A Really Ugly Death
Is Capitalism Preparing to Bury Itself?
by MURRAY DOBBIN OCTOBER 2, 2011
Where is Henry Ford when you need him?
You may remember Henry — the ruthless industrialist who nonetheless refused to be hobbled by suicidal ideology when it came to doing business. He realized as his workers cranked thousands of new cars off the assembly line that none of those workers would likely ever own one, because he didn’t pay them enough. So he dramatically increased their wages. It was such a good idea that most industrialists followed suit and his practical approach was dubbed Fordism. It was the foundation of a high-wage economy, it lasted a very long time and it produced incredible real wealth for decades.
Until something called neo-liberalism decided to kill the goose that laid the golden eggs. And the perpetrators of this ideology — and the catastrophic damage it has done to the global economy, nations, communities and workers — are so wedded to it that they seem determined to pursue its goals and accept its preposterous assumptions until the ship truly does go down.
The new set of goals and assumptions of neo-liberalism mandated that workers’ wages and salaries had to be constantly driven down in a new global system of competition for high share prices. Not a competition to achieve growing companies, or economic stability, or balanced growth, or even profits, but share prices.
Now, the vast majority of working people in Canada are up to their eyeballs in debt, hundreds of thousands have no jobs, families are hunkering down in survival mode and not buying much of anything beyond food and clothing, and everyone is waiting for the inevitable bursting of the housing bubble — the only thing keeping the rusting, rudderless hulk afloat. Someone should tell Canada’s finance ministers that consumers account for 60 per cent of our GDP. Choke the consumers (by choking their wages) and you choke the economy.
Last fall, the Canadian Payroll Association reported that 59 per cent of Canadians “said they would face financial difficulty if their pay cheque was delayed by even just one week.” Twenty-seven per cent of working Canadians aren’t saving at all.
The faux “financial economy” where nothing needs to be produced, has devastated the real economy but the same policies are still being pursued: fight wage increases, eliminate or down-size pensions, lay off workers to enhance.. you got it, the share price. Insanity: doing the same thing over and over again and expecting different results. more
One of the more interesting contrasts in the history of political economy was watching the performance of the 'advisors' that were dispatched to 'assist' the Russians in their recovery from the dislocations caused by decades of Marxist foolishness. In some ways, this wasn't the utterly arrogant nonsense that one might guess. After all, USA dispatched economists to help rebuild the economies of Germany and Japan after World War II and they didn't do such a bad job. In fact, Germany's recovery was so remarkable that the Germans called it Wirtschaftwunder (economic miracle.)
When There's Nothing Left to Lose
Saving the Rich, Losing the Economy
by PAUL CRAIG ROBERTS SEPTEMBER 26, 2011
Economic policy in the United States and Europe has failed, and people are suffering.
Economic policy failed for three reasons: (1) policymakers focused on enabling offshoring corporations to move middle class jobs, and the consumer demand, tax base, GDP, and careers associated with the jobs, to foreign countries, such as China and India, where labor is inexpensive; (2) policymakers permitted financial deregulation that unleashed fraud and debt leverage on a scale previously unimaginable; (3) policymakers responded to the resulting financial crisis by imposing austerity on the population and running the printing press in order to bail out banks and prevent any losses to the banks regardless of the cost to national economies and innocent parties.
Jobs offshoring was made possible because the collapse of the Soviet Union resulted in China and India opening their vast excess supplies of labor to Western exploitation. Pressed by Wall Street for higher profits, US corporations relocated their factories abroad. Foreign labor working with Western capital, technology, and business know-how is just as productive as US labor. However, the excess supplies of labor (and lower living standards) mean that Indian and Chinese labor can be hired for less than labor’s contribution to the value of output. The difference flows into profits, resulting in capital gains for shareholders and performance bonuses for executives.
As reported by Manufacturing and Technology News (September 20, 2011) the Quarterly Census of Employment and Wages reports that in the last 10 years, the US lost 54,621 factories, and manufacturing employment fell by 5 million employees. Over the decade, the number of larger factories (those employing 1,000 or more employees) declined by 40 percent. US factories employing 500-1,000 workers declined by 44 percent; those employing between 250-500 workers declined by 37 percent, and those employing between 100-250 workers shrunk by 30 percent. http://www.manufacturingnews.com/ more
Unfortunately, the economists who went to the old USSR were neoliberal fools and far from producing Wirtschaftwunder, they produced a calamity. In this case, bad ideas have caused unimaginable amounts of unnecessary pain.
September 20, 2011
Michael was recently interviewed on the Renegade Economists following his visit to Medvedev’s Global Policy Forum.
Karl Fitzgerald: Michael Hudson, our old friend here on the Renegade Economists, from the University of Missouri in Kansas City, has just returned from Russia speaking at the Global Policy Forum. Michael, tell us about the GPF.
MH: well that’s organized by President Medvedev more or less as an anti-Davos. Whereas the Davos invites many of the financial people to figure out how to run the West further into debt the subject of this forum was Russian poverty and how to overcome the fact that in the last 20 years the neo-liberal program that promised that Russia and the rest of the soviet republics would get rich has simply driven them all into debt and impoverished them.
KF: And so 30 years on from glasnost there must be quite some sense of concern about where the Russian economy has ended up.
MH: there certainly is. It’s been losing not only capital flight of $25 billion a year to the west but its people have been emigrating and President Putin, now Prime Minister Putin, has said that the demographic effect of just privatizing Russian real estate, and industry and following western advice has lost maybe 30 million Russians from what the normal demographic growth would be to 2050. So the effect of neo-liberal financial policy has been more devastating to Russia than WW2.
KF: 30 million people have gone due to neo-liberal policies?
MH: that’s right. The birth rate has fallen, life spans are shortening, and this is throughout the former Soviet Union. People of working age are emigrating. Instead of getting rid of the old Stalinist bureaucracy the neo-liberals simply privatized it and the result of course is corruption. Now public officials that used to be in charge of handing out public policies and administering them- not very efficiently its true – simply say give us a bribe or we won’t work.
In Latvia, for instance, people who go to doctors are expected to pay the doctors under the table in a little white envelope…but most notorious of all is the real estate debt they’ve taken on. What’s unique is that, just imagine, 20 years ago when there was the revolution that turned over power to Yeltsin in Russia and broke up the Soviet Union there wasn’t any debt at all. Families had all been living in their homes without paying rent and getting a free public education, public services were free and employers provided lunch, vacations and pensions, cultural and all of these connections were pulled up. And all of a sudden instead of just turning over the property to the people who lived in the homes and the businesses that used the offices the government said, okay, we are going to put it all up for sale and let the banks, usually the foreign banks, lend you the money, to buy it.
And the result was the biggest real estate bubble in the world in the mid 90’s and this is what started the whole real estate bubble- certainly what catalyzed it in the west because all of a sudden Russians, Latvians, Estonians and other people had to take on a lifetime of debt in order to get the homes that they’d been living in and not be thrown out on the street. So essentially they were told your money or your life – that’s neo- liberalism.
KF: And they’ve turned over from quite a stable society to one based on volatility, and oil price volatility. The after effects of the 2008 meltdown must have shocked a lot of people in the Russian government. What was the talk along those lines – what were people thinking about?
MH: Very little because they’d already in 1991 dismantled their industry. They were told that the way to get rich was to become a raw materials exporter or what the American protectionists and the bible called “hewers of wood and drawers of water”. So Russia simply dismantled its industry. The west said, oh, you’re not competitive and what the Russians didn’t realize is that all of this was very self serving to the west. The West, especially the American planners- the Harvard boys that went over said, well, we really don’t want is for Russia ever to be a military threat. We’d like to conquer it, to break it up, let’s now just slam them at the end of the cold war.
So without an industrial, manufacturing base there can’t really be much of a military. So the first thing they did was say – get rid of your manufacturing, get rid of your engineering, begin charging for your schooling, close down the schools – you don’t need engineers all you really need to do is make a hole in the ground.
But none of this export revenue from the hole in the ground should really be turned over to the state – we want to make sure that you only tax labor and tax business, but don’t tax natural resources – let it all be privatized. And so Russia thought, gee this sounds like a funny way to get rich but that’s what they did. And so they followed the Harvard advice to give away the oil, the nickel companies, the mineral resources, and that’s how they got the money to begin sending it all to the west. There wasn’t any Russian money to buy these companies because the IMF and World Bank wiped out Russian savers with a hyper inflation by getting rid of all the capital controls and letting the rouble float. So it was just one bad advice after another and now the Russians realize they’ve been taken.
And they’re trying to figure out how on earth do we get out of this mess following the West’s advice. They thought, and the Baltics thought, that they were been told how to develop in the way that the West did. Neo-liberalism is the exact opposite of how Britain and the United States, Germany, Japan, and now China, got rich by progressive taxation, and having public infrastructure provided at much lower cost than privatized infrastructure and a resource fund tax, basically a land tax which is how Europe and America – states and localities – have been financed all throughout their history. more