Okay, so let’s start out the new year with a little perspective. The estimable Michael Hudson has a great article up on Counterpunch called “The Financial War Against the Economy at Large”. Unfortunately, he left it too late to be included in a lot of people’s ‘Best of 2012’ lists. But it belongs there. And I hope you, dear reader, whenever you might be happening to view these words, will click through and read it. While you’re there, you might even decide to support Counterpunch! They’re worth it.
This article is only part two of a series: Part one is here. At post time, there are no further entries, but watch that space!
So anyway, Hudson gives a really concise and pointed outline of the plans our financial whiz kids have made for the rest of us. Their plan, which is working brilliantly so far, is to rule the world. Yeah, you read that right. It’s bold! It’s impudent! It’s audacious!
And it’s working. Here’s how:
First, use tax policy to starve what they call ‘the beast’, that is, the parts of government that serve the public rather than the rich. That starve-the-beast formulation is credited to Grover Norquist, the eminence grise of today’s Republican Party. (By the way, that language! It’s really worth parsing it: if the parts of government that work for the people are ‘the beast’, what does that make the people themselves? But I digress…)
If you need money, you go where the money is. If you’re a government, you tax the rich, including wealthy individuals and giant corporations. That’s what we used to do in America. Of course, we taxed everyone else as well, but the rich paid a major chunk, since they had the major chunk of the income and wealth. Debts, public and private, were manageable and we weren’t in hock to capital. That meant they couldn’t tell us what to do. We could decide national priorities through the usual processes of political democracy.
The ‘beast’ starvation program was kicked off by Reagan and more or less completed by George W. Bush. We have now made sure that the wealthy, as individuals and as capitalists, pay almost no taxes (for more on corporate taxes, see the charts here and here. For tax rates on the wealthy, go here. A cool animation can be found here, an illustrated history here) All levels of government, from nation to state to locality – are hurting for revenue. Government must now go into debt to finance capital to keep running. The victim is in the water. The sharks move in. Let’s let Hudson tell it:
The aim of financial warfare is not merely to acquire land, natural resources and key infrastructure rents as in military warfare; it is to centralize creditor control over society…Tax favoritism for the wealthy deepens the budget deficit, forcing governments to borrow more. Paying interest on this debt diverts revenue from being spent on goods and services. This fiscal austerity shrinks markets, reducing tax revenue to the brink of default. This enables bondholders to treat the government in the same way that banks treat a bankrupt family, forcing the debtor to sell off assets…In an Orwellian doublethink twist this privatization is done in the name of free markets, despite being imposed by global financial institutions whose administrators are not democratically elected…Greece, for example, has been told to start selling off prime tourist sites, ports, islands, offshore gas rights, water and sewer systems, roads and other property.
As Hudson says, this is happening now in Europe, with Greece, Spain, Portugal and others putting their societies on the auction block. Before that, it happened in East Asia following the 1997-98 financial crisis. Before that, it happened in Russia and around the Third World, as Simon Jenkins, former IMF chief economist, points out.
But the problem is getting a lot closer to home. In Michigan, the Republican-controlled legislature passed a law in 2011 giving the governor power to appoint ‘emergency managers’ for cities (like Detroit) which can’t balance their books. The emergency managers can overrule elected officials, terminate contracts and sell public assets. Sell assets? To who? For how much? That’s not the public’s business, according to the law. When Michigan’s voters rejected the law in November 2012, the Republicans enacted a new version within weeks. The voters, who thought they had won, now have to get ready to fight all over again. In other states and cities, the same thing is happening. We’re still in the early stages, but the trend is clear.
For this whole plan to work – ‘starving the beast’, running up debt, mismanaging public affairs, getting in way too deep, and then handing everything over to the private sector – you need corrupt, incompetent politicians who will ignore their constituents and run up huge, irresponsible debts. Politicians like – oh, I don’t know – maybe certain former US Presidents?
You also need a policy and culture of elite impunity. Reagan and Bush, for example, tolerated high levels of sleaze, even if you don’t count the war crimes. But when it comes to keeping hands off financial criminals, guess who takes the cake? The voters returned Obama to office last year in the face of a tidal wave of money and lies. It’s a pretty fair bet that they would support him if he went after Wall Street’s unpunished crimes. But NOOOOO, as John Belushi used to say. Whatever is keeping Obama off finance capital’s back, it isn’t popular demand. And it isn’t the law either.
So as this strategy unfolds, there is no more public property, except that which finance capital allows us to keep. There is no more public policy, except that which finance capital decides not to veto. No city, county, state or national government may take a step that could potentially impinge on finance capital’s interests. Ever. No matter what the voters say. The European Central Bank and the IMF can tell any Euro-zone country; ‘Go ahead. Have your little election. Choose whoever you like. It won’t make any difference.’ It’s happened in former Communist countries and large parts of the Third World. It’s on the march in the United States. The age of democracy, as it has been practiced since the late 1800s, is coming to a close. Capital – especially finance capital, in large concentrations – will inherit the world. If we let them. All we have to do is nothing. They’ll take care of the rest. Can they count on our inaction? Stay tuned…