back by the unions ?

Here's a clue - the unions are operating in the 21st century with a 1950's mentality.

oreilly62 Paidenoughalready , 2016-04-15 15:18:26
During the industrial revolution, profitability and productivity were off the scale because the workforce were just commodities, Unionisation instigated the idea that without the workforce, your entrepreneurs can't do anything on their own, Henry Ford wouldn't have become a millionaire without the help of his workforce. 'Poorest performing structures' Guess what! some of us are human beings not auto- matrons. I hope you dine well on sterling and dollars, cause they're not the most important things in life.
countyboy , 2016-04-15 14:43:30
It's the only way. It's not perfect but it achieves the best ( not ideal ) possible result.

What if in the end there's no where left to go ?

What if the highest possible taxes, zero avoidance / evasion and high employment still equals deficits and increasing national debt ?

What then ?

fumbduck countyboy , 2016-04-15 14:54:56

What if the highest possible taxes, zero avoidance / evasion and high employment still equals deficits and increasing national debt ?

The paragraph written above neatly describes the post WW2 years, where the UK was pretty much in perpetual surplus. High employment does not equate to national debt/deficit. Quite the opposite, the more people in gainful employment the better. Increasing unemployment, driving wages down while simultaneously increasing the cost of living is a recipe for complete economic failure.

This whole economics gig is piss easy, when the general mass of people have cash to spare they spend it, economy thrives. Hoard the cash into the hands of a minority and starve the masses of cash, economy dies. It really is that simple.

makirby countyboy , 2016-04-15 15:23:23
Public deficits exist to match the private surplus created by the rich enriching themselves. To get rid of the deficit therefore we need to get rid of the private wealth of the rich through financial repression and taxation
Aleocrat countyboy , 2016-04-15 23:41:11
Then you're spending it wrong and should be replaced.
CoobyTavern , 2016-04-15 14:43:38
I read, cannot remember where, that with neo liberalism the implementation is all that matters, you do not need to see the results. I suppose because the followers believe when implemented it will work perfectly.
I think it's supporters think it is magic and must work because they believe it does.
dreamer06 CoobyTavern , 2016-04-15 15:20:42
Yes, a high priest of neo-liberalism, Lord Freud, was given only 13 weeks to investigate and reform key elements of the the UK's welfare system, it hasn't worked and Freud is now invisible.
tonyeff , 2016-04-15 14:43:45
Hopeful this is the start for change through identifying issues and avoiding pitfalls.
Failed neoliberalism and not restricting markets that do not benefit the majority are the cause and we stand on the brink of falling further should the Brexiter's have their way. If there's one thing the EU excels at it's legislating against the excesses of business and extremism.
Let's make a start by staying in the EU. !-- Report
Anarchy4theUK PaulBowes01 , 2016-04-15 20:56:56
That's not what happens in Venezuela, Chavez was the big hero of the left, now look at Venezuela, how's it working out for them?
Osager , 2016-04-15 14:40:50
this is why I read the guardian
amberjack Osager , 2016-04-15 14:56:41

this is why I read the guardian

This is pretty much the only reason why I still read the Guardian.

Monbiot and the quick crossword.

Shanajackson Osager , 2016-04-15 15:07:42
Monbiot is the best journalist the Guardian has, he can actually make a logical fact based argument unlike the majority of Guardian journalist.
TOOmanyWilsons Shanajackson , 2016-04-15 16:36:01
John Harris is wonderful too. The only guy on the staff who can write about the working class with clarity, respect and understanding. But Monbiot is also the biscuit.
qzpmwxonecib , 2016-04-15 14:40:53
Any ideology will cause problems. Right wing and left wing. Pragmatism and compassion are required.
Tad Blarney qzpmwxonecib , 2016-04-15 15:17:22
'The Invisible Hand' is not an ideology or dogma. It's just a metaphor to describe those with problems grasping abstract concepts: when there are a large number of buyers and suppliers for a good, the 'market finds a price' which is effectively the sum of all the intelligence of the participants, their suppliers, customers etc..

The Socialists, who have difficulty grasping this reality, want to 'fix' the price, which abnegates the collective intelligence of the market participants, and causes severe problems.

Capitalism is freedom, Socialism is someone's ideology.

brovis Tad Blarney , 2016-04-15 18:38:35

'The Invisible Hand' is... a metaphor to describe those with problems grasping abstract concepts: when there are a large number of buyers and suppliers for a good, the 'market finds a price' which is effectively the sum of all the intelligence of the participants

You clearly haven't read Wealth of Nations. The only mention of an invisible hand is actually a warning against what we now call neoliberalism. Smith said that the wealthy wouldn't seek to enrich themselves to the detriment of their home communities, because of an innate home bias. Thus, as if by an invisible hand, England would be spared the ravages of economic rationality.
Your understanding of the 'invisible hand' is a falsehood perpetuated by neoliberal think tanks like the Adam Smith institute (no endorsement or connection to the author, despite using his name).

'The Invisible Hand' is not dogma.


You definitely know a lot about dogma (and false dichotomies):

Capitalism is freedom, Socialism is someone's ideology.

Ricochet , 2016-04-15 14:41:16
This is an interesting academic piece but the reality is that we don't have anything like neo-liberalism in this country as defined by Hayek and it has become a term of abuse by people who really ought to know better. The strongest abuse of course is linked to the Blair Government, a period, of course, when, with substantial success, the size and reach of the state increased quite substantially, ie the complete opposite of neo-liberalism.

In fact, suggesting that the UK is neo liberal is not that much different for suggesting that Russia had communism as defined by Marx.

Whether it is a good or bad thing that we don't have neo-liberalism is open to academic debate but is not of much use in real life.

Monbiot suggests that a coherent alternative to the current situation needs to be developed but disappointingly fails to give any clues as to what it might look like except, of course, that it must have some type of environmental context.

Aleocrat Ricochet , 2016-04-15 23:36:22
Maybe it takes more than one man to map out a path to the future.
unheilig , 2016-04-15 14:41:23

A coherent alternative has to be proposed. For Labour, the Democrats and the wider left, the central task should be to develop an economic Apollo programme, a conscious attempt to design a new system, tailored to the demands of the 21st century

All very well, but how? Did anyone hear the screams of rage when Sanders started threatening Hillary, or when Corbyn trounced the Blairites? The dead hand of Bernays and Goebbels controls everything.
Greg_Samsa , 2016-04-15 14:42:35
"Neoliberalism: do you know what it is?"

Yes it is what the G has been purveying wholesale for the last few years.

Luminaire Greg_Samsa , 2016-04-15 14:57:34
Wow, you read the WHOLE title. Well done.
zolotoy Luminaire , 2016-04-15 15:03:52
And yet Greg_Samsa's comment is entirely correct, and yours entirely worthless.
Luminaire zolotoy , 2016-04-15 15:26:59

And yet Greg_Samsa's comment is entirely correct, and yours entirely worthless.

So smug and yet so wrong. Infinite Wisdom is exactly already IN the article. He's not added anything. Which is what I was pointing out.

EricBallinger , 2016-04-15 14:42:51
There is no alternative on offer by the left.
The socialist/trade union package is outmoded.
The failure to describe reality in a way that concurs with what ordinary people experience has driven off much support and reduced credibility.
There is no credible model for investment and wealth creation.
The focus on social mobility upwards rather than on those who do not move has given UK leftism a middle-class snobby air to it.
Those entering leftist politics have a very narrow range of life experience. The opposition to rightist politics is cliched and outmoded.
There is a complete failure to challenge the emerging multi-polar plutocratic oligarchy which runs the planet - the European left just seeks a comfy accommodation.
There is no attempt to develop a post-socialist, holistic worldview and ideology.
oreilly62 EricBallinger , 2016-04-15 14:52:26
The trade union package, gave us meal breaks, holidays, sickness benefits, working hours restrictions, as opposed to the right wing media agenda, that if you aint getting it nobody should, pour poison on the unions, pour poison on the public sector, a fucking media led race to the bottom for workers, and there were enough gullible (poor )mugs around to accept it. You can curse the middle class socialists all you like, but without their support the labour movement would never have got off the ground.
Paidenoughalready oreilly62 , 2016-04-15 14:59:02
Okay, so you've described the 1950's through to the 1980's.

So what have the unions done for us isn the last two decades ?

Why is it all the successful, profitable and productive industries in the Uk have little or no union involvement ?

Why is it that the least effective, highest costs and poorest performing structures are in the public sector and held back by the unions ?

Here's a clue - the unions are operating in the 21st century with a 1950's mentality.

oreilly62 Paidenoughalready , 2016-04-15 15:18:26
During the industrial revolution, profitability and productivity were off the scale because the workforce were just commodities, Unionisation instigated the idea that without the workforce, your entrepreneurs can't do anything on their own, Henry Ford wouldn't have become a millionaire without the help of his workforce. 'Poorest performing structures' Guess what! some of us are human beings not auto- matrons. I hope you dine well on sterling and dollars, cause they're not the most important things in life.
countyboy , 2016-04-15 14:43:30
It's the only way. It's not perfect but it achieves the best ( not ideal ) possible result.

What if in the end there's no where left to go ?

What if the highest possible taxes, zero avoidance / evasion and high employment still equals deficits and increasing national debt ?

What then ?

fumbduck countyboy , 2016-04-15 14:54:56

What if the highest possible taxes, zero avoidance / evasion and high employment still equals deficits and increasing national debt ?

The paragraph written above neatly describes the post WW2 years, where the UK was pretty much in perpetual surplus. High employment does not equate to national debt/deficit. Quite the opposite, the more people in gainful employment the better. Increasing unemployment, driving wages down while simultaneously increasing the cost of living is a recipe for complete economic failure.

This whole economics gig is piss easy, when the general mass of people have cash to spare they spend it, economy thrives. Hoard the cash into the hands of a minority and starve the masses of cash, economy dies. It really is that simple.

makirby countyboy , 2016-04-15 15:23:23
Public deficits exist to match the private surplus created by the rich enriching themselves. To get rid of the deficit therefore we need to get rid of the private wealth of the rich through financial repression and taxation
Aleocrat countyboy , 2016-04-15 23:41:11
Then you're spending it wrong and should be replaced.
CoobyTavern , 2016-04-15 14:43:38
I read, cannot remember where, that with neo liberalism the implementation is all that matters, you do not need to see the results. I suppose because the followers believe when implemented it will work perfectly.
I think it's supporters think it is magic and must work because they believe it does.
dreamer06 CoobyTavern , 2016-04-15 15:20:42
Yes, a high priest of neo-liberalism, Lord Freud, was given only 13 weeks to investigate and reform key elements of the the UK's welfare system, it hasn't worked and Freud is now invisible.
tonyeff , 2016-04-15 14:43:45
Hopeful this is the start for change through identifying issues and avoiding pitfalls.
Failed neoliberalism and not restricting markets that do not benefit the majority are the cause and we stand on the brink of falling further should the Brexiter's have their way. If there's one thing the EU excels at it's legislating against the excesses of business and extremism.
Let's make a start by staying in the EU. !-- Report
Anarchy4theUK PaulBowes01 , 2016-04-15 20:56:56
That's not what happens in Venezuela, Chavez was the big hero of the left, now look at Venezuela, how's it working out for them?
Osager , 2016-04-15 14:40:50
this is why I read the guardian
amberjack Osager , 2016-04-15 14:56:41

this is why I read the guardian

This is pretty much the only reason why I still read the Guardian.

Monbiot and the quick crossword.

Shanajackson Osager , 2016-04-15 15:07:42
Monbiot is the best journalist the Guardian has, he can actually make a logical fact based argument unlike the majority of Guardian journalist.
TOOmanyWilsons Shanajackson , 2016-04-15 16:36:01
John Harris is wonderful too. The only guy on the staff who can write about the working class with clarity, respect and understanding. But Monbiot is also the biscuit.
qzpmwxonecib , 2016-04-15 14:40:53
Any ideology will cause problems. Right wing and left wing. Pragmatism and compassion are required.
Tad Blarney qzpmwxonecib , 2016-04-15 15:17:22
'The Invisible Hand' is not an ideology or dogma. It's just a metaphor to describe those with problems grasping abstract concepts: when there are a large number of buyers and suppliers for a good, the 'market finds a price' which is effectively the sum of all the intelligence of the participants, their suppliers, customers etc..

The Socialists, who have difficulty grasping this reality, want to 'fix' the price, which abnegates the collective intelligence of the market participants, and causes severe problems.

Capitalism is freedom, Socialism is someone's ideology.

brovis Tad Blarney , 2016-04-15 18:38:35

'The Invisible Hand' is... a metaphor to describe those with problems grasping abstract concepts: when there are a large number of buyers and suppliers for a good, the 'market finds a price' which is effectively the sum of all the intelligence of the participants

You clearly haven't read Wealth of Nations. The only mention of an invisible hand is actually a warning against what we now call neoliberalism. Smith said that the wealthy wouldn't seek to enrich themselves to the detriment of their home communities, because of an innate home bias. Thus, as if by an invisible hand, England would be spared the ravages of economic rationality.
Your understanding of the 'invisible hand' is a falsehood perpetuated by neoliberal think tanks like the Adam Smith institute (no endorsement or connection to the author, despite using his name).

'The Invisible Hand' is not dogma.


You definitely know a lot about dogma (and false dichotomies):

Capitalism is freedom, Socialism is someone's ideology.

Ricochet , 2016-04-15 14:41:16
This is an interesting academic piece but the reality is that we don't have anything like neo-liberalism in this country as defined by Hayek and it has become a term of abuse by people who really ought to know better. The strongest abuse of course is linked to the Blair Government, a period, of course, when, with substantial success, the size and reach of the state increased quite substantially, ie the complete opposite of neo-liberalism.

In fact, suggesting that the UK is neo liberal is not that much different for suggesting that Russia had communism as defined by Marx.

Whether it is a good or bad thing that we don't have neo-liberalism is open to academic debate but is not of much use in real life.

Monbiot suggests that a coherent alternative to the current situation needs to be developed but disappointingly fails to give any clues as to what it might look like except, of course, that it must have some type of environmental context.

Aleocrat Ricochet , 2016-04-15 23:36:22
Maybe it takes more than one man to map out a path to the future.
unheilig , 2016-04-15 14:41:23

A coherent alternative has to be proposed. For Labour, the Democrats and the wider left, the central task should be to develop an economic Apollo programme, a conscious attempt to design a new system, tailored to the demands of the 21st century

All very well, but how? Did anyone hear the screams of rage when Sanders started threatening Hillary, or when Corbyn trounced the Blairites? The dead hand of Bernays and Goebbels controls everything.
Greg_Samsa , 2016-04-15 14:42:35
"Neoliberalism: do you know what it is?"

Yes it is what the G has been purveying wholesale for the last few years.

Luminaire Greg_Samsa , 2016-04-15 14:57:34
Wow, you read the WHOLE title. Well done.
zolotoy Luminaire , 2016-04-15 15:03:52
And yet Greg_Samsa's comment is entirely correct, and yours entirely worthless.
Luminaire zolotoy , 2016-04-15 15:26:59

And yet Greg_Samsa's comment is entirely correct, and yours entirely worthless.

So smug and yet so wrong. Infinite Wisdom is exactly already IN the article. He's not added anything. Which is what I was pointing out.

EricBallinger , 2016-04-15 14:42:51
There is no alternative on offer by the left.
The socialist/trade union package is outmoded.
The failure to describe reality in a way that concurs with what ordinary people experience has driven off much support and reduced credibility.
There is no credible model for investment and wealth creation.
The focus on social mobility upwards rather than on those who do not move has given UK leftism a middle-class snobby air to it.
Those entering leftist politics have a very narrow range of life experience. The opposition to rightist politics is cliched and outmoded.
There is a complete failure to challenge the emerging multi-polar plutocratic oligarchy which runs the planet - the European left just seeks a comfy accommodation.
There is no attempt to develop a post-socialist, holistic worldview and ideology.
oreilly62 EricBallinger , 2016-04-15 14:52:26
The trade union package, gave us meal breaks, holidays, sickness benefits, working hours restrictions, as opposed to the right wing media agenda, that if you aint getting it nobody should, pour poison on the unions, pour poison on the public sector, a fucking media led race to the bottom for workers, and there were enough gullible (poor )mugs around to accept it. You can curse the middle class socialists all you like, but without their support the labour movement would never have got off the ground.
Paidenoughalready oreilly62 , 2016-04-15 14:59:02
Okay, so you've described the 1950's through to the 1980's.

So what have the unions done for us isn the last two decades ?

Why is it all the successful, profitable and productive industries in the Uk have little or no union involvement ?

Why is it that the least effective, highest costs and poorest performing structures are in the public sector and held back by the unions ?

Here's a clue - the unions are operating in the 21st century with a 1950's mentality.

oreilly62 Paidenoughalready , 2016-04-15 15:18:26
During the industrial revolution, profitability and productivity were off the scale because the workforce were just commodities, Unionisation instigated the idea that without the workforce, your entrepreneurs can't do anything on their own, Henry Ford wouldn't have become a millionaire without the help of his workforce. 'Poorest performing structures' Guess what! some of us are human beings not auto- matrons. I hope you dine well on sterling and dollars, cause they're not the most important things in life.
countyboy , 2016-04-15 14:43:30
It's the only way. It's not perfect but it achieves the best ( not ideal ) possible result.

What if in the end there's no where left to go ?

What if the highest possible taxes, zero avoidance / evasion and high employment still equals deficits and increasing national debt ?

What then ?

fumbduck countyboy , 2016-04-15 14:54:56

What if the highest possible taxes, zero avoidance / evasion and high employment still equals deficits and increasing national debt ?

The paragraph written above neatly describes the post WW2 years, where the UK was pretty much in perpetual surplus. High employment does not equate to national debt/deficit. Quite the opposite, the more people in gainful employment the better. Increasing unemployment, driving wages down while simultaneously increasing the cost of living is a recipe for complete economic failure.

This whole economics gig is piss easy, when the general mass of people have cash to spare they spend it, economy thrives. Hoard the cash into the hands of a minority and starve the masses of cash, economy dies. It really is that simple.

makirby countyboy , 2016-04-15 15:23:23
Public deficits exist to match the private surplus created by the rich enriching themselves. To get rid of the deficit therefore we need to get rid of the private wealth of the rich through financial repression and taxation
Aleocrat countyboy , 2016-04-15 23:41:11
Then you're spending it wrong and should be replaced.
CoobyTavern , 2016-04-15 14:43:38
I read, cannot remember where, that with neo liberalism the implementation is all that matters, you do not need to see the results. I suppose because the followers believe when implemented it will work perfectly.
I think it's supporters think it is magic and must work because they believe it does.
dreamer06 CoobyTavern , 2016-04-15 15:20:42
Yes, a high priest of neo-liberalism, Lord Freud, was given only 13 weeks to investigate and reform key elements of the the UK's welfare system, it hasn't worked and Freud is now invisible.
tonyeff , 2016-04-15 14:43:45
Hopeful this is the start for change through identifying issues and avoiding pitfalls.
Failed neoliberalism and not restricting markets that do not benefit the majority are the cause and we stand on the brink of falling further should the Brexiter's have their way. If there's one thing the EU excels at it's legislating against the excesses of business and extremism.
Let's make a start by staying in the EU.

[Apr 22, 2016] Neoliberalism – the ideology at the root of all our problems

Notable quotes:
"... So pervasive has neoliberalism become that we seldom even recognise it as an ideology. We appear to accept the proposition that this utopian, millenarian faith describes a neutral force; a kind of biological law, like Darwin's theory of evolution. But the philosophy arose as a conscious attempt to reshape human life and shift the locus of power. ..."
"... Neoliberalism sees competition as the defining characteristic of human relations. It redefines citizens as consumers, whose democratic choices are best exercised by buying and selling, a process that rewards merit and punishes inefficiency. It maintains that "the market" delivers benefits that could never be achieved by planning. ..."
"... We internalise and reproduce its creeds. The rich persuade themselves that they acquired their wealth through merit, ignoring the advantages – such as education, inheritance and class – that may have helped to secure it. The poor begin to blame themselves for their failures, even when they can do little to change their circumstances. ..."
"... What About Me? ..."
"... We are all neoliberals now. ..."
"... The Road to Serfdom ..."
"... The Road to Serfdom ..."
"... Masters of the Universe ..."
"... Naomi Klein documented that neoliberals advocated the use of crises to impose unpopular policies while people were distracted. ..."
"... Where neoliberal policies cannot be imposed domestically, they are imposed internationally, through trade treaties incorporating "investor-state dispute settlement": offshore tribunals in which corporations can press for the removal of social and environmental protections. When parliaments have voted to restrict sales of cigarettes, protect water supplies from mining companies, freeze energy bills or prevent pharmaceutical firms from ripping off the state, corporations have sued, often successfully. Democracy is reduced to theatre. ..."
"... Neoliberalism was not conceived as a self-serving racket, but it rapidly became one ..."
"... Sayer argues that the past four decades have been characterised by a transfer of wealth not only from the poor to the rich, but within the ranks of the wealthy: from those who make their money by producing new goods or services to those who make their money by controlling existing assets and harvesting rent, interest or capital gains. Earned income has been supplanted by unearned income. ..."
"... Chris Hedges remarks that "fascist movements build their base not from the politically active but the politically inactive, the 'losers' who feel, often correctly, they have no voice or role to play in the political establishment". When political debate no longer speaks to us, people become responsive instead to slogans, symbols and sensation. To the admirers of Trump, for example, facts and arguments appear irrelevant. ..."
"... Like communism, neoliberalism is the God that failed. But the zombie doctrine staggers on, and one of the reasons is its anonymity. Or rather, a cluster of anonymities. ..."
"... The invisible doctrine of the invisible hand is promoted by invisible backers. Slowly, very slowly, we have begun to discover the names of a few of them. We find that the Institute of Economic Affairs, which has argued forcefully in the media against the further regulation of the tobacco industry, has been secretly funded by British American Tobacco since 1963. We discover that Charles and David Koch, two of the richest men in the world, founded the institute that set up the Tea Party movement. We find that Charles Koch, in establishing one of his thinktanks, noted that "in order to avoid undesirable criticism, how the organisation is controlled and directed should not be widely advertised". ..."
"... The words used by neoliberalism often conceal more than they elucidate. "The market" sounds like a natural system that might bear upon us equally, like gravity or atmospheric pressure. But it is fraught with power relations. What "the market wants" tends to mean what corporations and their bosses want. "Investment", as Sayer notes, means two quite different things. One is the funding of productive and socially useful activities, the other is the purchase of existing assets to milk them for rent, interest, dividends and capital gains. Using the same word for different activities "camouflages the sources of wealth", leading us to confuse wealth extraction with wealth creation. ..."
"... These anonymities and confusions mesh with the namelessness and placelessness of modern capitalism: the franchise model which ensures that workers do not know for whom they toil; the companies registered through a network of offshore secrecy regimes so complex that even the police cannot discover the beneficial owners; the tax arrangements that bamboozle governments; the financial products no one understands. ..."
"... The anonymity of neoliberalism is fiercely guarded. Those who are influenced by Hayek, Mises and Friedman tend to reject the term, maintaining – with some justice – that it is used today only pejoratively. But they offer us no substitute. Some describe themselves as classical liberals or libertarians, but these descriptions are both misleading and curiously self-effacing, as they suggest that there is nothing novel about The Road to Serfdom, Bureaucracy or Friedman's classic work, Capitalism and Freedom. ..."
"... Neoliberalism's triumph also reflects the failure of the left. When laissez-faire economics led to catastrophe in 1929, Keynes devised a comprehensive economic theory to replace it. When Keynesian demand management hit the buffers in the 70s, there was an alternative ready. But when neoliberalism fell apart in 2008 there was ... nothing. This is why the zombie walks. The left and centre have produced no new general framework of economic thought for 80 years. ..."
"... The application and manipulation of neoliberalist philosophy by the wealthy elite, the overprivileged and those who aspire to own and control the world, remains the root of all the woes of your average citizen in advanced Western democracies. ..."
"... You have to go right back to the 1970s when all those neolib thinktanks were set up, all of them with funding from the wealthy who could see that this ideology was going to repay that investment bigtime. Consequently, you've had 40+ years of drip, drip, drip of neolib/rightwing ideas seeping into public consciousness. The Left doesn't have anything comparable, mainly for the simple reason that the rich are hardly going to fund institutions whose reason to exist is to share out their wealth. ..."
"... I think neo-liberalism's creators knew exactly how it would play out and, moreover, they wanted it that way: it would serve to ensconce them in their already-feathered nests. ..."
"... Look up the fractional reserve system. Understand why state sell offs are an invariable consequence of it, along with never ending inflation and the increasing power of banks, the financial system and central banks. ..."
April 15, 2016 | The Guardian

Imagine if the people of the Soviet Union had never heard of communism. The ideology that dominates our lives has, for most of us, no name. Mention it in conversation and you'll be rewarded with a shrug. Even if your listeners have heard the term before, they will struggle to define it. Neoliberalism: do you know what it is?

Its anonymity is both a symptom and cause of its power. It has played a major role in a remarkable variety of crises: the financial meltdown of 2007‑8, the offshoring of wealth and power, of which the Panama Papers offer us merely a glimpse, the slow collapse of public health and education, resurgent child poverty, the epidemic of loneliness , the collapse of ecosystems, the rise of Donald Trump . But we respond to these crises as if they emerge in isolation, apparently unaware that they have all been either catalyzed or exacerbated by the same coherent philosophy; a philosophy that has – or had – a name. What greater power can there be than to operate namelessly?

Inequality is recast as virtuous. The market ensures that everyone gets what they deserve.

So pervasive has neoliberalism become that we seldom even recognise it as an ideology. We appear to accept the proposition that this utopian, millenarian faith describes a neutral force; a kind of biological law, like Darwin's theory of evolution. But the philosophy arose as a conscious attempt to reshape human life and shift the locus of power.

Neoliberalism sees competition as the defining characteristic of human relations. It redefines citizens as consumers, whose democratic choices are best exercised by buying and selling, a process that rewards merit and punishes inefficiency. It maintains that "the market" delivers benefits that could never be achieved by planning.

Attempts to limit competition are treated as inimical to liberty. Tax and regulation should be minimised, public services should be privatised. The organisation of labour and collective bargaining by trade unions are portrayed as market distortions that impede the formation of a natural hierarchy of winners and losers. Inequality is recast as virtuous: a reward for utility and a generator of wealth, which trickles down to enrich everyone. Efforts to create a more equal society are both counterproductive and morally corrosive. The market ensures that everyone gets what they deserve.

We internalise and reproduce its creeds. The rich persuade themselves that they acquired their wealth through merit, ignoring the advantages – such as education, inheritance and class – that may have helped to secure it. The poor begin to blame themselves for their failures, even when they can do little to change their circumstances.

Never mind structural unemployment: if you don't have a job it's because you are unenterprising. Never mind the impossible costs of housing: if your credit card is maxed out, you're feckless and improvident. Never mind that your children no longer have a school playing field: if they get fat, it's your fault. In a world governed by competition, those who fall behind become defined and self-defined as losers.

Among the results, as Paul Verhaeghe documents in his book What About Me? are epidemics of self-harm, eating disorders, depression, loneliness, performance anxiety and social phobia. Perhaps it's unsurprising that Britain, in which neoliberal ideology has been most rigorously applied, is the loneliness capital of Europe . We are all neoliberals now.

***

The term neoliberalism was coined at a meeting in Paris in 1938. Among the delegates were two men who came to define the ideology, Ludwig von Mises and Friedrich Hayek. Both exiles from Austria, they saw social democracy, exemplified by Franklin Roosevelt's New Deal and the gradual development of Britain's welfare state, as manifestations of a collectivism that occupied the same spectrum as nazism and communism.

In The Road to Serfdom , published in 1944, Hayek argued that government planning, by crushing individualism, would lead inexorably to totalitarian control. Like Mises's book Bureaucracy , The Road to Serfdom was widely read. It came to the attention of some very wealthy people, who saw in the philosophy an opportunity to free themselves from regulation and tax. When, in 1947, Hayek founded the first organisation that would spread the doctrine of neoliberalism – the Mont Pelerin Society – it was supported financially by millionaires and their foundations.

With their help, he began to create what Daniel Stedman Jones describes in Masters of the Universe as "a kind of neoliberal international": a transatlantic network of academics, businessmen, journalists and activists. The movement's rich backers funded a series of thinktanks which would refine and promote the ideology. Among them were the American Enterprise Institute , the Heritage Foundation , the Cato Institute , the Institute of Economic Affairs , the Centre for Policy Studies and the Adam Smith Institute . They also financed academic positions and departments, particularly at the universities of Chicago and Virginia.

bluenick62 , 2016-04-15 14:44:58
Neoliberalism prevails as the rule of elites because there is no ideology to explain. As there is essentially no ideology, it's easy to sell to the uneducated masses because you can just throw them a few crumps (which they, in their ignorance are grateful for) while you (the elites) trouser the big money. Also, as there is no ideology in neoliberalism per se, it is portrayed as 'just how things are'.

The failure of the Left is because the Left has to sell an egalitarian ideology to the uneducated masses - which is tricky - because they are uneducated! The masses understood the argument at the start of the 20th century due to their own social deprivation. Their poverty was visible on a daily basis.

Now, with their 2 weeks in Spain, satellite tv, and benefits garnered by the Left during the period of awareness, they uneducated masses think they're well off. We've even got to the stage of peak stupidity in the US where Donald Trump can say 'I love the uneducated, they're so smart'. The elites are loving it.

The work of the Left is always harder - compare and contrast Marxism with Thatcherism, when reading and writing is a challenge, and you have actually got food on the table.

Toeparty , 2016-04-15 14:44:58
The purpose of neo-liberalism was to take liberal philosophy from the domestic sphere, where it had already failed, and apply it to the globe as a whole. The Americans sought to create a world market that it could dominate due to the overwhelming capacity of its post-War industry and which its allies could also benefit a little from. Of course this failed to. Liberalism is a defunct ideology just as capitalism is a defunct system. Industry has flooded out of America and America has become the world's biggest usury state in world history. Not only that but it has been bankrupted by its own project. Neo-liberalism as a prescription is dead and globalization behind American tutelage is rapidly unraveling. The cure has proven to be worse than the disease and it turned out that neo-liberalism was the Road to Neo-Serfdom. A New Dark Ages is on the way. Unless, as the writer says, the left straps on a set and rediscovers its purpose which to my mind is an can only be socialism. bluenick62 , 2016-04-15 14:44:58
Neoliberalism prevails as the rule of elites because there is no ideology to explain. As there is essentially no ideology, it's easy to sell to the uneducated masses because you can just throw them a few crumps (which they, in their ignorance are grateful for) while you (the elites) trouser the big money. Also, as there is no ideology in neoliberalism per se, it is portrayed as 'just how things are'.

The failure of the Left is because the Left has to sell an egalitarian ideology to the uneducated masses - which is tricky - because they are uneducated! The masses understood the argument at the start of the 20th century due to their own social deprivation. Their poverty was visible on a daily basis.

Now, with their 2 weeks in Spain, satellite tv, and benefits garnered by the Left during the period of awareness, they uneducated masses think they're well off. We've even got to the stage of peak stupidity in the US where Donald Trump can say 'I love the uneducated, they're so smart'. The elites are loving it.

The work of the Left is always harder - compare and contrast Marxism with Thatcherism, when reading and writing is a challenge, and you have actually got food on the table.

Toeparty , 2016-04-15 14:45:11
The purpose of neo-liberalism was to take liberal philosophy from the domestic sphere, where it had already failed, and apply it to the globe as a whole. The Americans sought to create a world market that it could dominate due to the overwhelming capacity of its post-War industry and which its allies could also benefit a little from. Of course this failed to. Liberalism is a defunct ideology just as capitalism is a defunct system. Industry has flooded out of America and America has become the world's biggest usury state in world history. Not only that but it has been bankrupted by its own project. Neo-liberalism as a prescription is dead and globalization behind American tutelage is rapidly unraveling. The cure has proven to be worse than the disease and it turned out that neo-liberalism was the Road to Neo-Serfdom. A New Dark Ages is on the way. Unless, as the writer says, the left straps on a set and rediscovers its purpose which to my mind is an can only be socialism.

[Apr 17, 2016] Credentialism and Corruption: Neoliberalism as Lived Experience

Notable quotes:
"... "The ideas of the ruling class are in every epoch the ruling ideas" ..."
"... The German Ideology ..."
"... Shareholder value ..."
"... Amorality, where litmus tests for any act are illegality and reputational risk ..."
"... Which prevents questions of ethics from subverting the structure ..."
"... The inspection report, which was recently made public by Medicare, said that all 81 results provided to patients from that test from April to September of last year were inaccurate. ..."
"... out of their department budget ..."
"... By the early 1990's the rot, which had started to set in during the mid-1980's, had begun to accelerate. Most regular readers of Naked Capitalism know how the movie ended. If only it was just a work of fiction. For those of you who have suffered financially, emotionally, physically (or all three) through an unlawful foreclosure, fee gouging, predatory lending, junk insurance or scam financial products you will know what the consequences of an industry which threw away its moral compass and any sense of a social contract are. ..."
"... However, it seems to me that what Clive labels "dishonesty and exploitation" is what I would label corruption, and that's what Ebeling was fighting against. ..."
"... Fish rots from the head, and it's the head that makes the decisions about what gets punished and what gets praised. You want to survive and thrive in that fishpond, you better do what the rotten head tells you to do. ..."
"... the right person ..."
"... Bill Black has written extensively about what he calls the "Gresham's dynamic" that forced good underwriters out of the market. He has pointed out more than once that a petition was presented to the authorities signed by a large number of honest underwriters asking for regulation long before the big financial collapse. Being amoral and dishonest was a competitive advantage and the honest underwriters were driven out of the business. It's not hard to understand and does not call for the conclusion that people in general are dishonest or unethical. ..."
"... This is a lot like Not In My Backyard (NIMBY). Regulation is fine, so long as it applies to everyone else but not me. ..."
"... A competent publicist could reframe the unfortunate-sounding term "pepper spray incident " into a benign "invigorating capsicum spritz, provided at no cost to the participants." It wasn't violence; it was philanthropy. :-) ..."
"... This acknowledgment of the role of the class struggle was hardly limited to the Founding Fathers. It was not Karl Marx who spoke of the proclivity of employers to conspire and "to deceive and even oppress the public," of "the mean rapacity, the monopolizing spirit of merchants and manufacturers," of the "monopoly of the rich," of the "bad effects of high profits," of the "natural selfishness and rapacity" the vain and insatiable desires" of the rich, who institute "civil government"against the poor." It was the godfather of laissez faire capitalism and the favorite guru of conservatives, Adam Smith, who said that. ..."
"... Apparently Smith did mean just that, because he advocated that the rascality on the part of the rich could not be allowed to proceed without interference if one were to have a functioning capitalist system; hence he spoke of the need for government action to prevent the stultification of the "laboring poor." If that be class struggle, apparently he favors it. ( Compare Tocqueville's similar observation: "When the rich alone govern, the interest of the poor is always in danger." ..."
"... There's a massive difference between what Smith actually said and what his modern fanbois believe he said. Most of them have never actually read Wealth of Nations (and even less his Theory of Moral Sentiments. My understanding is that they both have to be read back to back to truly understand his views). Though I'm sure plenty of them have unopened copies of WoN displayed on their shelves for prestige value. ..."
"... Also, Michael Hudson has been of great help by constantly pounding away at the point that Smith was talking about markets free from vestigial feudalism, particularly exactly the kind of unproductive rent extraction that is making a comeback in the modern age. That's very different from the concept of unregulated markets free from any kind of oversight. ..."
"... This reminds me of all the times over 30 years when I did bookkeeping and accounting work and was asked to go into grey areas and sometimes commit outright fraud and I said no, and of course that was the end of that job, I would get eased out, usually in a way sure to make me ineligible for unemployment. I would certainly have gone to jail because I was the one who knew the law. But your DIL surely should not have been held accountable for doing clerical tasks without knowledge of or control over the contracts. That is very scary. ..."
"... The first thing [in credit] is character … before money or anything else. Money cannot buy it.… A man I do not trust could not get money from me on all the bonds in Christendom. I think that is the fundamental basis of business. ..."
"... There's the rub: amassing organizational power in a corrupt organization is very difficult for an honest, outspoken person. What often happens is that decent people save up their moral outrage until after they retire from whatever position in which they have "gone along to get along." Then most of them discover that they no longer have the energy, or the means, to "fight the good fight" they have delayed for decades. ..."
"... In this age of the internet, I wish there was more reputational damage. For instance, the cop who sprayed all the students (and then got $38,000) because he was made to feel bad. How about posts with his picture, his address, what car he is seen driving, where he is posted, etc. ..."
"... Sadly, people are a bit more evil than we give them credit for ..."
"... This is a challenge for anybody that navigates what increasingly is an overtly corrupt system. ..."
www.nakedcapitalism.com

"The ideas of the ruling class are in every epoch the ruling ideas" –Karl Marx, The German Ideology

Despite the fancy title and the epigraph, this post is going to be more like where a pundit writes a column about taking to the cabdriver on the way into town from the airport; except one cabdriver is an anecdote, and four or five cab drivers starts to look like a pattern. In this case, the cab-drivers would be credentialed, what the Archdruid would call the salaried class , or Thomas Frank the professional class (Boston being their "spiritual homeland"). Marx would, I think, call them the petite bourgeoisie . (I call them the 20% , although I imagine only 20% of the 20% are really making it.) These are my people; I feel that I know them, which is why my analysis of them is going to be as tenuous as it is. (That's why I'm assuming, for the purposes of this post, that credentials are a good thing; I was brought up to regard credentials as the passport to serve others in the world of disinterested scholarship.)

So let's begin with the ruling class - obviously, finance - and its ideas, and work our way through to the lived experience. Joris Luyendijk, who wrote the Guardian's banking blog for several years, has a useful post at Faber & Faber based on many interviews with people who work in banking, including bankers. It starts out:

How can bankers live with themselves? by Joris Luyendijk

(If "How can you live with yourself?" is the same question as "What is the good life?" , it's vexed philosophers for millenia.) Luyendijk takes the #PanamaPapers as his starting point but soon branches out:

[T]he self-justifications of banking staff involved in helping clients avoid taxes were strikingly similar to those offered in other areas in banking.

Perhaps the best term to describe the tone by which people spoke of their work and its ethical dimensions is 'matter-of-fact'. For example, when they explained how to sell a deliberately intransparent financial product to 'some guy' at a small bank in Sweden or an airline company in Finland, knowing that 'this guy' has no idea what he is buying. …

As I said, bankers are not monsters so you can ask them, human being to human being: how can you live with yourself doing things like this?…

When pressed for details, financial workers used two interconnected terms to explain themselves: 'a-morality' and 'shareholder value'. Please understand, everybody said: 'a-moral' is not the same as 'immoral'. Immoral means knowingly breaking the law. The sign says you can go 100 kilometres, still you decide to drive 150. That's immoral. A-moral, by contrast, means that your ethical and moral framework is defined by what the law allows.

In finance you do not ask if a proposal is morally right or wrong. You look at the degree of 'reputation risk'. Financial lawyers and regulators who go along with whatever you propose are 'business-friendly' and using loopholes in the tax code to help big corporations and rich families evade taxes is 'tax optimization' with 'tax-efficient structures'.

Once I tuned my ear in to it, I began to hear such 'sanitized' terms everywhere and this is because the vocabulary available to people in finance to think about their own actions has been deliberately stripped of terms that can provoke an ethical discussion. Hence the biggest compliment in finance is to be called 'professional'. It means you do not let emotions get in the way of work, let alone moral beliefs – those are for home….

If a-morality is the reigning mentality in today's financial sector, then 'shareholder value' provides the ideological underpinning. Almost every interviewee brought this up.

So in summary we have these ruling ideas:

(Note that the professional classes of our day, unlike the 1% and 0.01%, lack the power - and the money - to procure changes to the law or repair a damaged reputation by hiring public relations specialists. That is, perhaps, why they are petite : They must take both the law and the nature of reputation as givens.)

Comparing my summary of Luyendijk's framework to NC's "Neoliberalism Expressed as Simple Rules," we see list item #1 is equivalent to Rule #1 of Neoliberalism: "Because markets." And we can see that list item #2 is equivalent to Rule #2 - "Go die! - although worked out with differing degrees of intensity according to context.

Now let's go on to five examples where the question "How do you live with yourself?" might be posed, and in which the points of Luyendijk's framework are variously salient. (I'm really writing this post because I encountered all these links in the last couple of days, so I felt like something's out there in the zeitgeist.)

The first example is Theranos , although not for the bezzle-ish, scammy reasons one might expect in Silicon Valley. From the New York Times :

Examiners from Medicare inspected Theranos's laboratory in Newark, Calif., last fall and found numerous deficiencies, one of which they said posed "immediate jeopardy to patient health and safety."

That particular deficiency related to Theranos's test for the clotting ability of blood, a measurement used to help determine the correct dose of the blood-thinning drug warfarin. Too much warfarin can cause internal bleeding while too little can leave a patient vulnerable to a stroke. The inspection report, which was recently made public by Medicare, said that all 81 results provided to patients from that test from April to September of last year were inaccurate.

Theranos said in response to regulators that it had voided the results of those tests. Ms. Buchanan said the company, after talking to the patients and doctors involved, did not believe any patients had been harmed.

The regulators also said that the director of the laboratory was not qualified and some other personnel were inadequately trained. At the time of the inspection, the laboratory director was a local dermatologist who continued to run his medical practice while also supervising the lab.

("[D]id not believe any patients had been harmed" is not quite as definitive a denial as one might hope for.) But how did that dermatologist live with themselves? Theranos was valued at what, $9 billion , and the guy in charge of the bloodwork is a dermatologist? And how about the other credentialled professionals working with the guy, at Theramos and in their dermatology practice? How do they live with themselves? Didn't they notice? Were they all Theranos shareholders? Or did they just have hostages to fortune in the form of families?

The second example is Baxter Internationa l. Health Care Renewal has been covering the Heparin debacle for several years[1]:

The More Things Stay the Same – More Apparently Adulterated Heparin, This Time from Chinese Ruminants

Baxter International imported the "active pharmaceutical ingredient" (API) of heparin, that is, in plainer language, the drug itself, from China. That API was then sold, with some minor processing, as a Baxter International product with a Baxter International label. The drug came from a sketchy supply chain that Baxter did not directly supervise, apparently originating in small "workshops" operating under primitive and unsanitary conditions without any meaningful inspection or supervision by the company, the Chinese government, or the FDA. The heparin proved to have been adulterated with over-sulfated chondroitin sulfate (OSCS), and many patients who received got seriously ill or died. While there have been investigations of how the adulteration adversely affected patients, to date, there have been no publicly reported investigations of how the OSCS got into the heparin, and who should have been responsible for overseeing the purity and safety of the product. Despite the facts that clearly patients died from receiving this adulterated drug, no individual has yet suffered any negative consequence for what amounted to poisoning of patients with a brand-name but adulterated pharmaceutical product .

OK, it's a complex global supply chain (and why does that have to be? Maybe if it's too complex to regulate, it's too complex to exist?) Nevertheless, there were credentialed professionals at every step, even if we leave out the Chinese manufacturers: Buyers, quality assurance specialists, distributors, pharmacists, doctors, and of course people at the FDA who let this all go. How do they live with themselves? Was the share price of Baxter International really that important?

The third example if the University of California at Davis . From the Sacramento Bee :

UC Davis spent thousands to scrub pepper-spray references from Internet

UC Davis contracted with consultants for at least $175,000 to scrub the Internet of negative online postings following the November 2011 pepper-spraying of students and to improve the reputations of both the university and Chancellor Linda P.B. Katehi, newly released documents show.

"Scrub the Internet?" How does the consultant that sold that job live with themselves?[2]

Figures released by UC Davis show the strategic communications budget increased from $2.93 million in 2009 to $5.47 million in 2015.

Money to pay the consultants came from the communications department budget , [UC Davis spokeswoman Dana Topousis] said.

Katehi, as we see, is in the class where she can seek to repair reputational damage, and not simply accept it. But how on earth - and I'm asking this as a university brat - was the chair of the communications department suborned to pay for a university PR exercise personally benefiting the president out of their department budget ? How can they live with themselves? (I grant no lives are at stake, but that's only because the pepper spray incident didn't turn into a disaster from a debacle.)

The fourth example is Gordon Ingram Associates (GIA) , of London, and I'm including this one for anybody who's had to deal with a local land use board. From Our City :

[T]all buildings can have a devastating impact on the daylight received by neighbouring homes. Regardless of this, they are often still approved by planning authorities.

Why do councils grant planning permission to these buildings that so clearly damage the homes of local residents, even when planning policies say that amenities like daylight must be protected?…

The reality is that planning authorities are often not told about, or are misled about the real impact these new buildings will have. Instead, specialist consultants, employed by developers, manipulate the figures and facts to make new buildings seem far less harmful than they really are.

This gives the impression to councillors that the harm to residents is either much less than or at the very least a debatable point, easing the passage of a controversial planning application.

Experts, by spending many years concentrating on a particular subject occupy a privileged role, which inevitably carries some weight in the planning process. However, if that process is to work properly experts must behave responsibly and present the facts in a clear and unbiased assessment.

Let me introduce to you Gordon Ingram Associates. GIA is a firm of specialist daylight consultants based in Waterloo. They have little regard for formal education, preferring to give staff their own training. The flaws in this approach will become obvious later in this article. As a result they employ an eclectic group of people as surveyors, a former male model included….

In each case I have seen, GIA told the local planning authority that buildings showed high levels of compliance with national daylighting guidance and that in their expert and considered opinion, any damage to daylight on neighbouring properties was negligible. They lied, and I'm going to show you how.

How do GIA live with themselves?

For each of these four examples, we've seen Milgram Experiment-like outcomes, where seemingly normal members of the professional, credentialed class end up helping to jeopardize patient health with blood tests, killing people with adultered drugs, surrenduring academic independence by caving to administrators, and ruining the built environment with doctored reports, and in each case the question to ask is very obvious: "How do they live with themselves?" But we haven't had an example that put all the pieces of Luyendijk's framework together.

With our fifth example, Boots , we have all the pieces. (Boots is also a horrible private equity story, with KKR the villain, but in this post I'm focusing on professionals in the workplace.) In addition, we have a professional who can't live with it. From the Guardian , the story of "Tony," a (credentialed) pharmacist:

How Boots went rogue

How many of these patients guessed that their own chemist was sick? Over the past few years, depression has dug its claws into Tony. He is tired all the time. His weight, blood sugar and blood pressure have shot up.

The illness kicked in shortly after he began his latest job, in 2011.

This is Tony's lived experience of the quest for "shareholder value" under neoliberalism, and I'd love to have numbers on how widely it's shared. And, readers, your experiences.

The past few years have been spent on and off anti-depressants. When we met late last year, he had just started another course of pills and was back in the usual side‑effects cycle: sweating, waking too early, exhaustion, sexual dysfunction.

"[B]usiness targets" are, of course, for "shareholder value". And here we have the corrupt language:

That fear comes wrapped in the corporate language of empowerment. Targets are "non-negotiable", and staff who beat them get graded as "legendary". A chemist advising a customer – "You know, like I've done my entire career," as one Boots lifer puts it – is now having a "Great Conversation". If the satisfied customer then compliments the chemist that is now a "Feel Good Moment" (although in performance plans they are unfortunately referred to as FGMs – so a chemist must notch up, say, five FGMs a week).

And here we have the amorality:

But that was the least of Tony's worries. It was the medicine-use reviews (MURs) that really bothered him. Patients came to his consulting room and discussed their diet and health problems, while he took them through a chunky list of questions and advised them on what their medicines were meant to do and how best to take them. Free for the customer, a way of keeping a patient out of a GP's waiting room, and for each one the NHS pays the company £28. To prevent the system from being abused, every pharmacy in the country is limited to 400 MURs a year. Except Tony's managers took that number as a target for his store to hit. So keen was Tony's store to make that profit, he claims it did reviews on anyone, no matter how unsuitable. Tony himself was told to have one – and to give one to a patient with severe dementia. His manager came in for one – no sooner had it begun than she walked out, but it still went towards the total. All so the shop could earn that extra £11,200 from a scheme intended to help the sick.

And, as we can see, Tony can't live with it (and good for him).

This capital-driven process of leaching out all meaning from professional work is akin to crapificaiton, but I'm not sure it's exactly the same thing. I've always remembered this post from Clive :

Let me continue with the self-disclosure, but it's perhaps more of a confessional or appeal for absolution. I've spent almost 30 years working in the FIRE (Finance, Insurance, Real Estate) sector, my entire adult life. When I first started, it was viewed as a most suitable career choice for middle class not particularly aspirational sorts who wanted security, respectability and a recognisable position in the community. It was never supposed to be a passport to significant wealth or even much more than very modest wealth. It was certainly never supposed to be anything which oppressed or harmed anyone.

By the early 1990's the rot, which had started to set in during the mid-1980's, had begun to accelerate. Most regular readers of Naked Capitalism know how the movie ended. If only it was just a work of fiction. For those of you who have suffered financially, emotionally, physically (or all three) through an unlawful foreclosure, fee gouging, predatory lending, junk insurance or scam financial products you will know what the consequences of an industry which threw away its moral compass and any sense of a social contract are.

For those of us on the inside, we don't deserve any sympathy. But I'd like to offer a glimmer of insight into the conflict that those of us with any sort of conscience wrestle with because it is a conflict which is going to shape our societies over the next generation.

Increasingly, if you want to get and hang on to a middle class job, that job will involve dishonesty or exploitation of others in some way .

Of course, hanging onto a "middle class job" is, so far as we know, what all the professional players in the examples above have been doing. All of their (credentialed, professional) jobs have involved "dishonesty or exploitation of others." And all of them, so far as we know, have been able to live with themselves. With the exception of Tony.[3]

There is an alternative, as the life of Bob Ebeling shows :

Last week, Bob Ebeling died. He was an engineer at a contracting firm, and he understood just how badly the O-rings handled cold weather. He tried desperately to convince NASA that the launch was going to end in disaster. Unlike many people inside organizations, he was willing to challenge his superiors, to tell them what they didn't want to hear. Yet, he didn't have organizational power to stop the disaster. And at the end of the day, NASA and his superiors decided that the political risk of not launching was much greater than the engineering risk.

Now, how to give Bob Ebeling the requisite organizational power is another question, outside the scope of this post. However, it seems to me that what Clive labels "dishonesty and exploitation" is what I would label corruption, and that's what Ebeling was fighting against.

Recall again that corruption, as Zephyr Teachout explains, is not a quid pro quo , but the use of public office for private ends. I think the point of credentials is to create the expectation that the credentialed is in some sense acting in a quasi-official capacity, even if not an agent of the state. Tony, a good pharmacist, was and is trying to maintain a public good, on behalf of the public: Not merely the right pill for the patient, but the public good of trust between professional and citizen, which Boots is trying to destroy, on behalf of the ruling idea of "shareholder value." Ka-ching.

NOTES

[1] Here's a link on the first Baxter International Heparin scandal . Heparin is, apparently, made from the intestines of pigs. But the Chinese ran out of pigs, and so they used cows instead, hopefully not mad ones, but how does one know? Anyhow, hundreds died and the adulterated Heparin might still be on the shelves. Reminds me of how the banks satisfied the demand for paper with NINJA mortgages….

[2] So how's that workin' out for ya? TomD , April 17, 2016 at 1:36 pm

One thing I don't understand, if you are an honest banker-or you want to be an honest banker-shouldn't you support tough regulations that crack down and remove the fraud and corruption? Shouldn't the vast majority of people working in FIRE want the rot removed?

instead while simultaneously engaging in not-quite-moral activities, they circle the wagons whenever someone suggests cleaning it up.

jrs , April 17, 2016 at 2:14 pm

Isn't that just cognitive consonance (opposite of cognitive dissonance) if they spend their whole lives morally minimizing fraud and corruption to do so when advocating public policy as well?

diptherio , April 17, 2016 at 2:20 pm

What, you wanna be a trouble maker? Hope you don't care about that raise, or that promotion. Fish rots from the head, and it's the head that makes the decisions about what gets punished and what gets praised. You want to survive and thrive in that fishpond, you better do what the rotten head tells you to do.

Bas , April 17, 2016 at 2:30 pm

George Clooney – yeah, $343,000 is an obscene amount of money and it's a terrible problem, but whaddya gonna do? It takes an obscene amount of money to get the right person elected. So we're just going to keep throwing obscene amounts of money at the problem until it gets corrected, because I have obscene amounts of money, and I can help.

jgordon , April 17, 2016 at 2:33 pm

That's because while individual people may be moral and upright, in aggregate people are delusional sociopaths. An individual banker going against the tide would be like a lemming having second thoughts about going over the cliff; it's goring to get trampled and squashed.

Bas , April 17, 2016 at 2:43 pm

I think that because of this we have to encourage refusal to participate. I don't think everyone who refuses gets trampled and squashed, but they do have to find their own niche, which can be a lonely thing. I never listen to people who tell me that lying and cheating are the way things get done, and that I will die homeless and alone if I don't just accept it. More people end up homeless and alone because they participated in a rigged system and then got screwed. I opted out, and I am not rich, but I am independent in that I make choices based on my own values.

Jamie , April 17, 2016 at 3:49 pm

Bill Black has written extensively about what he calls the "Gresham's dynamic" that forced good underwriters out of the market. He has pointed out more than once that a petition was presented to the authorities signed by a large number of honest underwriters asking for regulation long before the big financial collapse. Being amoral and dishonest was a competitive advantage and the honest underwriters were driven out of the business. It's not hard to understand and does not call for the conclusion that people in general are dishonest or unethical.

TomD , April 17, 2016 at 4:19 pm

This is interesting. Thanks.

P Walker , April 17, 2016 at 4:03 pm

Regulation gets in the way of boosting KPIs which one needs to keep up in order to be promoted, or worse, get fired for low KPIs.

This is a lot like Not In My Backyard (NIMBY). Regulation is fine, so long as it applies to everyone else but not me.

Jim Haygood , April 17, 2016 at 1:44 pm

A competent publicist could reframe the unfortunate-sounding term "pepper spray incident " into a benign "invigorating capsicum spritz, provided at no cost to the participants." It wasn't violence; it was philanthropy. :-)

Bas , April 17, 2016 at 1:49 pm

The NEO conservatives/liberals go-to guy for poking fun always seems to be Marx, while Adam Smith is their boy. A laissez faire capitalist who said some other stuff

http://www.opednews.com/articles/Whose-Class-War–by-Manfred-Weidhorn-Class-War_Class-Warfare_Conservatives_Democracy-160415-908.html

This acknowledgment of the role of the class struggle was hardly limited to the Founding Fathers. It was not Karl Marx who spoke of the proclivity of employers to conspire and "to deceive and even oppress the public," of "the mean rapacity, the monopolizing spirit of merchants and manufacturers," of the "monopoly of the rich," of the "bad effects of high profits," of the "natural selfishness and rapacity" the vain and insatiable desires" of the rich, who institute "civil government"against the poor." It was the godfather of laissez faire capitalism and the favorite guru of conservatives, Adam Smith, who said that.

Could Smith have meant that some businessmen, when left to their own devices, are actually capable of resorting to such measures as setting up offshore company headquarters and Swiss bank accounts, of cooking the books, stacking Boards of Governers, employing sweated labor, busting unions, polluting the environment, outsourcing jobs, colluding to fix prices, bribing officials and legislators, buying judges, concocting Ponzi schemes, secretly financing phony "grass roots" and "populist" rallies, providing themselves huge bonuses regardless of performance, and depending on government bail-outs not available to others–all this among other outrageous forms of often illegal and always immoral behavior?

Apparently Smith did mean just that, because he advocated that the rascality on the part of the rich could not be allowed to proceed without interference if one were to have a functioning capitalist system; hence he spoke of the need for government action to prevent the stultification of the "laboring poor." If that be class struggle, apparently he favors it. (Compare Tocqueville's similar observation: "When the rich alone govern, the interest of the poor is always in danger.") The suspicion is strong that, judging by these words of his, were Smith alive today, he would far more likely be a liberal than a conservative.

Plenue , April 17, 2016 at 4:38 pm

There's a massive difference between what Smith actually said and what his modern fanbois believe he said. Most of them have never actually read Wealth of Nations (and even less his Theory of Moral Sentiments. My understanding is that they both have to be read back to back to truly understand his views). Though I'm sure plenty of them have unopened copies of WoN displayed on their shelves for prestige value.

I'll admit I too have not gotten around to either book, just as I have yet to tackle Marx's 2400 page doorstop (hopefully both are easier reads than Veblen, who was a chore). But from what I've gathered to Smith 'enlightened self-interest' (what they now call homo economicus) wasn't 'everyone be a prick and this will somehow make society as a whole better'. In fact to Smith man WASN'T purely selfish, and had a variety of drives and motivations. And this was because we were endowed with a divine nature. To Smith the 'invisible hand' was literally the hand of God imbuing his creation with the capacity to make moral decisions.

Also, Michael Hudson has been of great help by constantly pounding away at the point that Smith was talking about markets free from vestigial feudalism, particularly exactly the kind of unproductive rent extraction that is making a comeback in the modern age. That's very different from the concept of unregulated markets free from any kind of oversight.

Madmamie , April 17, 2016 at 1:54 pm

This is a wonderful analysis of our conundrum. To add another example which reveals the final, bottom-most layer; what we might call "collateral damage": the case of my daughter-in-law.

One evening my son answered the door to three FBI agents who handcuffed his wife in front of their (her) 6 year-old and dragged her away to jail. She was arrested for fraud two years after the 2008 crash and mortgage crisis. She had been a clerk at a real-estate co. doing "what everybody was doing" , that is, making sure that people could buy even if they didn't have the down payment and helping others flip houses that were way overpriced. She was not an agent, she was the office clerk who sent the false info in the mail and deposited the checks. In the end she was sent to prison for a year, leaving her young son and 10-month old baby daughter at home with their desperate father.

Her boss was given house arrest and probation BECAUSE HIS WIFE WAS PREGNANT (!!!) which adds sexism to the context of class warfare (the judge lectured her about not having gone to college to better herself at one point?!). This story, I am sure, was played out all over the country. Perhaps not all judges were nasty old men with a chip on their shoulder about the new administration but even at this level, I'm sure not many "bosses" went to prison.

Bas , April 17, 2016 at 2:10 pm

So sorry for your family, what a terrible thing. I suppose her boss did go to college??!!1?

This reminds me of all the times over 30 years when I did bookkeeping and accounting work and was asked to go into grey areas and sometimes commit outright fraud and I said no, and of course that was the end of that job, I would get eased out, usually in a way sure to make me ineligible for unemployment. I would certainly have gone to jail because I was the one who knew the law. But your DIL surely should not have been held accountable for doing clerical tasks without knowledge of or control over the contracts. That is very scary.

diptherio , April 17, 2016 at 2:28 pm

Wow. Just…wow. Somehow the FBI has manpower to spare to go after a secretary, but can't find it in themselves to consider maybe going after the people who were financing the whole operation (and many, many others just like it)?!? Well, at least now we know whose side their on. Speaking of how do they live with themselves….

jo6pac , April 17, 2016 at 4:10 pm

My thought also.

I do hope your daughter and family have been able to recover.

jrs , April 17, 2016 at 2:11 pm

Hmm, what's the point of a post saying people should have ethics if reproducing (supporting a family) suddenly nulls and voids all ethics like some magical get out of jail free card. It isn't even at all clear that a single person with no kids will end up in any better shape when they lose their job than the person with kids (for one thing they are less likely to qualify for much in the way of government benefits meager as those are anyway).

Bas , April 17, 2016 at 2:18 pm

That certainly points up the pressure to go along to get along. Especially if you are married to someone with dodgy values.
"How hard can it be to lie and cheat, Bob? Suck it up, Momma needs to send the kids to private school!"

diptherio , April 17, 2016 at 2:52 pm

He's not saying that (or at least I didn't see it). The more financial responsibilities you feel like you have, the harder it is to buck the system. You're right, even just an individuals needs can make it hard, so all the more so when you've got kids to consider (I'll sleep in my car, but can I make them? etc.)

Bas , April 17, 2016 at 3:34 pm

What makes me crazy these days is that now the conversation is, either you compromise your values, or you won't have enough to eat and/or be homeless, whereas, before, perhaps you just may not make as much money. What is up with this? Do all roads now lead to perdition?

jo6pac , April 17, 2016 at 4:17 pm

True my late father called them (financial responsibilities) the Golden Handcuffs. I know of a few jobs I was very qualified to get but I wasn't married with children and a mortgage. I had company owner I was doing contractor work for tell they hated hiring me because of that but I did the best work so there was that.

Lambert, I'm standing on my chair clamping. Yes I remember telling you not to stand on chairs to take pictures in the yard;)

Yves Smith , April 17, 2016 at 3:48 pm

This is not about ethics. This is about norms.

It used to be that despite Americans always seeing money as a route to statue (see De Tocqueville), the downside of that was kept in check by having a well-understood set of social norms and people feeling they had to adhere to them because they would be shunned otherwise. Shady businessmen would not get the status goodies they wanted, like membership at the local country club. JP Morgan was not kidding when he said:

The first thing [in credit] is character … before money or anything else. Money cannot buy it.… A man I do not trust could not get money from me on all the bonds in Christendom. I think that is the fundamental basis of business.

So Lambert's question, "How can these people live with themselves?" is critical.

You shrug your shoulders, By doing that, you become part of the problem. You are enabling this conduct by your resignation.

We collectively need to start making the foot soldier as well as the higher ups ashamed of what they are doing. We need to delegitimate this conduct. Remember, what brought Joe McCarthy down was when Joseph Welsh called him out by asking, "At long last, have you left no sense of decency?" People need to start doing that, publicly and privately, every time the opportunity presents itself, even if that means alienating friends. You need to be willing to ostracize people if you want a better society.

cnchal , April 17, 2016 at 5:08 pm

. . .You need to be willing to ostracize people if you want a better society.

The fly in the ointment, is that the ones one is ostracizing are the majority, so it becomes a very lonely existence. People find that hard to live with.

Bas , April 17, 2016 at 5:20 pm

you do find other people. it's often the family ostracization that is the killer.

diptherio , April 17, 2016 at 2:17 pm

A couple more anecdotes to throw on the pile:

1) Close friend is a life-long gov't engineer. After a pipeline leak near Billings, MT, the details of which he was personally familiar with, the oil company CEO went on TV, in front of some gov't types, to answer questions….and proceeded to lie through his teeth.

When asked why the leak was allowed to continue for an hour before the pipeline was shut down, he claimed it was due to physics, that you can't just push a button and stop the flow because of all the pressure build-up. Only you can. They have like, sciencey stuff that makes just that possible. There is literally a button in the pump station you can push to stop the flow. The reason the leak went on for an hour was because there was no safety manual in the pump station, so the guy on duty had to call around to try to find out what this particular blinking light or alarm meant, and what to do about it. It took them an hour and a literal game of telephone to figure out they were discharging crude oil into the Yellowstone River.

And they had been sited, more than once iirc, for failure to have said safety manual in the pump station. It had been years that they failed to have one printed up. I got to see the final inter-office memo on the incident, which reported a fine that amounted to a couple minutes worth of profit for the company involved.

So knowing all this, and watching the CEO lie about the facts, did this gov't employee call the press, or anyone, and inform them of the truth? No. Why not? Because Reagen issued and executive order barring public employees from talking to the press without permission and this guy valued his job and his pension. So he kept his mouth shut. He's got a family and grandkids and whatnot, so it's somewhat understandable. Still….

2) A Nepali friend works for H&M in the Middle East. He's worked his way up to a store manager after a number of years working in Kuwait, and recently got transfered to Saudi Arabia to open a new store. We got to talk quite a bit about his work. I was fascinated.

H&M has astoundingly fine-grained surveillance procedures. Sales at individual registers are tracked at 10 minute intervals. Numbers of customers entering the store are likewise tracked. Metrics are analyzed and plans for improving them are made at Monday morning meetings with upper management. Mondays are the worst.

"Why was there this drop in customers coming in last Wednesday?"

"Because there was a sandstorm"

"Don't make excuses."

"Secret Shoppers" are the bane of G's existence. They regularly come in and check things out, being sure to note any possible failing, since they're not being paid to say "everything's just great!" After one's been through, G gets called to a meeting and they discuss the results. Again, he's got to have a "plan" for addressing any failings, and apologize for not being perfect.

The secret to G's success is that he's figured out how to game the metrics. Secret shoppers give a demerit if they aren't greeted within 15 seconds of entering the store, so G had the bright idea to hire some poor schlub to stand by the door all day for a pittance and say 'hello' to everyone who enters. Customers not coming in? Offer some free snack and put a sign outside. Most people will just come in for the free food and walk right out, but the customer entrance metric just went up. He's also a great ass-kisser, which really helps in dealing with his upperlings.

And, of course, he has to be pretty merciless with the employees he manages. Not making enough high-end sales? A few seconds slow helping a secret shopper? You're toast. No second chances for the front line crew. He doesn't enjoy it but what to do ( ke garne? ) that's the job. And it's been providing an above average salary for him and his family, so it's understandable why he does it. Still….

TomD , April 17, 2016 at 3:06 pm

I always wondered why the big grocery stores around here have a super old person as a 'greeter' who says hi to everyone who walks in.

diptherio , April 17, 2016 at 4:30 pm

I've only seen it in Walmarts around here. I thought it was funny he came up with the same idea as a way to pass secret shopper tests. Maybe that's how it started at WallyWorld too. The sad thing is, my friend is a brilliant salesman but is having to use his talents for the benefit of whoever runs H&M (when he's not using them to game their surveillence systems).

cnchal , April 17, 2016 at 5:14 pm

It's a sales gimmick. Making eye contact with someone that elicits sympathy is supposed to open your wallet wider. It works too.

Bas , April 17, 2016 at 5:21 pm

lol. not with me. i'm autistic

Ulysses , April 17, 2016 at 2:22 pm

"Unlike many people inside organizations, he was willing to challenge his superiors, to tell them what they didn't want to hear. Yet, he didn't have organizational power to stop the disaster."

There's the rub: amassing organizational power in a corrupt organization is very difficult for an honest, outspoken person. What often happens is that decent people save up their moral outrage until after they retire from whatever position in which they have "gone along to get along." Then most of them discover that they no longer have the energy, or the means, to "fight the good fight" they have delayed for decades.

I have tremendous admiration for a group of retired Teamsters up in Rhode Island that I know. They have come out against mobbed-up sellouts, at great personal risk to themselves, and now Local 251 is far more progressive than it ever was! Those guys are truly an inspiration.

My own small contributions to the struggle haven't required nearly as much personal courage. My wealthy and influential Anglo/Dutch relations don't go out of their way to protect me from adverse consequences of radical activism. Yet their mere existence provides me a larger "free-speech zone" from which to hurl invective at the kleptocrats– compared to the very tiny space for protest allowed to most in U.S. society. I have also been fortunate to witness the encouraging reality that at least some people– who are regarded as trusted insiders in our corrupt system– are actually thoroughly subversive!

Plenue , April 17, 2016 at 3:03 pm

"How do these people live with themselves?"

At least part of the time on a bed made of money.

https://www.youtube.com/watch?v=U2oG4nz7YTE

gizzardboy , April 17, 2016 at 3:42 pm

An important post. Thanks, Lambert. You mention reputational damage.

In this age of the internet, I wish there was more reputational damage. For instance, the cop who sprayed all the students (and then got $38,000) because he was made to feel bad. How about posts with his picture, his address, what car he is seen driving, where he is posted, etc.

Same sort of treatment might be meted out for executives of some of the companies and organizations you discussed. There are reputation repair companies, how about a site "How do you live with yourself.org"? It could get a little more personal than "cop shoots family dog'.

Clive , April 17, 2016 at 3:51 pm

More evidence of dispensing prescription medication for fun and profit (regardless of the impact to consumers, sorry, patients) has come to my notice through my experience at Walmart's British outpost, known as Asda

The NHS has moved to a system of not having primary care responsible for maintaining responsibility for repeat prescriptions but instead pharmacies (such as Boots mentioned in Lambert's piece above) got to do the admin. You sign up to any number of dispensing pharmacies you like and, when you need a repeat prescription, you go to the pharmacy not primary care.

The Mom and Pop independent pharmacies seem to operate the system as intended (the dispensing pharmacist checks the indication you present and validates the medication is in line with what the physician who originally prescribed the medication intended). For example, I have an ocular antibiotic on repeat and, when I go to an independent pharmacy I'm registered with, they do the expected investigations before issuing the repeat prescription. This is perfectly appropriate and I am pleased that they will not simply dole out things like antibiotics carte blanche. They'd rather not dispense than send people out the store with something inappropriate.

Not so with Asda/Walmart. There, you just get shown the screen - which has everything you've ever been prescribed listed and you simply click the ones you like. No questions asked. Asda/Walmart get money from the NHS for each of the items that they dispense. They are obviously setting themselves up as the go-to place for hassle free eee-zee-meds. It costs them nothing (the NHS covers the cost of the drugs and the reimbursement to the pharmacies for issuing the prescription plus Asda/Walmart's profit from the "transaction").

Primary care is supposed to monitor what the pharmacies are dispensing but, guess what, they are being stretched way too thinly and are having to be ruthless in their priorities under the constant drive for "efficiency", all in the name of austerity.

How do the pharmacists live with themselves? My guess is that, like Boots, Asda/Walmart have put their pharmacies under a target regime. If they don't send as many people out the door loaded with medication as much medication as they can, their management will replace them with people who will.

Neoliberalism is corrupting, absolutely. Everyone and everything is vulnerable to being captured in its thrall.

Alex morfesis , April 17, 2016 at 4:32 pm

Sadly, people are a bit more evil than we give them credit for…they would rather go along then move along…they are quite happy walking over homeless people they helped put there just as long as the lawn has that putting green feeling and the car lease does not run past the miles allotment before it is time to get a brand spanking new car payment…

evil is easy for most people because we don't call it evil anymore….

They would much rather go along then move along…and we are becoming less and less the home of the brave…

Larry , April 17, 2016 at 6:02 pm

This is a challenge for anybody that navigates what increasingly is an overtly corrupt system. One of my more high profile publications was a piece of work refuting blatantly fradulent work from another scientist in the same city. The fradulent scientist was publishing high profile papers on the mechanisms of how antibiotics work, and drawing great fame and acclaim for doing so. On the ground level, other scientists couldn't repeat the work and in their small singlular labs probably thought they had failed in some step to repeart the famous work.

We were skeptical of the work the instant it was published because all our own work and decades of evidence countered it. It was only when we aligned with another prominent scientist to publish back to back papers refuting the work that it got published. And did it deter the fradulent scientist? Not one bit.

Where is the incentive to be an honest intellectual when fraud has clear and obvious rewards?

[Apr 13, 2016] The dead end of neoliberal transformation of the USA society

economistsview.typepad.com

Economist's View

New Deal democrat : , Monday, April 11, 2016 at 03:07 PM
"consensus in support of global economic integration as a force for peace and prosperity "

"The Great Illusion" ( https://en.m.wikipedia.org/wiki/The_Great_Illusion )
That increased trade is a bulwark against war rears its ugly head again.

The above book which so ironically delivered the message was published in 1910.

Alas, the Kaiser, the Tsar, and the Emperor did not act in accord with its tenets. Either increased global trade is irrelevant to war and peace, or World War I didn't happen. Your pick which to believe.

RC AKA Darryl, Ron -> New Deal democrat... , Tuesday, April 12, 2016 at 03:06 AM
Awesome, Dude!
George H. Blackford : , Monday, April 11, 2016 at 03:20 PM
Our problems began back in the 1970s when we abandoned the Bretton Woods international capital controls and then broke the unions, cut taxes on corporations and upper income groups, and deregulated the financial system. This eventually led a stagnation of wages in the US and an increase in the concentration of income at the top of the income distribution throughout the world: http://www.rwEconomics.com/Ch_1.htm

The export-led growth model that began in the 1990s seriously exacerbated this problem as it proved to be unsustainable: http://www.rwEconomics.com/htm/WDCh_2.htm

When combined with tax cuts and financial deregulation it led to increasing debt relative to income in the importing countries that caused the financial catastrophe we went through in 2008, the economic stagnation that followed, and the social unrest we see throughout the world today. This, in turn, created a situation in which the full utilization of our economic resources can only be maintained through an unsustainable increase in debt relative to income: http://www.rwEconomics.com/htm/WDCh3e.htm

This is what has to be overcome if we are to get out of the mess the world is in today, and it's not going to be overcome by pretending that it's just going to go away if people can just become educated about the benefits of trade. At least that's not the way it worked out in the 1930s: http://www.rwEconomics.com/LTLGAD.htm

RC AKA Darryl, Ron -> George H. Blackford ... , Tuesday, April 12, 2016 at 03:13 AM
Totally excellent, Dude!
Dan Kervick : , Monday, April 11, 2016 at 06:26 PM
Global integration and the liberalization of capital flows outside of national boundaries, and outside of the constraints of national solidarity, has pushed Americans further into a ruthless capitalist struggle for strictly individual measures of "success", and intensified economic insecurity and the gaps between winners and losers. Economists find the resistance to these trends mysterious; others not so much.
RC AKA Darryl, Ron -> Dan Kervick... , Tuesday, April 12, 2016 at 03:14 AM
Priceless!
Adamski : , Tuesday, April 12, 2016 at 07:10 AM
The prospect of an international recession has me feeling down but then I read this sniping timewasting comments section and it doesn't seem so bad
Ashok Hegde : , Tuesday, April 12, 2016 at 02:07 PM
Economic leaders after WW2 had a Colonialist attitude entrenched within. They made a plan for global economic integration, which only considered the economic needs and realities of developed western nations. China/India/Indonesia/etc...were never at the conceptual table.

Now, the tides have turned. The China-India nexus historically accounted for roughly 40% of the global economy. That 'normal' state was eclipsed for 1.5 centuries, and we may regress to that norm. If so, a ton of jobs, and economic activity, may shift from the West, to Asia. If so, the western middle classes are screwed.

BILL ELLIS -> Ashok Hegde ... , Tuesday, April 12, 2016 at 03:02 PM
It's not a zero sum problem
BILL ELLIS : , Tuesday, April 12, 2016 at 02:56 PM
Up till now globalism has mostly been conducted by laissez faire neo liberal elite...for the needs of the elite.
That's not entirely a bad thing. Wars are started over the needs and desires of our elites. Common folks left to their own, won't find reason to go off and kill their counterparts... it only after "the other" has been dehumanized and demonized by the elite that common people will allow themselves to be organized to kill one another.

By allowing and encouraging the world's elite to operate within a system of mutual dependence, we decrease the incentive for the elite to marshal and deploy their captive populations against one another.

But once that international system has been solidified...as it has now... The objective should be to tear it down...it should be to make it democratized, unionised, and transparent .

We need to move from laissez faire neo liberalism to social democratic neo liberalism.

BILL ELLIS -> BILL ELLIS... , -1
Should " not" be torn down...

[Apr 11, 2016] Paul Krugman: Snoopy the Destroyer

Notable quotes:
"... "Judge Collyer repeatedly complained that the regulators had failed to do a cost-benefit analysis." What Professor Krugman omits here is that so-called "cost-benefit analysis" has been corrupted by the fallacious Kaldor-Hicks compensation principle. The house cleaning has a lot further to go than "Republicans." ..."
economistsview.typepad.com
Systemically important presidential elections:
Snoopy the Destroyer, by Paul Krugman, NY Times : Has Snoopy just doomed us to another severe financial crisis? Unfortunately, that's a real possibility, thanks to a bad judicial ruling that threatens a key part of financial reform. ...
At the end of 2014 the regulators designated MetLife , whose business extends far beyond individual life insurance, a systemically important financial institution. Other firms faced with this designation have tried to get out by changing their business models. For example, General Electric ... sold off much of its finance business. But MetLife went to court. And it has won a favorable ruling from Rosemary Collyer , a Federal District Court judge.
It was a peculiar ruling. Judge Collyer repeatedly complained that the regulators had failed to do a cost-benefit analysis, which the law doesn't say they should do, and for good reason. Financial crises are, after all, rare but drastic events; it's unreasonable to expect regulators to game out in advance just how likely the next crisis is, or how it might play out, before imposing prudential standards. To demand that officials quantify the unquantifiable would, in effect, establish a strong presumption against any kind of protective measures.
Of course, that's what financial firms want. Conservatives like to pretend that the "systemically important" designation is actually a privilege, a guarantee that firms will be bailed out. Back in 2012 Mitt Romney described this part of reform as "a kiss that's been given to New York banks"..., an "enormous boon for them." Strange to say, however, firms are doing all they can to dodge this "boon" - and MetLife's stock rose sharply when the ruling came down.
The federal government will appeal..., but even if it wins the ruling may open the floodgates to a wave of challenges to financial reform. And that's the sense in which Snoopy may be setting us up for future disaster.
It doesn't have to happen. As with so much else, this year's election is crucial. A Democrat in the White House would enforce the spirit as well as the letter of reform - and would also appoint judges sympathetic to that endeavor. A Republican, any Republican, would make every effort to undermine reform, even if he didn't manage an explicit repeal.
Just to be clear, I'm not saying that the 2010 financial reform was enough. The next crisis might come even if it remains intact. But the odds of crisis will be a lot higher if it falls apart.

jonny bakho : Monday, April 11, 2016 at 06:54 AM

The free market needs government intervention to save the market from itself.
pgl said in reply to jonny bakho... , Monday, April 11, 2016 at 07:25 AM
Yes - and we need to get the corporate lawyers out of the way.
Sandwichman -> pgl... , Monday, April 11, 2016 at 07:47 AM
10,000 at the bottom of the ocean would be a good start.
DrDick -> jonny bakho... , Monday, April 11, 2016 at 07:36 AM
Markets cannot even exist without government regulation.
anne : , Monday, April 11, 2016 at 07:02 AM
http://krugman.blogs.nytimes.com/2015/04/11/a-victory-against-the-shadows/

April 11, 2015

A Victory Against the Shadows
By Paul Krugman

There are two big lessons from GE's announcement * that it is planning to get out of the finance business. First, the much maligned Dodd-Frank financial reform is doing some real good. Second, Republicans have been talking nonsense on the subject. OK, maybe point #2 isn't really news, but it's important to understand just what kind of nonsense they've been talking.

GE Capital was a quintessential example of the rise of shadow banking. In most important respects it acted like a bank; it created systemic risks very much like a bank; but it was effectively unregulated, and had to be bailed out through ad hoc arrangements that understandably had many people furious about putting taxpayers on the hook for private irresponsibility.

Most economists, I think, believe that the rise of shadow banking had less to do with real advantages of such nonbank banks than it did with regulatory arbitrage - that is, institutions like GE Capital were all about exploiting the lack of adequate oversight. And the general view is that the 2008 crisis came about largely because regulatory evasion had reached the point where an old-fashioned wave of bank runs, albeit wearing somewhat different clothes, was once again possible.

So Dodd-Frank tries to fix the bad incentives by subjecting systemically important financial institutions - SIFIs - to greater oversight, higher capital and liquidity requirements, etc. And sure enough, what GE is in effect saying is that if we have to compete on a level playing field, if we can't play the moral hazard game, it's not worth being in this business. That's a clear demonstration that reform is having a real effect.

Now, the more or less official GOP line is that the crisis had nothing to do with runaway banks - it was all about Barney Frank somehow forcing poor innocent bankers to make loans to Those People. And the line on the right also asserts that the SIFI designation is actually an invitation to behave badly, that institutions so designated know that they are too big to fail and can start living high on the moral hazard hog.

But as Mike Konczal notes, ** GE - following in the footsteps of others, notably MetLife *** - is clearly desperate to get out from under the SIFI designation. It sure looks as if being named a SIFI is indeed what it's supposed to be, a burden rather than a bonus.

A good day for the reformers.

* http://www.nytimes.com/2015/04/11/business/dealbook/the-lessons-for-finance-in-the-ge-capital-retreat.html

** http://www.nextnewdeal.net/rortybomb/how-end-ge-capital-also-kills-core-conservative-talking-point-about-dodd-frank

*** http://dealbook.nytimes.com/2015/01/13/metlife-to-fight-too-big-to-fail-status-in-court/

Sandwichman : , Monday, April 11, 2016 at 07:14 AM
"Judge Collyer repeatedly complained that the regulators had failed to do a cost-benefit analysis." What Professor Krugman omits here is that so-called "cost-benefit analysis" has been corrupted by the fallacious Kaldor-Hicks compensation principle. The house cleaning has a lot further to go than "Republicans."
anne said in reply to Sandwichman ... , Monday, April 11, 2016 at 07:23 AM
https://en.wikipedia.org/wiki/Kaldor%E2%80%93Hicks_efficiency

A Kaldor–Hicks improvement, named for Nicholas Kaldor and John Hicks, also known as the Kaldor–Hicks criterion, is a way of judging economic re-allocations of resources among people that captures some of the intuitive appeal of Pareto improvements, but has less stringent criteria and is hence applicable to more circumstances.

A re-allocation is a Kaldor–Hicks improvement if those that are made better off could hypothetically compensate those that are made worse off and lead to a Pareto-improving outcome. The compensation does not actually have to occur (there is no presumption in favor of status-quo) and thus, a Kaldor–Hicks improvement can in fact leave some people worse off.

Sandwichman -> anne... , Monday, April 11, 2016 at 07:31 AM
There are no stable "units" in which compensation could be paid.

http://econospeak.blogspot.ca/2014/11/numeraire-shmoo-meraire-nature-doesnt.html

David Ellerman:

"Consider a transfer of an apple from Mary to John and a transfer of $0.75 from John to Mary. Use Kaldor-Hicks to evaluate each part as a "project" with the other part as the "compensation". Using money as the numeraire and the apple transfer as the "project", we see under the assumptions that the transfer of the apple increases social wealth measured in dollars so that is the recommendation based on "efficiency", and the payment of the "compensation" of $0.75 is a matter of "equity" of concern to politician, theologians, and philosophers but not to the professional economist. Now reverse the numeraire taking apples as the numeraire and the transfer of the $0.75 as the "project". Then the transfer of the apple (= "compensation") does not change social wealth = size of the apple pie, but the transfer of the $0.75 increases the size of the social apple pie by 3/4 of an apple so it is the transfer of the $0.75 that is recommended on efficiency grounds by hard-nosed economists while the transfer of the apple is left to politicians, theologians, and the like as a matter of "equity." Thus the outcome of the KH analysis is reversed by a change in the numeraire used to describe the exact same pair of transfers."

anne said in reply to Sandwichman ... , Monday, April 11, 2016 at 07:50 AM
November 22, 2014

#NUM!éraire, Shmoo-méraire: Nature doesn't truck and barter

The commodity in terms of which the prices of all the others are expressed is the numéraire. -- Leon Walras, Elements of Pure Economics.

But the numéraire is a purely technical device, introduced simply for the purpose of making exchange values explicit. In no way does the introduction of a standard of value alter the fundamental nature of the economy in question. It remains a barter economy, since goods are exchanged solely for other goods. -- André Orléan, The Empire of Value.

-- Sandwichman

anne said in reply to Sandwichman ... , Monday, April 11, 2016 at 07:26 AM
http://en.wikiquote.org/wiki/Catch-22

1961

Yossarian looked at him soberly and tried another approach. 'Is Orr crazy?'

'He sure is,' Doc Daneeka said.

'Can you ground him?'

'I sure can. But first he has to ask me to. That's part of the rule.'

'Then why doesn't he ask you to?'

'Because he's crazy,' Doc Daneeka said. 'He has to be crazy to keep flying combat missions after all the close calls he's had. Sure, I can ground Orr. But first he has to ask me to.'

'That's all he has to do to be grounded?'

'That's all. Let him ask me.'

'And then you can ground him?' Yossarian asked.

'No. Then I can't ground him.'

'You mean there's a catch?'

'Sure there's a catch,' Doc Daneeka replied. 'Catch-22. Anyone who wants to get out of combat duty isn't really crazy.'

There was only one catch and that was Catch-22, which specified that a concern for one's own safety in the face of dangers that were real and immediate was the process of a rational mind. Orr was crazy and could be grounded. All he had to do was ask; and as soon as he did, he would no longer be crazy and would have to fly more missions. Orr would be crazy to fly more missions and sane if he didn't, but if he was sane, he had to fly them. If he flew them, he was crazy and didn't have to; but if he didn't want to, he was sane and had to. Yossarian was moved very deeply by the absolute simplicity of this clause of Catch-22 and let out a respectful whistle.

'That's some catch, that Catch-22,' he observed.

'It's the best there is,' Doc Daneeka agreed.

-- Joseph Heller

Sandwichman -> anne... , Monday, April 11, 2016 at 07:42 AM
Also known as the double-bind in Gregory Bateson's analysis.

And why the big fuss about the Panama Papers? Doesn't the Laffer Curve tell us that if the 1% evade taxes by hiding their money in off-shore accounts, it will cause so much economic growth that government tax revenues will actually increase?

Laffer curves, Kaldor-Hicks cost-benefit swindles and lump-of-labor fantasies are not "incidentals" of an otherwise sound economic discipline. They are symptoms of an ideology that is rotten to the core.

William said in reply to Sandwichman ... , Monday, April 11, 2016 at 08:54 AM
Yes, those supply-siders must love it when companies hide their income offshores. Just think how many more jobs they must be creating with their lower tax rate!
ilsm said in reply to Sandwichman ... , Monday, April 11, 2016 at 09:59 AM
BCA's or CBA's start with assumptions and ground rules.

Neither do anything but give "foundation" to preferences.

pgl : , Monday, April 11, 2016 at 07:24 AM
"The federal government will appeal the MetLife ruling, but even if it wins the ruling may open the floodgates to a wave of challenges to financial reform. And that's the sense in which Snoopy may be setting us up for future disaster."

As soon as Dodd-Frank was passed the large financial institutions got their legal teams busy trying to undermine it. One would think all progressives would rally behind enforcing Dodd-Frank. Of course Rusty wants us to believe enforcing Dodd-Frank is just too complicated. It is complicated only because the lawyers for the financial sector get paid big bucks to obscure what is sensible regulation.

DrDick -> pgl... , Monday, April 11, 2016 at 07:39 AM
Rusty is well paid not to understand that it is people like him and his employers who are responsible for the complexity of federal regulations.
pgl said in reply to DrDick ... , Monday, April 11, 2016 at 09:02 AM
I bet Rusty will protest this by saying he is not being paid that much. Which would be cool but the notion that we should just trash Dodd-Frank strikes me as bad financial economics. Now if we can improve on Dodd-Frank, that would be awesome if it makes Jamie Dimon really mad.
Peter said in reply to pgl... , Monday, April 11, 2016 at 10:36 AM
"One would think all progressives would rally behind enforcing Dodd-Frank."

What is that supposed to mean?

JohnH : , Monday, April 11, 2016 at 08:05 AM
LOL!!! "A Democrat in the White House would enforce the spirit as well as the letter of reform"...just like the incumbent Democrat sent bankers to jail for rampant mortgage fraud.

Oh, right! Obama and Holder actually made the investigation of mortgage fraud JOD's lowest priority and brought no criminal indictments...undermining the rule of law, giving bankers a 'get out of jail free' card, and encouraging them to commit yet more fraud.

Krugman is becoming just ridiculous, a partisan hack on steroids.

Peter said in reply to JohnH... , Monday, April 11, 2016 at 08:51 AM
"The episode showed that traditional financial regulation, which focuses on deposit-taking banks, is inadequate in the modern world."

What Krugman fails to inform his reader - one can only say so much in a column is that Bill Clinton repeatedly reappointed Alan Greenspan as regulator in chief.

The shadow-banking system was created during Greenspan's tenure and he saw no need to regulate it b/c free markets are awesome! And so the shadow-banking system promptly had a bank run.

Eric Blair -> Peter... , Monday, April 11, 2016 at 09:02 AM
Not "promptly"--it took fifteen years. That was Clinton's biggest weakness--he was good at dealing with urgent obvious problems, but he would sometimes let longer-term issues fester. This is why Obama will be remembered as a better president than Clinton--he plays the long game.
Peter said in reply to Eric Blair ... , Monday, April 11, 2016 at 09:10 AM
15 years? No. Clinton ended in 2000 with a tech stock bubble. Less than a decade later we had the mother of all bank runs.

"he was good at dealing with urgent obvious problems, "

Like what? Balancing the budget?

Eric Blair -> Peter... , Monday, April 11, 2016 at 09:29 AM
Notable examples of urgent problems that Clinton addressed effectively included the Mexico crisis of 1994, the East Asian crisis of 1997, and the collapse of Long Term Capital Management in 1998. Any one of these crises could have turned into a broader meltdown and spawned a depression similar to the 2008 one, but Clinton and his appointees (including Greenspan) did a good job of containing the damage. Unfortunately they did nothing to address the underlying problems that had made it necessary for them to act in the first place.
ilsm said in reply to Eric Blair ... , Monday, April 11, 2016 at 10:11 AM
Clinton pandered to the Sunnis sending USAF to do their work sundering Serbia. Bombing the Chinese embassy was par for the military industry complex.

Permanently stationed US funded mechanized brigade to keep the Sunnis happy with NATO over Serbia.

Peter said in reply to Eric Blair ... , Monday, April 11, 2016 at 10:13 AM
Dean Baker has a good critique of their handling of the East Asian Crisis, if you aren't familiar with it.
Peter said in reply to JohnH... , Monday, April 11, 2016 at 08:52 AM
"Oh, and yes, the episode also showed that making the breakup of big banks the be-all and end-all of reform misses the point."

*sends more money to Sanders campaign*

Peter said in reply to Peter... , Monday, April 11, 2016 at 09:12 AM
http://readersupportednews.org/opinion2/277-75/36222-focus-why-the-banks-should-be-broken-up

Why the Banks Should Be Broken Up

By Matt Taibbi, Rolling Stone

09 April 16

Bernie or no Bernie, 'Times' columnist Paul Krugman is wrong about the banks

Paul Krugman wrote an op-ed in the New York Times today called "Sanders Over the Edge." He's been doing a lot of shovel work for the Hillary Clinton campaign lately, which is his right of course. The piece eventually devolves into a criticism of the character of Bernie Sanders, but it's his take on the causes of the '08 crash that really raises an eyebrow.

...

Peter said in reply to JohnH... , Monday, April 11, 2016 at 08:56 AM
"It doesn't have to happen. As with so much else, this year's election is crucial. A Democrat in the White House would enforce the spirit as well as the letter of reform - and would also appoint judges sympathetic to that endeavor. A Republican, any Republican, would make every effort to undermine reform, even if he didn't manage an explicit repeal.

Just to be clear, I'm not saying that the 2010 financial reform was enough."

The Republicans are going to lose so Krugman's lesser evil argument doesn't really work.

Does Krugman discuss Hillary's reforms? No of course not.

Eric Blair -> JohnH... , Monday, April 11, 2016 at 08:59 AM
Your comment only makes sense if you believe that either
(1) designating a financial institution "systemically important" is trivial or totally meaningless compared to criminal indictments for previous actions, or (2) a Republican would enforce this designation just as much as Obama has. Which is it?
pgl said in reply to Eric Blair ... , Monday, April 11, 2016 at 09:04 AM
Uh oh - a tough question for JohnH. Careful as he might say you are "not qualified" or something like that.

Republicans want a laissez faire financial system. After all - 2008 was such a great year (not).

Peter said in reply to pgl... , Monday, April 11, 2016 at 09:11 AM
Hey buddy! Getting feisty again?
JohnH said in reply to Eric Blair ... , Monday, April 11, 2016 at 09:20 AM
LOL!!! Eric Blair asserts that it is "totally meaningless" to sending bankers to prison for fraud that threatened systemically threatened the economy!

And he assumes that Obama would behave less deferentially to Wall Street banks when it comes to enforcing any regulation that bankers don't approve of.
Republicans have no monopoly on servility to the interests of Wall Street and their wealthy clientele, but Krugman obviously prefers Democratic corruption to its Republican cousin...

Eric Blair -> JohnH... , Monday, April 11, 2016 at 09:36 AM
No, I did not say what you claim that I said. And whether Obama is being deferential to someone is at most a side issue. The important questions are first, does the rule help make the financial system more stable, and second, would it be enforced less by Republicans. I believe the answer to both questions is yes.
pgl said in reply to Eric Blair ... , Monday, April 11, 2016 at 10:43 AM
JohnH does this a lot. Cross his serial nonsense and you become Jamie Dimon's enabler.
JohnH said in reply to Eric Blair ... , Monday, April 11, 2016 at 03:21 PM
"would it be enforced less by Republicans?"

LOL!!! How can it get less than zero...which is the number of bank fraud indictments Obama issued against prominent Wall Street bankers?

It's hilarious how Wall Street Democrats try to claim that the Democratic Party is less corrupt than Republicans, when both parties feed from the same trough.

MIB said in reply to JohnH... , Monday, April 11, 2016 at 10:43 AM
Sandwichman says:

"The house cleaning has a lot further to go than "Republicans."

How about the leader of the Democrats, President Obama?

Real Democrats can hardly wait for good ol authentic, honest Bernie Sanders to start attacking President Obama – he's certainly not qualified to be president, taking all that Wall Street cash and letting the big banks off scot-free, like he and Holder did back 2009 -- unqualified.

But good ol straight shootin Bernie aint gona do that, is he? Nope, because even Bernie understands that Democrats actually like, maybe even love President Obama.

Bernie probably even understands that most Democrats like their democratic representatives, senators, governors, mayors, city councilors, etc as well. So railing against the establishment is not nearly as effective for Bernie as it is for Trump, Cruz and the tea party railing against the Republican establishment. You see this in most Sanders surrogates carefully leaving "democratic" off when criticizing the establishment, heck they might be confused with Republicans or Independents. Even the more excitable online Berniacs rarely use the term democratic establishment, instead invoking the generically ominous and evil "establishment."

It would have been much better (and honest) if Bernie had not turned his back on 28 years as a proud Independent and run for president as a proud Independent instead of his gimmick to garner more media attention by running as a Democrat.

His ego trip would have been much shorter, and Bernie certainly wouldn't be able to raise as much cash running as an independent, he'd likely struggle to exceed Nader's 3% general election vote in 2000, but he could have honestly taken on the real leader of the (democratic) establishment, President Obama.

JohnH said in reply to MIB... , Monday, April 11, 2016 at 03:25 PM
Nonetheless, Bernie is bringing critical economic issues into public discourse, issues that Wall Street Democrats have long tried to suppress or occasionally pay lip service to...issue such as minimum wages, trade policy, etc.

Even better, Bernie is showing socialist Democrats how to campaign and win against corrupt, incumbent Wall Street Democrats.

Antoni Jaume : , Monday, April 11, 2016 at 10:36 AM
That looks suspiciously just what Charles Murray proposed in his book "By the People: Rebuilding Liberty Without Permission", to litigate against norms that regulate corporations.

http://americablog.com/2015/05/by-the-ruling-class-charles-murrays-anti-democratic-revolution.html

dd : , -1
Well not all SI's are equal. The drubbing AIG took even as it was used to launder cash to more favored institutions is no doubt seen as the template. There's that nowhere to be found independent insurance guy with no clout on FSOC that's another message. Woodall,a former insurance regulator from Kentucky is the definition of outsider.
Last there's Jack Lew lecturing everyone on financial stability,truly a nice irony given Citi's illegal Traveler's deal and the horrific consequences.
No doubt the lawsuit is about positioning and they'll be more by other players who worry about being sacrificed to save the clout-heavy.
This is totally predictable given the power structure of FSOC.

[Apr 11, 2016] #panamapapers Offshore Funds: On the Run With (Almost) Nowhere to Go?

Notable quotes:
"... NY banking rules ..."
"... Nicholas Shaxson's Treasure Islands: Tax Havens and the Men Who Stole the World ..."
www.nakedcapitalism.com
Posted on April 11, 2016 by Yves Smith As strange as it may seem, a confluence of developments in the banking industry means the Panama Papers revelations looks likely make it a lot more difficult for offshore money, as tax evasions and tax secrecy are often politely called, to stay hidden. This would serve as a marked contrast to the last international-headlines-gripping leaks, the Snowden revelations. Even though Snowden gave a big window into the reach of the surveillance state, not all that much has changed, save the Chinese making more active efforts to avoid cloud computing and US technology vendors, and the Europeans bashing US concerns over violations of their privacy laws.

By contrast, the massive Mossack Fonseca records haul feeds into trends in banking that mean that a lot of these funds are going to find it hard remain secret. We'll summarize them below.

Tax base expansion initiatives . The US and European Union have been working on a program to expand the base of income that is subject to tax. Budget-starved European member states have been moving the plan forward ahead of schedule. This is one of the few positive developments to come of of governments failing to understand the implications of having a fiat currency (you can and typically need to run deficits, since the private sector sets unduly high return targets and chronically underinvests; the constraint on deficit spending is creating too much inflation).

Increasingly tough "know your customer" rules . The US going aggressively after foreign banks that have falsified records as a part of money-laundering has led to increased compliance. Even Standard Chartered, which thought the US had no business telling it not to do business with Iran, was brought to heel and its CEO forced to resign for his continued intransigence.

Now the US can throw its weight around only as far as dollar-based transactions are concerned, since those ultimately clear through US facilities. But the UK has also adopted stringent "know your customer" rules. It now takes weeks to open a new account that is not a personal account, say for your rugby club.

As John Dizard in the Financial Times reports :

There is a new urgency in the tone of the lawyers and advisers for offshore asset holders. The essential message is that you are the Shah of Iran, this is 1979, and you and your money will find yourselves hopscotching from one unwelcoming landing place to another…

If you or your clients think this is about tax cheats or the merely middle rich, they should think again…

As this column and others have noted, by next year Switzerland, along with Luxembourg, the Channel Islands and other European offshore investment management centres, will start exchanging tax information with their counterparts.

There are a very large number of beneficiaries, ie globalised rich people, who have until the end of this year to get their money safely onshore. The one Western country that does not have a deadline for complying with the Common Reporting Standard is the US.

Almost everyone who has non-criminally sourced capital would like to have at least some of it accessible within the dollar-based clearing system. But the clerical and legal checklists to set up accounts for legitimate money have become so long that it will take months to accomplish this even for those willing to pay the transaction costs.

And before you think the US banks are therefore the answer…. US banks are shunning money from the rich these days. . Dizard again:

The largest US banks do not really want to take more deposits, or even do the cursory know-your-customer due diligence work to open new special purpose accounts for old customers. Americans I know with legitimately acquired nine- or ten-figure investment portfolios now have to scrounge around to open accounts in midsize US banks.

Those rich Americans do not have the logistical or legal problems that Panama Papers-related flight capital will have in "onshoring" their money.

Moreover, US legislators are calling for the US tax havens like Delaware corporations and Wyoming limited liability companies, to report on who their ultimate beneficiaries are. Given the tone of his Guardian op-ed, Carl Levin sound like he is warming up for hearings:

Global revulsion against shell company abuses, offshore tax havens, and the lawyers that promote them has generated new public pressure to tackle these problems. Here are three steps to consider.

Outlaw corporations with hidden owners

….G20 world leaders have made a start with a joint commitment to increase corporate transparency. The United Kingdom is leading the way, mandating public disclosure of the true owners – the "beneficial owners" – of UK companies. The European Union has followed…

The United States is far behind. We now require more information to get a library card than to form a US corporation. ….The biggest impediment is opposition from the secretaries of state of our 50 states, who financially benefit from forming new corporations and don't want to ask questions that might jeopardize their revenue. Our states need to wake up to the damage they are doing and stop forming corporations with hidden owners.

Get tough on offshore tax abuse

Tax authorities should use existing tax information exchange agreements, including the US-Panama agreement, to go after tax cheats and determine whether Mossack Fonseca facilitated illegal conduct.

Offshore tax abuse goes beyond individuals. Some multinational corporations use tax havens to arrange secret tax deals or declare earnings offshore. The international community is finally demanding that large multinationals file reports disclosing the profits they make and the taxes they pay on a country-by-country basis. The United States has proposed regulations requiring those reports; the next step is to finalize them. A bigger issue: making those reports public.

Get tough on lawyers promoting misconduct

….Lawyers should be subject to the "know your client" requirements of anti-money laundering laws. In addition, banks should scrutinize suspicious accounts of law firms and require them to certify that they will not use those accounts to help clients circumvent the bank's own anti-money laundering controls.

Note that Levin doesn't seem to have a good answer about what to do about states that find it attractive to act as secrecy jurisdictions, but in the past, the Feds have used cutting off various Federal funds as a stick to force cooperation, Moreover, if Congress were to pass laws with "know your client" requirements with criminal sanctions and tough fines, that in and of itself would choke off a lot of domestic activity.

Information technology risk . Mossack Fonseca exposed in a very dramatic way that secrecy isn't just a function of the design of legal arrangements and the choice of jurisdiction and bank, but also of the integrity of the registered agent's IT security. There's no way to do due diligence on that. Those with offshore accounts must already be nervous that they could be exposed by a similar hack. Dizard's fallback remedy for the rich who want to keep their money hidden, "…you and your money will find yourselves hopscotching from one unwelcoming landing place to another," might work for the relatively small and fleet of foot to stay ahead of the taxman and the bank transparency moves, but it won't reduce IT risk.

Dizard's article, despite being informative, weirdly rails against crackdown on large-scale international capital transactions" as populist and ill-informed, due to limiting the mobility of international capital. Someone needs to clue him on the research by Ken Rogoff and Carmen Reihart, who are hardly of the pinko persuasion, who found that high levels of international capital movements are powerfully correlated with more severe and frequent financial crises. Dizard also tries to depict reducing capital movements as being Smoot-Hawley revisited. First, the notion that Smoot-Hawley caused the Depression had been well debunked. Second and more important, international capital flows these days are at such high levels (over 60 times trade flows) that the Bank of International Settlement has said that large international transactions are not about facilitating trade, and that excessive financial "elasticity" was the cause of the crisis.

He also depicts banks as winding up being beneficiaries, which contradicts his message that they regard onshored money as more hassle (which means cost) that its worth:

This will, within the next two years or so, lead to a one-time transfer from the global rich to the staff and owners of US financial institutions. But that will be followed by a long drought for new business, as the global wealth that did not move quickly enough gets slotted into endless holding patterns in the mid-Atlantic or mid-Pacific.

It's hard to see what good it will do someone to have money moving around the few finessable locations and banks that remain. Pray tell, how does it spent? Money you can't readily touch, or get into a jurisdiction where you'd like to spend it, does not seem terribly useful.

And the big point that Dizard misses is that onshoring these funds will make the future investment income on them subject to tax. Hidden untaxed wealth has contributed to rising inequality; Gabriel Zucman of UC Berkeley has estimated that 6% to 8% of global wealth is offshore, and most of that not reported to tax authorities. So the more the rich are discomfited by their overly-clever machinations, the better.

Northeaster , April 11, 2016 at 7:34 am

Well, if you live in a state where you can name an LLC for your nominee trust, it doesn't get any better. File the off shore LLC in Nevada where they don't ask any questions, and use it for your real estate vehicle to launder your monies. Any question to why high end real estate is on fire? The opaqueness in some states is intentional, as it took me about 10 minutes of random searching of properties (over $2 million) to find the off shore LLC owner, with people and entities that did not exists in the SoS filings. The activity index for RE sales over $750K is almost equal to the index under $400K and below combined. If you add the $500K and above sales, it crushes the entire index below $500K.

https://research.stlouisfed.org/fred2/graph/?g=47×5

Alex morfesis , April 11, 2016 at 10:30 am

Owning an entity does not open a bank account…a party almost always has to be vetted for a new enterprise…wired in funds for the benefit of an entity helps break the corporate veil…govt officials rambling to the public that this corporate charade is just "impossible" to deal with or stop are just laughing at the public (or need to hand back their law license to the bar)…money can Always be traced…a real estate closing will have closing instructions and in those instructions will be to whom to send back the funds and to what name if the transaction is not concluded….since title companies are state regulated enterprises….and there are basically only four major title insurance umbrella companies….this myth that a state title insurance investigator could not walk in and obtain the beneficiary of the source of funds is one big second city improv skit

Northeaster , April 11, 2016 at 11:33 am

All they have to do is have real estate fall under FinCen Suspicious Activity Reporting (SAR) requirements, but the NAR is simply too powerful and well funded with a more than accepting sold out CONgress,

Alex morfesis , April 11, 2016 at 12:52 pm

Not defending nar but state title insurance investigators have the absolute right to walk in unannounced and spot audit files…a new corp will not have all these closing funds in hand and for a proper corp veil to stand and hold, the funds had to be in a bank account in the name of corp…might I suggest that the funds do not arrive from a source matching the corporate name…thus revealing the actual party in interest….

susan the other , April 11, 2016 at 2:25 pm

After this amazing seminar from Yves MERS is making much more sense… and as always Utah stands squarely behind the banks by ruling in appeals court that you can make a ham sandwich your agent.

JTMcPhee , April 11, 2016 at 8:36 am

Another piece of the problem is the difficulty of "piercing the corporate veil" in so many legal domains (almost said "states and nations," but those are mostly convenient fictions themselves). There's been a long tail of effort by the Few and the Corrupt and the Criminal to make it very difficult, ever increasingly difficult, to hang liability for what little remains of proscriptions and penalties for vicious and renter-driven personal (from "behind the veil") actions that offend what are supposed to be police-powers (health, safety, welfare, nuisance and environmental destruction, etc.), hang it where it belongs, with penalties that actually matter to the sociopath, if behaviors are going to change - around the necks of the individual rotten humans that plot and plan and operate all the stuff that is killing ordinary people and the planet.

Corporate "beneficial owners" get to hide behind the screen of opacity and deflection that comes from the perversion of the notion that "business" needs require immunity of individuals from the consequences of "corporate" behavior. "Piercing the veil" requires meeting an extreme burden of proof that the corporation is a fraudulent shell, or merely an alter ego of the individual officer/owner. And if course the Wealthy and their advisers and facilitators and wholly owned political actors are still in the game, with huge resources even if currently under some increasing and likely temporary constraints, and they will be doing their damndest to preserve existing moats and walls and veils and find new ways to pervert the legitimacy-granting functions of law-making to protect their pleasure palaces and "specialness."

Eat the Rich, reads the old bumper sticker from Hippier days… With a plate of fava beans, and a nice sauce of Retribution and a side of Restitution…

inode_buddha , April 11, 2016 at 12:00 pm

I have seen one case in particular, where the CEO made one set of sworn statements to the SEC in the 10k, and said the exact opposite in Federal court in the same month. Neither legal team picked up on this or mentioned it, and neither did the judge. It was incredibly aggravating to watch. In this case he rode the company into the ground while pumping and dumping like mad, and got away with it. The lawsuit was simply another vehicle to pump the stock, it didn't matter if it even had any merit - which it didn't. Years later, the company imploded ithe only a few employees left, the execs walked away with millions, etc. and they made a lot of enemies along the way.

divadab , April 11, 2016 at 8:36 am

Hopefully greater regulation and international cooperation will surface the tax evaders and capture their previously unpaid taxes. But it will also drive many of them deeper into organized crime-style hiding schemes. For example, using squeaky-clean nominees acting as beards: here's how it works in many communities – one guy "owns" many rental properties for which there are long-term tenants, and the rent equals exactly the carrying cost of the property. The tenants happen to be businessmen and their families who run pretty close to the wind and whose assets are thereby continually at risk – effectively, they protect their houses from creditors by holding them in a trustworthy nominee name – the "legal owner" is a hidden agent for the actual owners. Totally undetectable. But enforcement of this type of contract is extra-legal – organized crime-style – and communal.

This type of setup is also a classic money-laundering vehicle – involving property flips between ostensibly unrelated parties but in reality coordinated. Hence distorted real estate markets as noted by Northeaster above. First $500,000 of profit on a principle residence sale is non taxable. I'd suggest the IRS focus on auditing house sales for which the principle residence exemption has been claimed, especially when people make close to the limit several times over (say) a ten-year period.

Synoia , April 11, 2016 at 10:26 am

$250,000 exemption for each individual on title every 2 years.

weinerdog43 , April 11, 2016 at 9:01 am

Way back when dinosaurs roamed the Earth, and I was taking Income Tax in law school, I couldn't shake the feeling that the whole point of the class was to assist people (corporations are people, my friend) to scam the government. While no one likes to pay taxes, these taxes provide services that people do, in fact like. It's all I can do to resist slapping folks who complain about the condition of the roads, and then in the next breath, whine about their tax burden.

Anyway, cheating the government out of one's fair share of the tax burden means 2 things:
1.) The remaining burden falls more heavily on those who DO pay; and
2.) Unpunished cheating encourages more people (and corporations) to cheat. "If they're not paying, why should I pay?"

After that class, I couldn't run fast enough away from tax law as it seemed to attract classmates I rather loathed. I couldn't agree more that tax lawyers who encourage cheating should face disbarment and fines. Apologies to my tax law brethren who try to do the right thing. I know some fine CPAs and tax guys. It just wasn't my calling.

Whine Country , April 11, 2016 at 10:03 am

I began my career as a CPA in the early '70s in the SF Bay area and virtually all of the lawyers I came in contact with had the same thoughts about taxes as you did. One of my accounting professors used to go on about how it was incredible that an attorney could pass the bar and practice law without ever having taken one tax course.

Particularly when you consider that there is very little that a lawyer does that does not in some way involve taxes. So for us CPAs this was just an opening for us to specialize in an area where lawyers had little or no interest.

In those days I recall that when you actually needed a tax attorney he was usually – I won't say loathsome – but kind of an odd sort. Recently I spoke to my ex-partner who took over our practice and the subject of tax attorneys came up. He reported to me that in the Bay Area tax attorneys are now billing $900 to $1,000 per hour. I guess you can call this supply side economics at work. As the number of mega zillionaires grows in the SF/Silicon Valley area, demand has apparently been created for a new category of super lawyer. The Free Market really can do some wonderful things when manipulated properly.

Yves Smith Post author , April 11, 2016 at 5:40 pm

You have to have your brain turned inside out to understand tax well enough to be a tax lawyer. Most regular lawyers have some antipathy for tax lawyers (I've sensed this and confirmed it). The logic of tax is extremely arcane, non-intuitive, and pedantic. Plus it does not have commercial value added.

perpetualWAR , April 11, 2016 at 10:46 am

Too bad the bar associations protect the scheming, lying cheats. Most bar associations have been infiltrated and are run by the bank lawyer scum.

polecat , April 11, 2016 at 1:47 pm

this is thing…..nearly every establishment related profession seems, in my mind at least, to be corrupted by fraud and graft……be it Pharma, Financials, Medical, MIC, Education, Agriculture, Law & Judicature, Transportation & Energy, National social policy, Foreign & National & Security policy……..

….hence… all phony & all illegitimate !!!

Alex V , April 11, 2016 at 9:04 am

I'm an American citizen living overseas. For me an "offshore account" is not an option, it's a fact of life. Creating fair laws to control tax evasion are therefore of interest to me.

One example of the opposite of fair law is FATCA. This is quite a terrifying bit of poorly conceived legislation; intended to go after blatant tax evaders and sanction evaders, but instead creating penalties that can be life ruining for a middle class expat that makes an honest mistake in their reporting. The penalties on banks (and by extension foreign countries) that did not want to subject themselves to US law are also overly aggressive. So aggressive that many financial institutions refused to deal with any Americans, even for things as simple as a savings account. "Knowing your customer" became discrimination based on citizenship.

I'm just hoping that any changes to enforcement or regulation that come about from the PPs take this into account.

Regarding Standard Chartered, I'm not quite sure it's absolutely clear cut that they were in the wrong:

http://www.exportlawblog.com/archives/4584
http://www.exportlawblog.com/archives/4266

They may have settled just to make the problem go away, and to maintain access to the US financial system. The US has a habit of imposing it's laws on the rest of the world, or ignoring international law it doesn't like. In my opinion, the sanctions on Iran were in many ways outright bullying, very much like with those on Cuba.

Yves Smith Post author , April 11, 2016 at 5:45 pm

Buh? Standard Chartered defied the advice of its US outside counsel and falsified wire transfer documents in a systematic manner after having been previously sanctioned for handling the transfer of funds to Iran for its oil sales, and to Sudan and other prohibited jurisdictions. You clearly have not read Benjamin Lawsky's order against the bank. Standard Chartered had a branch in New York to do dollar operations, and all dollar transactions ultimately clear (have to clear) through that branch.

These were clear-cut violations of NY banking rules and Lawsky could have yanked Standard Chartered's NY banking license, which would have been a cataclysmic event for the bank. And after Federal regulators initially acting offended that Lawsky had end run and embarrassed them, they stepped up and issued big fines against Standard Chartered of their own.

You also omit that Standard Chartered got yet another round of fines for failing to comply with the changes required! That led to the ouster of CEO Peter Sands, who had been defiant all along. From the New York Times in 2014, Caught Backsliding, Standard Chartered Is Fined $300 Million :

It took $667 million in fines and a promise to behave for the British bank Standard Chartered to emerge from the regulatory spotlight. All it took to return there was its failure to fully keep that promise.

In a settlement announced on Tuesday by New York State's financial regulator, Standard Chartered will pay a $300 million fine and suspend an important business activity because of its failure to weed out transactions prone to money-laundering, a punishing reminder of settlements in 2012. Those settlements with state and federal authorities resolved accusations that Standard Chartered, in part through its New York branch, processed transactions for Iran and other countries blacklisted by the United States.

The New York regulator, Benjamin M. Lawsky, has now penalized Standard Chartered for running afoul of the 2012 settlement, which he said required the bank to "remediate anti-money-laundering compliance problems."

An independent monitor, hired as part of Mr. Lawsky's 2012 settlement, recently detected that the bank's computer systems failed to flag wire transfers flowing from areas of the world considered vulnerable to money-laundering, according to Mr. Lawsky's order. The order did not specify the number of transactions that the bank's filters failed to identify, but a person briefed on the matter said that it was "in the millions."

Please stop defending crooked bank behavior. Plus this is agnotology, which is against our house rules.

DJG , April 11, 2016 at 9:08 am

Thanks for this. The problem with the Panama Papers for those of us outside economics and finance is that we don't understand the mechanisms and regulations that ease all of this movement of money. Even though I have stocks in my IRA, it isn't as if the companies report their financial messes in the proxy statements. Au contraire, it's all the glory of Jeffrey Immelt all the time.

"Finessable": I kind-a like it. Your coinage?

readerOfTeaLeaves , April 11, 2016 at 4:22 pm

You may want to check McClatchy's website as they have some explanatory videos and terrific reporting.
I got started on all the tax haven skullduggery by reading Yves, so it's wonderful to see this getting a far wider, fully documented exposition.

http://www.mcclatchydc.com

Also, Nicholas Shaxson's Treasure Islands: Tax Havens and the Men Who Stole the World is one of the best books that I've ever read. His blog is here: http://treasureislands.org

Earlier this week, a friend said, "Is it a good day?" I said, "It's an AWESOME day! All the sleaze is finally coming out into the sunlight."

Yves Smith Post author , April 11, 2016 at 8:01 pm

Yes, Treasure Islands is a terrific book. Highly readable but still covers many of the important technical issues.

Jim Haygood , April 11, 2016 at 1:46 pm

'It now takes weeks to open a new account that is not a personal account, say for your rugby club.'

… which is why workarounds, both old school (gold) and new (anonymous digital currencies), will be found to sidestep the politicization of government currencies, which now come bundled with odious surveillance that makes their use increasingly unattractive.

Yves Smith Post author , April 11, 2016 at 8:04 pm

These are both property, not money, and not at all workable for anyone who needs them for transactions. Both are volatile and bitcoin with its blockchain makes its entire history of past holders accessible. That's not a desirable feature for someone hiding from the taxman.

Micky9finger , April 11, 2016 at 1:56 pm

the constraint on deficit spending is creating too much inflation).

Huh?

Yves Smith Post author , April 11, 2016 at 5:32 pm

That is correct for fiat currency issuers. This is not any secret if you've been reading about how monetary operations work.

RBHoughton , April 11, 2016 at 8:25 pm

Good grief. What's the world coming to? Are we now expected to visit our offshore paradise and suitcase money home? The gentlemen in Customs will be checking every flight from the Caymans.

"The one Western country that does not have a deadline for complying with the Common Reporting Standard is the US." – Ahh ha – is this part of the solution to falling inwards investment?

[Apr 11, 2016] Whats Behind The Revolt Against Global Integration?

Notable quotes:
"... I think some fellows already had this idea: "Much more promising is this idea: The promotion of global integration can become a bottom-up rather than a top-down project" -- "Workers of the World, Unite. You have nothing to lose but your chains!" ~Marx/Engels, 1848 ..."
"... The "populists" are raging against global trade which benefits the world poor. The Very Serious economists know what is really going on and have to interests of the poor at heart. Plus they are smarter than the "populists" who are just dumb hippies. ..."
"... Cover your a$$ much Larry? No mention of mass immigration? No mention of the elites' conscious, planned attack on homogeneous societies in Western Europe, the US, and now Japan? ..."
"... The US was 88% European as of 1960. As of 1800 it was like 90% English. So yes, it was basically a homogeneous society prior to the immigration act of 1965. Today it is extremely hard for Europeans to get into the US -- but easier for non-Europeans. Now why would that be? Hmm .... ..."
"... The only trade that is actually free is trade not covered by laws and/or treaties. All other trade is regulated trade. ..."
"... Here's a good rule to follow. When someone calls something the exact opposite of what it is, in all probability they are trying to hustle your wallet. ..."
"... ISIS was invented by Wall Street who financed them. ISIS is a scam, just like Bin Laden's group, just like "COMMUNISM!!!!" to control people. To manipulate them. ..."
"... Guys, the bourgeois state is a protection racket and always has been. It makes you feel safe, secure and "feel like man". So we can enjoy every indulgent individual lust the world has to offer. Then comes in dialectics of what that protection racket should do. ..."
"... To me, the bourgeois state is nothing more than a protection racket for the rich, something you should not forget. ..."
"... I find it rather precious that Summers pretends not to understand why people hate TPP. I do not think there is any real widespread antipathy toward global integration, though it does pose some rather substantial systemic dangers, as we saw in the global financial collapse. What people, including me, oppose is how that integration is structured. These agreements are about is not "free trade", but removing all restrictions on global capital and that is a big problem. ..."
"... TPP is not free trade. It is protectionism for the rich. ..."
"... All or most modern "free trade" agreements are like that. What people oppose is agreements which impoverish them and enrich capital. ..."
"... More free trade arrangement are not always better trade arrangements. People have seen the results of the labor race to the bottom caused by earlier free trade agreements; and now they are guessing we're going to get the same kind of race to the bottom with TPP when we have to put all of our environmental laws and other domestic regulations into capitalist competition with backward countries. ..."
"... progressive states (WA, OR, CA, NV, IL, NY, MD) could simply treat union busting the same way any OTHER major muscling or manipulation of the free market is treated: make it a felony. ..."
"... Summers: "Pie in the Sky" So trade negotiations would have to be lead by labor advocates and environmental groups -- sounds great to me, but I can't for the life of me figure out why the goods and service producers (i.e. capital owners) would have any incentive to promote trade under such a negotiated trade agreement... or that trade would actually occur. You'd have to eliminate private enterprise incentives to profit I think.. not something the U.S.'s "individualism" god can't tolerate. ..."
"... Alas, the Kaiser, the Tsar, and the Emperor did not act in accord with its tenets. Either increased global trade is irrelevant to war and peace, or World War I didn't happen. Your pick which to believe. ..."
economistsview.typepad.com
Larry Summers:
What's behind the revolt against global integration? : Since the end of World War II, a broad consensus in support of global economic integration as a force for peace and prosperity has been a pillar of the international order. ...
This broad program of global integration has been more successful than could reasonably have been hoped. ... Yet a revolt against global integration is underway in the West. ...
One substantial part of what is behind the resistance is a lack of knowledge. ...The core of the revolt against global integration, though, is not ignorance. It is a sense - unfortunately not wholly unwarranted - that it is a project being carried out by elites for elites, with little consideration for the interests of ordinary people. ...
Elites can continue on the current path of pursuing integration projects and defending existing integration, hoping to win enough popular support that their efforts are not thwarted. On the evidence of the U.S. presidential campaign and the Brexit debate, this strategy may have run its course. ...
Much more promising is this idea: The promotion of global integration can become a bottom-up rather than a top-down project. The emphasis can shift from promoting integration to managing its consequences. This would mean a shift from international trade agreements to international harmonization agreements, whereby issues such as labor rights and environmental protection would be central, while issues related to empowering foreign producers would be secondary. It would also mean devoting as much political capital to the trillions of dollars that escape taxation or evade regulation through cross-border capital flows as we now devote to trade agreements. And it would mean an emphasis on the challenges of middle-class parents everywhere who doubt, but still hope desperately, that their kids can have better lives than they did.
Tom aka Rusty : , Monday, April 11, 2016 at 07:15 AM
Is Summers really this naive?
Jedgar Mihelic : , Monday, April 11, 2016 at 07:21 AM
I think some fellows already had this idea: "Much more promising is this idea: The promotion of global integration can become a bottom-up rather than a top-down project" -- "Workers of the World, Unite. You have nothing to lose but your chains!" ~Marx/Engels, 1848
pgl -> Jedgar Mihelic ... , Monday, April 11, 2016 at 07:28 AM
Krugman sort of said this when he saw that apparel multinationals were shifting jobs out of China to Bangladesh. Like $3 an hour is just way too high for workers.
pgl : , Monday, April 11, 2016 at 07:32 AM
A large part of the concern over free trade comes from the weak economic performances around the globe. Summers could have addressed this. Jared Bernstein and Dean Baker - both sensible economists - for example recently called on the US to do its own currency manipulation so as to reverse the US$ appreciation which is lowering our net exports quite a bit. What they left out is the fact that both China and Japan have seen currency appreciations as well. If we raise our net exports at their expense, that lowers their economic activity. Better would be global fiscal stimulus. I wish Larry had raised this issue here.
Peter -> pgl... , Monday, April 11, 2016 at 08:12 AM
The "populists" are raging against global trade which benefits the world poor. The Very Serious economists know what is really going on and have to interests of the poor at heart. Plus they are smarter than the "populists" who are just dumb hippies.
likbez -> pgl... , Monday, April 11, 2016 at 04:48 PM
pgl,

And what about neocolonialism and debt slavery ?

http://historum.com/blogs/solidaire/245-debt-slavery-neo-colonialism-neoliberalism.html

=== quote ===
One of the most fundamental reasons for the poverty and underdevelopment of Africa (and of almost all "third world" countries) is neo-colonialism, which in modern history takes the shape of external debt.

When countries are forced to pay 40,50,60% of their government budgets just to pay the interests of their enormous debts, there is little room for actual prosperity left.

International debtors are the modern colonialists, sucking the marrow of countries; no armies are needed anymore to keep those countries subjugated. Debt is the modern instrument of enslavement, the international banks, corporations and hedge funds the modern colonial powers, and its enforcers are instruments like the Global Bank, the IMF, and the corrupt, collaborationist governments (and totalitarian regimes) of those countries, supported and propped up by these neo-colonials.

In reality, not much has changed since the fall of the great colonial empires. In paper, countries have gained their sovereignty, but in reality they are enslaved to the international credit system.

The only thing that has changed, is that now the very colonial powers of the past, are threatened to become debt colonies themselves. You see, global capitalism and credit system has no country, nationality, colour; it only recognises the colour of money, earned at all cost by the very few, on the expense of the vast, unsuspected and lulled masses.

Debt had always been a very efficient way of control, either on a personal, or state level. And while most of us are aware of the implementations of personal debt and the risks involved, the corridors of government debt are poorly lit, albeit this kind of debt is affecting all citizens of a country and in ways more profound and far reaching into the future than those of private debt.

Global capitalism was flourishing after WW2, and reached an apex somewhere in the 70's.

The lower classes in the mature capitalist countries had gained a respectable portion of the distributed wealth, rights and privileges inconceivable several decades before. The purchasing power of the average American for example, was very satisfactory, fully justifying the American dream. Similar phenomena were taking place all over the "developed" world.

Kgaard : , Monday, April 11, 2016 at 07:32 AM
Cover your a$$ much Larry? No mention of mass immigration? No mention of the elites' conscious, planned attack on homogeneous societies in Western Europe, the US, and now Japan?
anne -> Kgaard... , Monday, April 11, 2016 at 07:44 AM
There is of course no reasonable answering to prejudice, since prejudice is always unreasonable, but should there be a question, when was the last time that, say, the United States or the territory that the US now covers was a homogeneous society?

Before the US engulfed Spanish peoples? Before the US engulfed African peoples? Before the US engulfed Indian peoples? When did the Irish, just to think of a random nationality, ruin "our" homogeneity?

I could continue, but how much of a point is the in being reasonable?

anne -> anne... , Monday, April 11, 2016 at 09:06 AM
Correcting:

I could continue, but how much of a point is there in being reasonable?

Kgaard -> anne... , Monday, April 11, 2016 at 11:21 AM
The US was 88% European as of 1960. As of 1800 it was like 90% English. So yes, it was basically a homogeneous society prior to the immigration act of 1965. Today it is extremely hard for Europeans to get into the US -- but easier for non-Europeans. Now why would that be? Hmm ....

Also ... What is your definition of prejudice?

Benedict@Large -> pgl... , Monday, April 11, 2016 at 08:56 AM
The only trade that is actually free is trade not covered by laws and/or treaties. All other trade is regulated trade.

Here's a good rule to follow. When someone calls something the exact opposite of what it is, in all probability they are trying to hustle your wallet.

Has anyone been trying to hustle the wallets of the people who became ISIS? Oh please. That's a stupid question to even ask.

So is free trade, as in regulated trade that is called the opposite of what it is, responsible for ISIS? Of course it is.

Ben Groves -> pgl... , Monday, April 11, 2016 at 10:10 AM
ISIS was invented by Wall Street who financed them. ISIS is a scam, just like Bin Laden's group, just like "COMMUNISM!!!!" to c