The Robber Barons Behind Neoclassical Economics

rockefeller

John D Rockefeller

Classical Economics as a Stratagem Against Henry George (free link)

By Mason Gaffney (2007)

Book Review-Part II

(In Part I, I discuss how Henry George’s work inspired the Populist and Progressive movements of the early 1900s and how the corporate elite struck back by inventing a new type of economics for the rich, called neoclassical economics.)

Who Paid for Neoclassical Economics to Take Over American Universities?

Gaffney’s book traces the phenomenal public support Georgism enjoyed before the tenets of neoclassical economics took hold in American universities. In addition to inspiring the Populist and Progressive movements, an LVT to fund irrigation projects in California’s Central Valley made California the top producing farm state. In 1916 the first federal income tax law was introduced by Georgist members of Congress (Henry George Jr and Warren Bailey) and included virtually no tax on wages. In 1934 Georgist Upton Sinclair was almost elected governor of California.

Gaffney also identifies the robber barons whose fortunes financed the economics departments of the major universities who went on to substitute neooclassical economics for classical economic theory. At the top of this list were

  • Ezra Cornell (owner of both Western Union and Associated Press) – founder of Cornell University
  • John D Rockefeller – helped found the University of Chicago and installed his cronies in its economics department.
  • J. P Morgan – investment banker and early funder of Columbia University
  • B&O Railroad – John Hopkins University
  • Southern Pacific Railroad – Stanford University

The final section of Gaffney’s book lays out the tragic economic, political, and social consequences of allowing the Red Scare and neoclassical economics to stifle America’s movement for a single Land Value Tax:

Economic Consequences

  1. The corporate elite has privatized, or is privatizing, most of the public domain (including fisheries, the public airwaves, water, offshore oil and gas, and the right to clean air) without compensation to the public.
  2. The rate of saving and capital formation continues to fall rapidly. This is the main reason there is no recovery. Although profits soar, corporations have no incentive to invest in expansion and jobs. Instead they invest their profits in real estate, derivatives, and commodities speculation.
  3. American capital is decayed and obsolete. The US has lost much of its steel and auto industries. Power plants and oil refineries are ancient and polluting. Most public capital (infrastructure) is old and crumbling.
  4. The number of American farms has fallen from 6 million in 1920 to 1 million in 2007.
  5. The USA, once so self-sufficient, has grown dangerously dependent on importing raw materials and foreign manufacturers.
  6. The US financial system is a shambles, supported only by loading trillions of dollars of bad debts onto the taxpayers.
  7. Real wage rates have continued to fall since 1975,
  8. Unemployment has risen to chronically high levels.
  9. Inequality in wealth and income continues to increase rapidly.

Political Consequences

  1. The corporate elite has nullified all the Progressive Era electoral reforms by pouring money into politics and “deep lobbying,” at all levels of government, including our institutions of higher learning and our public schools.
  2. The corporate elite continue to pour ever more of our tax money into prisons.

Social Consequences

  1. Homelessness has risen to new heights, in spite of decades of subsidies to home-building and, favorable tax treatment of owner-occupied homes
  2. Hunger is rampant.
  3. Street begging, once rare, is everywhere
  4. Americans have experienced a sharp loss of community, honor, duty, loyalty and patriotism.
  5. In the shadow world between crime and business there is now the vast, gray underground economy that includes tax evasion, tax avoidance, and drug-dealing.
  6. The US which once led the world in nearly every endeavor, has fallen far behind in infant survival, in longevity, in literacy, in numeracy, in mental health.
  7. American education no longer leads the world. Privatized education in the form of commercial TV has largely superseded public education.

photo credit: cliff1066™ via photopin cc

14 thoughts on “The Robber Barons Behind Neoclassical Economics

  1. It is unsurprising that a country built on the literal blood, sweat and tears of immigrant and slave labor and the decimation of the indigenous people of N. America finds it’s chickens coming home to roost. Now the Homeland security apparatus and Chicago school of economics has it’s sights turned on the homeland, itself. I appreciate all of the alternatives and solutions you bring to our consciousness.

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  2. “The Corruption of Economics”, or as it should be known as, where, when and why it all started to go wrong.

    We live in an insane World. How is it that only a tiny, tiny minority of people know about this pivotal point in human history?

    Frank Knight and his chums have inflicted more unnecessary misery on the World than Hitler and Stalin combined. Yet the their doctrine is taught in every Collage and University in the World.

    Thanks to NCE, we all now think in atomised terms. This has seriously diminished our ability to perceive reality, and hence the root of our problems.

    NCE has blinded us.

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  3. Well put, Benji, I totally agree. Just to clarify Frank Knight was the founder of the so-called Chicago School of economics and the reactionary neoliberal theories that have transformed contemporary society into a brutal fascist feudalism.

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    • Thanks for reblogging. Prior to reading Progress and Poverty last year, I was a Marxist for 30 years. Last May I converted to Georgism. Have you ever seen the letter Marx wrote trashing Progress and Poverty? http://trove.nla.gov.au/ndp/del/article/6420876

      Marx clearly didn’t grasp the importance of The Commons and The Enclosure Acts.

      He also makes the same mistake a lot of neoclassical economists make by confusing land with capital accumulation created via surplus value.

      A pity George never heard of Marx (who hadn’t been translated into English in 1879). For more than a century it’s Marx been Marx who is held up as the boogeyman. When it was actually Henry George and his influence on the populist movement that was so dangerous to capitalist robber barons – thus his consignment to oblivion.

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  4. Pingback: BOOK REVIEW | thedepression.org.au

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