Please, sir, may I have another cup of poorr-ridge?
The U.S.'s Dickensian economy is a legacy of Milton Friedman's 40-year promotion of unregulated capitalism advanced by the University of Chicago School of Economics. The neoliberal model widely disseminated through many U.S. universities has been exported worldwide. Naomi Klein (Shock Doctrine: The Rise of Disaster Capitalism) wrote about Friedmanite "disaster capitalists" who exploit natural or man-made disasters -- crisis as catalyst for change. Such "shock doctrine" is prelude to imposition of harsh policies of unregulated capitalism and the sell-off of public domain to profit multinational corporations. A U.S. financial crisis is one more opportunity to shift wealth upwards at the expense of federal, state and local governments and the working class.
Disaster capitalists' first concrete success was the 1973 violent overthrow of Chile's first democratically elected president, Salvador Allende, by dictator General Augusto Pinochet, abetted by the CIA, with the Nixon administration's blessing. Pinochet declared a "nation of owners" 30 years before George W. Bush touted his "Ownership Society." The Chilean dictator, writes Klein, replaced the public school system with vouchers and charter schools, instituted pay-as-you-go health care and privatized Chile's Social Security system -- a mirror of the U.S. conservative agenda.
Many uprisings in the Middle East are reactions to the same pattern of crony capitalism -- the marriage of parasitic multinational corporations seeking privatization of resources for profit with corrupt regimes and their elite associates who appropriate their country's wealth for their inner circle, at the expense of the people. Hosni Mubarak's ill-gotten family wealth is estimated between $1 billion to $70 billion, while more than 20 percent of Egypt's 82 million people reportedly live on less than two dollars a day.
Notes Klein, most coups since Chile have been carried out by "elites in suits" -- many have grown extremely wealthy on the backs of "large portions of what had been the working class who were discarded from the economy altogether and turned into surplus people," said economics professor Ricardo Grinspun. "Everywhere the Chicago School crusade has triumphed, it has created a permanent underclass of between 25 and 60 percent of the population," writes Klein.
To neoliberals, any crisis is an opportunity to loot deregulated markets and crush the working class. Klein quotes a New Orleans activist: "Those who do not support public education, healthcare, and housing will continue to turn all of our country into the Lower Ninth Ward unless we stop them." Rather than rebuild large parts of New Orleans post-Katrina, much of it became a blank slate on which corporatists could launch new markets of privatized, deregulated capitalism. Louisiana's education secretary boasted of "the first 100% free-market education system in the country," as most of New Orleans' 124 public schools were replaced by charter schools, which received more public, private and foundation funding than New Orleans public schools ever did pre-Katrina. So, too, were 7,500 public school staffers, including teachers, fired -- effectively breaking the union in a "right-to-work" state.
At the core of the Chicago school neoliberal crusade is the triple obsession of privatization, deregulation and union-busting. Crony capitalism on steroids permitted the most criminal behavior within the banking/mortgage industry, economic fraud measured in trillions of dollars of losses, with no prosecutions, notes economics professor William K. Black. The same banksters who betrayed their responsibilities and committed fraud were bailed out by taxpayers, got rich and continue to benefit, said Black, who calls the financial reform bill of 2010 a "travesty" that fails to address the underlying cause of the financial crisis.
In spite of the 2004 FBI report of an "epidemic of mortgage fraud," both Alan Greenspan and Ben Bernanke failed to use the authority that only the Federal Reserve has to regulate mortgage bankers, notes Black. Even Bernanke has acknowledged "two societies" due to a wide disparity of wealth. Black calls the wealth gulf and resulting plutocracy a greater threat to democracy than to the economy. Furthermore, Obama's capitulation by extending Bush tax cuts for the wealthiest one percent exponentially increases the extraordinary power of the wealthiest elites, in the wake of the Supreme Court's 2010 Citizens United vs. FEC decision.
Michael Hudson, President of the Institute for the Study of Long-Term Economic Trends, observes that the predominant mindset on the deficit commission is to reduce labor's wages -- depression is deemed a "solution," to achieve wage cuts of "20 percent." Wall St./corporate philosophy holds that they will become richer if they "can only impoverish the economy" by shifting the tax burden away from finance and industry onto labor. So, too, did Alan Greenspan a decade ago praise debt as a "cure" for the "labor problem" -- a means to create steadily falling wages. "What Greenspan and others call the post-industrial economy is really neo-feudalism, a financialized economy where all of the surplus goes to the banks," says Hudson.
Professor Tom Ferguson of the Roosevelt Institute, observes that the need for stimulus and jobs is ignored, while non-stimulant large tax giveaways are freely granted to the super-rich, proving how "cheap" is talk about deficits. Extension of the Bush tax cuts for the wealthiest two percent (which never created jobs in 10 years) are projected to add almost $830 billion to the deficit over the next 10 years.
Social Security "reform" is further distraction, as the program should have been sound for decades. However, Obama's tax deal with Republicans to cut the Social Security tax, Ferguson says, will make the short-term finances of Social Security look worse, setting the stage to ultimately squeeze and cut Social Security, and fulfilling a long-time dream of corporatists to gut all New Deal-type programs.
Economist Dr. Robert A. Johnson judges that in terms of Sen. Alan Simpson's budget "minnows and whales," Social Security is a "minnow." The "Moby Dick of the American budget problem" is money in politics. One result is enormous military pork, another the unresolved financial corruption, prompting Johnson's forecast of another large-magnitude financial industry bailout within 20 years. Health care is responsible for the greatest inflationary costs, says Johnson, naming the best cure a Medicare-for-All model. Unfortunately, corporatists blocked the most comprehensive health care reform, also the best for economic recovery.
Ronald Reagan's budget director David Stockman acknowledged that historic Reagan federal budget deficits were a strategy to cut domestic spending. So, too, did Reagan's regressive taxation -- increased payroll taxes and tax cuts for unearned capital income of the wealthy -- shift the greater tax burden to the working class. Whether in D.C. or Wisconsin, large tax breaks for the wealthy have been followed by declarations of budget emergency and demands for austerity cuts to social programs and workers' compensation. Wisconsin Gov. Scott Walker reversed Wisconsin's surplus, creating a deficit with large tax cuts for businesses and the wealthy, and then promoted a bill demanding pay and benefit cuts for public employees, and elimination of collective bargaining rights.
More crony patronage buried in the same bill would permit the sale or no-bid contract-for-management of Wisconsin's state-owned utilities to anyone. Several likely candidates were subsidiaries of Koch Industries, whose billionaire owners were large donors to Walker's 2010 gubernatorial campaign and to the Republican Governors Association.
Grover Norquist (Americans for Tax Reform) has agitated for a huge wealth shift upwards and dismantling of democracy, and applauds the effects of states' fiscal crises. "We are trying to change the tones in the state capitals, and turn them toward bitter nastiness and partisanship," he gloated.
Determined to gut state budgets and public employee compensation, Republican corporatists rejected renewal of the Build America Bonds program that expired on Dec. 31, 2010. The bonds comprise roughly 20 percent of all new debt sold by states, called a lifeline to states that face up to $130 billion shortfalls this year and cannot deficit spend and are further constrained by reduced state income tax revenues due to continuation of George W. Bush's federal and dividend tax cuts. Congressional Republicans are reportedly preparing legislation to change federal bankruptcy law so states can declare bankruptcy in order to erase pension responsibilities to workers.
U.S. corporate taxes are 35 percent, but, thanks to loopholes, the General Accounting Office reported that two out of three U.S. corporations paid no federal income taxes from 1998 through 2005. Forbes Magazine reported that in 2009 General Electric generated $10.3 billion in pretax income and a "tax benefit of $1.1 billion," paying nothing to Uncle Sam. In 2009, big corporations with tax shelters shifted a $100 billion annual tax burden onto U.S. taxpayers.
"Balancing the budget" and "deficit reduction" are code for shifting benefits of government spending to corporations and Wall St., away from workers, as corporatism has steadily gained dominance and subverted democracy in state and federal legislatures.
Disaster capitalism has come full circle -- Koch brothers et al pay for "populist" demonstrations, exploiting as shills Tea Party people whom they seek to disempower, who in turn agitate for disempowerment of workers in unions, which Governor Walker, whose election was hugely funded by the Koch brothers, seeks to break in return for handing over control of the people of Wisconsin's public utilities to the Koch Brothers. It is the rise of modern feudalism under corporate feudal overlords.
Corporate media are too invested in the conservative/corporate narrative to relate the story of disaster capitalists' subversion of democracy. Accurate information about the economic crisis is best accessed through alternative media such as The Real News Network (TRNN.Com), DemocracyNOW! and Free Speech Radio News.