THE FUN HOUSE MIRROR
That vertigo you feel watching current events unfolding on our media is actually cognitive dissonance, suffered by any sensible adult when force-fed a fantasy reality which the brain on some level suspects is not true, a "reality" shown through a prism that distorts the truth in a deceivingly consistent fashion, like a fun house mirror.
That prism is called "Free Market Capitalism," also sometimes known as Globalization, or Friedman Economics, or The Chicago School, or, more colloquially, the Washington Consensus as imposed by "the Chicago Boys." It purports to be a scientific description of the full flowering of modern capitalism, especially as compared to socialism or communism. What it really is, is a secular religion, the Free Market Religion. Its dogma and its freakish statistics dominate the minds of most of the world's leaders today. Regardless of what formal religion these leaders profess, they all are acolytes of the Free Market Religion, and that is how they see the world and make their decisions; it is their reality which our media show us. How did so many top dogs come to embrace this dogma? Answer: through a combination of conscious conviction impelled by positive reinforcement (the promise of munificent personal rewards when their national economy is privatized and internationalized) and by brutal force (both military and financial).
When you take a closer look, Friedmanism has played some part in almost every problem we have today, both domestic and foreign: trade and budget deficits, subprime meltdown, illegal immigration, terrorist attacks, "clash of civilizations," Iraq war, corruption, torture, outsourcing, housing bubble, decline of the middle class, Hugo Chavez, China as our banker, inflation, the list is almost endless, yet we never get the true story, and until we end the rule of "Free Market" we never will.
Like most religions, the Free Market Religion offers a vision of heaven, a nirvana of perfect bliss which can be obtained only after hard work and only if every little point of its dogma is immaculately fulfilled. Otherwise, it's Purgatory or Hell. No kidding.
FREE MARKET HEAVEN
Milton Friedman, the University of Chicago professor who launched the economic theory which became the new dogma, was adamant: Unregulated capitalism seeking profits will inevitably produce the greatest good for the greatest number through the mysterious, unseen hand of a completely free market. Anything which hampers this operation is a distortion, and that is very, very bad, i.e., evil. Distortions include subsidies to special industries, social safety nets like unemployment insurance or social security, pensions, unions, environmental regulations, accounting and fraud prevention requirements, government spending and taxes, government-run services (which should be turned over to private enterprise)---- in other words, all of what in the United States is called the New Deal.
Once you achieve a totally distortion-free economy, Friedman promises a world of peace and plenty with a flexible economy full of innovation and material goods, all of which will be self-regulating because every individual will make decisions based on personal self-interest (the economic man ideal), and that mysterious hidden hand of The Market then puts it all together seamlessly. Voila! Heaven on Earth. Putting any sort of restrictions on The Market is a sin; any questioning of Free Market dogma is heresy and will be punished by The Market god, or more directly by corporations, which personify the path for achieving Free Market heaven. It is the mature global corporate form of capitalism which has most eagerly adopted Friedmanism, endowing universities and think tanks to teach the doctrine, and buying politicians all across the world in a successful campaign to bring the dogma's light to all.
FREE MARKET: THE SHORT STORY
FREE MARKET AND THE COLD WAR: Once the Marshall Plan restored Europe after World War II, Friedman economics rapidly became the theory du jour for central bankers everywhere. The Chicago School has an impressive catechism of statistics, charts, metrics, matrices, and, eventually, computer models that make a seemingly irrefutable dogma of the whole, and its students can quickly produce country- or market- specific stats, metrics, etc., upon request. Who could argue with their math? Freidman economists at the World Bank and International Monetary Fund promised aspiring Third World countries they, too, could enjoy Western prosperity if they applied the Free Market dogma. Its global competitor was the older economic theory called dialectical materialism or Communism, which also purported to be "scientific" but likewise showed characteristics of a secular religion. Communist theory was actually being applied in real life on-the-ground in Russia, but it looked like a grade school exercise compared to the footnoted, equation-heavy statistics and charts of the Friedmanites---- who to this day castigate every impediment to Friedman's dogma as "socialism" or "communism."
The emphasis on an unfettered, unregulated dash for cash and bottom-line profits made Free Market a natural on Wall Street, and from there it devolved into a political platform for the Republican political party in the United States, whose members quickly noticed that here is a religion which not only sanctifies unrestrained personal greed ("God wants you to be rich!") but can scientifically "prove" its benefits; it democratically lets every economic man decide what he wants in the open market, and that ability to choose promises to produce a booming economy- now, that's freedom! What's not to like? Even the Democratic Party, at the urging of the Democratic Leadership Council (which was seeking campaign donations from mega-corporations), abandoned the New Deal for Free Market, which is why we now have NAFTA.
FREE MARKET INTERNATIONALE: The World Bank and International Monetary Fund have always conflated Free Market capitalism with Western-style political democracy, implying the two are somehow synonymous. Unfortunately, the two in real life turned out to be pretty much incompatible. Whenever the World Bank sought to apply purist policies by abolishing things like worker protections, price controls, or regulation of business, demanding that fragile developing national economies be ruthlessly privatized and opened to unrestricted intervention by multinational corporations, the local populations often rebelled at the pain of such wrenching changes. (See the descriptions in Naomi Klein's book The Shock Doctrine for extensive analyses of various efforts to impose the free market dogma in one country after another). Friedman and the Chicago Boys therefore developed a corollary: To impose Free Market successfully requires that the economic and social slate be wiped clean in the subject country, and this could best happen as a result of some calamity (earthquake, tsunami; inflation, depression) which so disoriented the population that the World Bank could force a complete change in their way of life and rebuild their economy on the globalization model. Naomi Klein refers to this corollary as Disaster Capitalism, and it has become clear over the past forty years that acolytes of the Free Market Religion are quite willing to manufacture a disaster which ruins a country's economy and wrecks its society, often using a coup assisted by the CIA, in order to set up the Friedman Free Market at one fell swoop.
Early examples of such regime changes, many actually requested by a mega-corporation, include Iran (Mossadegh to the Shah), Chile (Allende to Pinochet), and Argentina more than once. Invariably, the regime change was presented as being for "freedom," and/or democracy, but that freedom did not mean democracy but rather freedom for multi-national corporations to take over the local resources and dominate the economy. Any nation which included protection of its domestic industry in its development program was consistently accused of evil socialism---- unless or until local leaders could be cajoled or forced into adopting Friedmanism, as sometimes did happen when even democratically elected leaders, joined by old elites, saw how more of the country's wealth could be diverted into their personal bank accounts under the free market. Greed is good---- it's so naturally human that it works wonders, and is very reliable. Then again, if it fails, opponents can be and were "disappeared" or even publicly assassinated as happened in Guatemala, Argentina, Chile, Indonesia.... When human rights groups like Amnesty International objected to the torture and suppression of dissent, to the "disappearances" and murders which seemed a part of "defeating Communism" and establishing the freedom of the Free Market, these were always excused as being unfortunate aberrations when the truth was, they were necessary for imposing the Free Market dogma.
FREE MARKET TRIUMPHANT: Then, mirabile dictu! Communism failed, the Soviet Union fell, and Free Market capitalism declared itself the victor, although the capitalism practiced in the West has never been congruent with Friedmanism, being full of pesky "distortions" like unemployment benefits and social security. Nevertheless, Friedmanites now claimed the right to run the world as befit the winner. Briefly, even Russia seemed ready to install the Free Market religion, and Communist China coincidentally burst on the world, pumped up by the capitalist profit motive under state control. Globalization was now regarded as inevitable
FREE MARKET AT HOME AND IN IRAQ
In 2000 we made George W. Bush, an ardent acolyte of the Free Market religion, our President, and Cheney, ever desirous of another regime change at corporate behest, Vice-President. The terrorist attacks of 9/11/2001 enabled them to proclaim "everything has changed," code words Friedmanites knew meant that here was the necessary calamity which would permit installation of a full blown Free Market in the United States. Free Market dogma explains almost everything done by the Bush II regime, including weakening of environmental regulations, enhancement of executive power, rampant bribery, corporate lobbyists writing legislation, attempts to privatize Social Security, Katrina, invasion of Iraq, no-bid contracts, the hollowing out of government and even the armed forces because that ideology demands outsourcing to private enterprise, and so on. As Bush said, "it would be much easier if I were a dictator," like, one assumes, Pinochet in Chile, another ruthless Free Marketer.
It also explains the diversion of resources from Afghanistan to Iraq. Full scale military Shock and Awe "wiped the slate clean" by subduing Iraq, and Paul Bremer was sent to create the ideal Free Market state, a laboratory experiment in Friedmanism unhampered by any messy restraints like unions or regulations. Existing state enterprises were summarily shut down with the intention of replacing them with Western corporations, especially in the petroleum industry, but Iraqis did not knuckle under easily (see my earlier diary on "Why They Became Insurgents, " http://www.raisingkaine.com/sh... The idea apparently was, that establishing free markets (i.e., multinational corporate dominance) in Iraq would magically create a productive, free market economy---- and Iran would be next. It's all about profits, the absolute foundation of Free Market Religion, and the fact that, like True Believers everywhere, Free Market acolytes cannot tolerate the existence of any other dogma. To get their clutches on Iraqi oil, corporations had to call upon their American government servant for a military surge after 5 years' war and occupation.
HOW FREE MARKET WORKED OUT
Free Market Religion has had around 60 years of dominance, about 3 generations, almost as long as Communism had in Russia, so we certainly have had enough time to reach some judgments on how it, too, has worked out. From the point of view of mega-corporations, plus the top 0.000001% of the world's population (about 6,000 people, the world super-elite lovingly described in David Rothkopf's Superclass), their immediate hangers-on, and the earnest Free Market acolytes with their statistics, it has been a smashing triumph. Freidman acolytes claim this bootstrap success comes from the doctrines of Free Market capitalism, and believe that if they do yet more of the same, (that is, more deregulation, more tax cuts, more coddling of global corporations "because they create jobs and prosperity") that the whole world can be raised to Western middle class life styles. That is the story in our media---- but it is the fun house mirror wearing rose-colored glasses.
Many historical factors contributed to the 20th century's impressive world-wide development, so it is specious to attribute all this growth to Free Market doctrine (look at China, which adopted capitalism's profit motive but still is a Communist dictatorship). Only when you look from the top down can you confuse the muscular spread of mature capitalism's greatest invention, the mega-corporation, with righteousness or freedom. Seen from the bottom up, it's another story. None of those countries where the Chicago Boys had free rein to impose Free Market dogma survived unscathed, huge unemployment and poverty invariably increased while the top elites always saw their share of national income mushroom, most of the country's natural resources and profits ended up in the hands of foreign capitalists and global corporations, and there was always a very long period of painful adjustment before the economy (much less the society) recovered, and in any case their previous culture was "Gone With The Wind." Look no further to find the underlying cause of most terrorism---- including religious-based jihad.
Radical free trade doctrines imposed under shock therapy caused a 30 percent reduction in industrial production and 25% lingering unemployment in Poland, for example. Another: post shock, major Korean companies like Samsung were acquired, butchered into component parts, and sold off by and to foreign investors for a fraction of their true value. Russia's brief flirtation under Yeltsin with the Chicago Boys' shock therapy forced the average Russian to consume 40% less in 1992 than in 1991 (pre-shock), rammed 74 million or one-third of the population below the poverty line, and bankrupted over 80% of the farms. In Thailand, there was a 20% increase in child prostitution the year after IMF "reforms" as desperate farmers sold their daughters. (See Klein). Then there is the fact that massive unregulated development is consuming Earth's resources at a frenzied pace, and we are now at not merely peak oil but peak water, our oceans are over-fished and turning into dead zones. Free Market doctrine demands quarter-to-quarter "growth," but we may simply be nearing the end of that ride, and scientific innovations may not be able to close the gap.
BUSH SCAMS THE U.S.: How about Bush's Free Marketeering in the United States? If you had vertigo when democracy was conflated with free markets, or torture was excused as an aberration, then you must be downright dizzy now that you are being assured there is no recession. Pause here while the statisticians jigger the figures a little more, so as to convince you your reality is not real. What we actually have is a two-tier economy economy: the Friedmanites do not measure the right things to show what is happening at the bottom. They do not much care, in fact- until the misery affects the upper corporate level, and even then their response is along the lines of, "your pain is necessary to achieve the Free Market heaven, so simply endure until The Market works it out." It is hard to tell what is really going on because, as Peter D. Schiff in his book Crash Proof explains, official statistics are useless in assessing America's true economic and financial health, and adds "The fatal flaw in the modern economy is that any attempt to save and under consume, which would surely bring about a badly needed recession, is resisted by government policy, the sole purpose of which is to postpone the inevitable day of reckoning." (P.7) Michelle Singletary in The Washington Post of 31 August 2008, pointed out Census Bureau figures show the number of people living in poverty in 2007 rose to 37.3 million (up from 36.5 million in 2006). Bankruptcy filings were up 29% in June, year-over-year (total filings for the 12-month period were just shy of 12 million). The pay of top CEO's has, by some measurements, ranged from 364-525 times the pay of the average worker, this while "productivity" per worker has soared, yet worker pay is in real terms declining (about $2,000 since Bush took office). Looks as though 9/11 provided sufficient shock therapy so now Americans are experiencing what the rest of the world has undergone at the hands of the Free Market acolytes.
CONCLUSIONS
Free Market Religion, like Communism, cannot work in real life, at least not as promised. There is no such animal as a true "free market" because one side will always have an advantage and scheme for more. The "economic man" is exceedingly rare; most personal decisions, including economic ones, are always made on other bases than pure self-interest. Free-market capitalism cannot exist without engendering authoritarianism based on brute force, and creates one disaster after another to survive. The profit motive alone cannot produce many things human beings need or value (such as orphan drugs, for example, and universal good health care). The perception abroad is that the free market "reforms" demanded by the World Bank-IMF are nothing more than a ruse to create world-wide dominance by Western mega-corporations and culture in a sort of modern colonialism. Applying Free Market Religion in the U.S. looks more like establishing a corporotist state, a kind of reverse mercantilism. Today's global corporations and hot capital markets cannot be effectively regulated by geographically limited nation states. I suspect the historical trend will result in a kind of new, world-wide corporate feudalism, and political governments will by and large be little more than the servants of mega-corporations (if they are not already).
WHAT TO DO (if anything)? First, replace Free Market Religion, that is, Friedmanism, with a coherent new economic philosophy, and debate the acolytes of free markets while standing firmly on the new frame of reference. Re-regulate insofar as possible, negotiate for "fair markets" rather than free. It harks back to the days of FDR but is more of a bottom-up movement. It does require a savvy grassroots and a willingness to butt heads with an entrenched power system loaded with money which controls an agitprop media. Study the New Deal, Keynes and, yes, the Austrian economists, and apply the lessons learned. Until we begin this process, and winkle Free Marketeers from positions of influence within the Democratic Party, the Democrats have no hope of winning any arguments with Republicans, or managing to make headway with any reforms. John F. Schwarz in an op-ed in The Washington Post 29 August 2008, wrote
"The mantra of the free market has gained such a hold on America that Sen. John McCain recently aired an ad exclaiming, as if it's a given: 'Higher taxes, more government spending, so fewer jobs.'...Democrats have failed to provide a compelling counter-mantra about the economy... (and) they will have a hard time winning votes until they have a narrative that competes effectively with the GOP's."
I think we need an amendment to the Bill of Rights which says we shall be protected from the "Free Markets".
As for confusing democray with free market capitalism, I do not think those doing the confusing are confused. It is a marketing ploy, propaganda.
Nobel Prize winner Amartya Sen suggests that we ask how we measure fair, in dollars or in human lives.
George Soros and Jesse Jackson, Jr. agree that the market is the most effective wealth generator in human history, but there's nothing in it to guarantee justice or equal opportunity.
Jesse says, and I love this, sure, the market is a great engine. But to drive safely, a car needs more than an engine-brakes, a steering wheel, and a driver who knows how to use them.
The other Friedman that deserves mention is Thomas Friedman - NY Times columnist and author of The World is Flat. In my view, Thomas Friedman over simplifies globalization and is the George Bush of economic theory (for people who think George Bush is a moron).
In a government plaugued by influence of big business, there is no invisible hand or purely market driven economy. There is a very visible and manipulative hand - the US government in collusion with big business. Whenever the economy moves in a direction seen as unkind to banking and finance, the fed steps in. Should they? Perhaps - but the fact that they do poisons the "free market stew".
Also, global markets are anything but free of government intervention. True free trade and capitalism would require a single global currency. Currently, China is a key trading partner. Unfortunately because they manipulate their currency and have restricted our access to their markets, our open markets and free market currency is at a disadvantage. It pays to cheat these days.
The free traders are so loathe to admit that they were wrong that they now resort to name calling. Anyone advocating fair trade is branded a protectionist, or even worse a communist.
The other aspect of trade is labor. Our current trade policy sees humans as cogs in the wheel. Commodities no different than cattle or corn. These commodities can be traded through immigration agreements (guest worker visas/indentured servant visas) - and are now a part of trade agreements. That't right - our trade agreements dictate immigration laws, not some more altruistic body (or the body with the Constitutional duty to decide this - Congress).
In addition to movement of humans across borders for the purpose of labor arbitrage (cheap, exploitable labor designed to subsidize markets and increase supplies, driving down demand and thus salaries/benefits) there are also huge disparities in labor protections. For example, your shoes were probably made in China or Indonesia where children work in factories, wages are low, and workers put in 12 hours 7 days a week. Our trade agreements don't restrict this or have penalties for such behavior. The WTO has no labor group in the organization.
In short, labor has no seat at the table when it comes to global trade. That is what needs to change.
Senator Jim Webb has often commented that President Jackson felt his greatest contribution to American democracy was to veto the legislation establishing a Central Bank. But that is what the Federal Reserve turned out to be.