An Insider’s View of the 1%

The 1%

Directed by Jamie Johnson (2006)

Film Review

The 1%, produced and directed by Johnson and Johnson heir Jamie Johnson, offers a rare insider perspective on the dangers of extreme wealth inequality for contemporary society. Johnson favors using major tax reform, ie requiring the wealthy to pay more tax, to reduce inequality.

The film devotes more or less equal emphasis to the psychological insecurities underlying greed and the sordid efforts of the 1% to corrupt democratic institutions.

It includes interviews with late conservative economist Milton Friedman, Ralph Nader, arms dealer Adnan Kashoggi (who brokered the Irangate arms for hostages deal), Robert Reich, sugar barons Alfie and Pepi Fanjul,* Chuck Collins (the Oscar Mayer heir who gave away his wealth), Bill Gates senior (who also supports higher taxes for the rich), and Nicole Buffet (her grandfather Warren Buffet cut her off from the family when she appeared in an earlier version of the 1%.

The film has some great archival footage of Katrina victims during their five day struggle, in the hurricane’s aftermath, to find food and water.

I was also struck at the major role professional financial advisors play in protecting the wealth and power of the 1%.

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*Who largely owe their wealth to a quaint US law (and subsidy) that sets the wholesale price of sugar at 23 cents a pound while the rest of the world pays 7 cents.

**See A 1%er Looks at Inequality

The Mythology of Science and Technology

Pandora’s Box: A Fable from the Age of Science

Directed by Adam Curtis (1992)

Film Review

Pandora’s Box is Curtis’s first documentary (at least that I can find on YouTube) about the history of perception management, mass indoctrination and collective thought control. His films, a treasure trove of the hidden history that is censored in our schools, offer a unique perspective on the role of government and media in manipulating the way we view ourselves and our relationship with society and the ruling elite.

First appearing on BBC television in 1992, the six-part series explores the collusion between engineers, corporate oligarchs and the public relations industry to hoodwink the industrialized world into believing science and technology would solve all the world’s problems. It was a process that granted a dangerous amount of power to pseudo-rational engineer/technocrats – who in many instances proved far less rational than the general population.

As Curtis demonstrates in Part 1, a parallel process occurred in the non-capitalist Soviet Union under Stalin.

Part 1 The Engineer’s Plot – concerns the powerful impetus to electrify and industrialize the Soviet Union after the 1917 Bolshevik Revolution. Lenin, who believed industrialization was vital to the success of Communism, was famous for the dictum: “Communism is Soviet power plus electrification.”

Part 2 To the Brink of Eternity – concerns the development of Game Theory at the Rand Corporation (a right wing think tank closely allied with the Pentagon and US intelligence) and whiz kids like Kennedy’s Secretary of Defense Robert McNamara who nearly led us into a global nuclear holocaust. Clips depicting McNamara’s use of Game Theory to manage the Vietnam War are particularly comical.

Part 3 The League of Gentleman – concerns the capture of British economic policy by Milton Friedman’s pseudo-scientific monetarism under Margaret Thatcher. This would result in the total decimation of Britain’s manufacturing base and skilled workforce (and economy).

Part 4 Goodbye Mrs Ant – concerns the glorification of the chemical industry after World War II, resulting in the total contamination of the environment (and our bloodstreams) with DDT and similar synthetic pesticides. Curtis also traces the backlash against this environmental destruction that started with Rachel Carson’s 1962 Silent Spring and culminated with the birth of the ecology movement at the University of Wisconsin in 1968.

Part 5 Black Power – concerns the destructive myth perpetuated by Wall Street and the World Bank that massive technology projects would magically solve the problem of third world poverty. Curtis specifically examines the massive Volvo damn project the World Bank funded for Ghana (and Kaiser Aluminum) in 1960. And how shameless exploitation by Kaiser (and the collapse in the world cocoa price) left the country worse off than ever.

Part 6 A is for Atom – concerns the massive snow job the nuclear power industry did on the US, British and Russian public in promoting nuclear energy as a totally safe and cheap form of virtually unlimited energy. According to Curtis, nuclear engineers knew as early as 1958 that nuclear power was far more expensive than other energy sources – and would require massive government subsidies. They also knew by the early sixties that standard safeguard features were unreliable in preventing nuclear accidents. When they pointed this out to the Atomic Energy Commission, the government bureaucrats decided too much money had been invested in nuclear power to admit they were wrong.

Fed Chairman Yellen Breaks 50 Year Taboo on “Helicopter Money”

At a June 15 press conference, Federal Reserve Chairwoman Janet Yellen made the surprise announcement that the Fed “might legitimately consider” using “helicopter money” in an “all-out” effort to rescue the U.S. economy from a severe downturn.

“Helicopter money,” a term coined in 1969 by late economist Milton Friedman, is money government creates by spending it into the economy.

As economist Richard Murphy describes in The Joy of Tax, government has always played a role in creating money whenever private banks generate insufficient money (by issuing loans from money they create out of thin air) to maintain the smooth running of the economy. Following the 2008 recession, the Obama administration pursued a policy called “quantitative easing,” in which the US Treasury created $500 billion (out of thin air). Unlike “helicopter” money, quantitative easing provided these funds directly to private banks, hoping they would use them to generate more loans. This, in turn, was meant to stimulate business investment and job creation.

Although it probably prevented the US economy from collapsing, Obama’s quantitative easing did little to promote business investment and job creation. This was because the banks used most of these funds for purposes other than making new loans – ie buying back their stock (to increase stock prices) and paying obscene CEO bonuses.

In contrast, “helicopter money”, a policy that has been virtually taboo for fifty years, calls for a central bank to print money and spend it into the economy for social services, infrastructure development, or even a citizen’s dividend. The idea is to put the money directly into people’s hands – rather than using banks as an intermediary – as they are more likely to stimulate the economy by spending it.

As Murphy details in The Joy of Tax, libertarian corporatists obsessed with balanced budgets, government debt and austerity are largely responsible for the taboo against public money (aka sovereign money) that the government creates and spends into the economy. Their position is that only private banks should be allowed to create money – in most cases due to immense financial benefits (from interest payments) they derive from this type of money creation.

Ironically former Federal Reserve Chairman Ben Bernanke also raised the possibility of the US using “helicopter money” as a tool to stimulate a flagging economy in an April blog post.

And in a similar move , 18 Members of the European Parliament have written to European Central Bank (ECB) president Mario Draghi requesting that the ECB should revisit its opposition to using “helicopter money” to boost the EU’s deteriorating economy.

The Psychological Trauma Inflicted by Predatory Capitalism

The Shock Doctrine: The Rise of Disaster Capitalism

Directed by Michael Winterbottom (2009)

Film Review

Based on Naomi Klein’s best-selling book by the same name, this documentary explores predatory capitalism’s use of psychological trauma to crush human rights and forcibly transfer vast sums of money  from the poor to the rich.

Like the book, the documentary begins with Dr Ewan Cameron’s CIA-funded research at McGill University into the long term  effects of shock therapy, sleep deprivation and other deliberately inflicted trauma. The Agency would incorporate Cameron’s findings in their Kubark counterintelligence interrogation (ie torture) manual. They went on to use Kubark to train fascist South American military officers at the School of the Americas and to interrogate random prisoners (the vast majority were never charged) at Guantanamo and Iraqi prisons.

The film also explores the “economic shock therapy” developed by the late University of Chicago economist Milton Friedman. Friedman was a master at exploiting natural and contrived disasters to impose the kind of extreme free market reforms that crush unions and wages, shut down or privatize public services and create massive unemployment – while simultaneously transferring obscene amounts of wealth from the working and middle classes to the rich.

Friedman and his cronies seized the opportunity to put their predatory theories into practice when the CIA helped overthrow democratically elected governments in Chile, Brazil, Uruguay and Argentina; during the neoconservative regimes of Thatcher and Reagan; in Russia after the Berlin Wall collapsed; in New Orleans after Katrina; in Sri Lanka after the 2004 tsunami; and in Iraq after 9/11.

Privatization and the Theft of the Commons

Catastroika

by Aris Chatzistefanou and Katerina Kitidi

Film Review

Catastroika is a Greek documentary on neoliberalism, with a specific focus on the privatization of publicly owned resources. Although it makes no mention of historian Richard Linebaugh, its depiction of the neoliberal privatization movement provides an elegant illustration of the ongoing theft of the Commons (see Stop Thief: the Theft of the Commons).

After a brief overview of the University of Chicago economists (championed by Milton Friedman) who first put neoliberal theory into practice during the Pinochet dictatorship, the documentary tracks the wholesale privatization of Russia’s state owned industries after the 1993 coup by Boris Yeltsin, in which he illegally ordered dissolution of the Russian parliament (see The Rise of Putin and the Fall of the Oligarchs).

The fire sale of state assets to oligarchs and western bankers would virtually destroy the Russian economy, throwing millions of people into extreme poverty and reducing average life expectancy by ten years.

The Privatization of East Germany

With German reunification in 1990, East Germany would be the third major target for massive privatization. According to German economists interviewed in the film, the process amounted to an “acquisition” of East Germany by West German bankers. The West German government set up an agency called Treuhand to buy up state owned East German businesses at the rate of ten to fifteen a day – a total of 8,500 businesses in four years. The process, undertaken with virtually no oversight, predictably resulted in massive chaos and fraud. Many well-performing East Germany companies were dissolved for the simple reason they competed with West German businesses. Three million (out of 4.5 million) East German workers lost their jobs, which East Germany’s GDP shrank by 30%.

Using Debt to Compel Compliance

With the gradual demise of the world’s dictatorships during the 1990s, debt, rather than brute force, became the main mechanism to compel people to give up their publicly funded assets. At present, most of the focus is on Greece.

Current EU Commission Jean-Claude Juncker holds up Treuhand (which incurred a 250 million euro debt German taxpayers are still paying off) as a model for the Greek Asset Development Fund. The latter has been steadily selling off (at bargain basement prices) Greek railroads and municipal power and water systems.

The Dismal Track Record of Privatized Utilities

The filmmakers end the film by highlighting the disastrous outcome of Britain’s decision to privatize its railroads in 1993, the city of Paris decision to privatize its water service in the 1980s (it’s recently been re-municipalized due to massive public unrest – like privatized water systems in Bolivia, Ecuador and Argentina) and California’s experiment with electricity deregulation in the 1990s (leading to the Enron scandal).*

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*The Enron scandal involved massive securities fraud and a deliberate conspiracy by power companies to withhold power to drive up electricity prices.

“Conscious Capitalism”: Lipstick on a Pig?

Not Business Usual

Directed by Lawrence Le Lam, Rik Klingle-Watt (2014)

Film Review

Not Business as Usual challenges the maxim promoted by neoliberal economist Milton Friedman that corporations have no social obligation beyond providing a short term financial return to their shareholders. It traces the rise of “conscious capitalism” and the “B corporation,” which started from a 1989 Colorado meeting of the founders of various socially responsible corporations, including Patagonia, the Body Shop and Ben and Jerry’s.

The goal of the B corporation is to introduce social responsibility to capitalism. Thus far 20 states have introduced regulations for chartering B corporations, and 18 are working on pending legislation. Criteria for becoming a B corporation include responsible environmental practices, demonstrated commitment to the community and fair treatment of employees. According to the film, a B corporation commits to high environmental and employment standards along the entire supply chain. Thus a B corporation selling eco- apparel commits that the contractor producing the garments isn’t ruthlessly exploiting workers or discharging harmful chemicals into Bangladeshi waterways.

The documentary highlights a number of B corporations whose activism has resulted in groundbreaking changes in their communities and, in some cases, the third world. I was particularly intrigued by a B corporation called Lunapads. Lunapads has introduced low cost, washable menstrual pads to 120,000 women in the third world. In Uganda and other African countries, teenage girls typical skip school during their period when they lack access to affordable menstrual pads. In addition to keeping teenage girls in school (and unmarried), local manufacture of Afropads has created hundreds of local jobs.

Can the “Conscious Capitalism” Movement Save Capitalism?

The filmmakers contend the “conscious capitalism” movement will save the capitalist economic system. They argue that consumer pressure will eventually force all corporations to become more socially responsible – insisting consumers are demanding more socially responsible products and are happy to pay more for them.

I find a number of fallacies in this argument. In the first place, it’s only middle class consumers who are “demanding” ethical products, a middle class that is rapidly vanishing in most of the industrialized world. Minimum wage workers who are a paycheck away from the street have no choice but to opt for the cheapest clothes, foods and household goods they can find.

Secondly the present economic and environmental crisis is driven by powerful monopolies, particularly in the banking and defense industry. The thought of banking monopolies like Goldman Sachs or JP Morgan suddenly transforming themselves into B corporations is ludicrous. At present the main obstacle preventing entrepreneurs from forming B corporations is the unwillingness of Wall Street banks to provide start-up funding.

Thirdly while the social activism of individual B corporations is extremely laudable, I question the criteria used for measuring community responsibility. Surely a B corporation that’s truly committed to their community wouldn’t be seeking out “ethical” apparel contractors in Bangladesh. Surely they would be bringing these jobs back home to their local region.

The irony here is that many of the entrepreneurs who started the “conscious capitalism” movement made their fortunes by selling up to multinationals who clearly don’t share their vision. Ben and Jerry’s sold up to Anglo-Dutch food giant Unilever in 2000, and in 2006 the Body Shop agreed to a takeover by l’Oreal.

We have approached our local Body Shop outlet numerous times about supporting local environmental issues (ie fracking, fecal runoff from dairy farms). Claiming “corporate-wide policy,” they won’t even permit us put a poster in their front window.