How Neoliberalism Gave Us Brexit and Trump

Revenge of the Rich: The Neoliberal Revolution in Britain and New Zealand

by Austin Mitchell

Canterbury University Press (2017)

Book Review

Revenge of the Rich, by British economist Austin Mitchell, describes how the neoliberal revolutions of Margaret Thatcher and New Zealand finance minister Roger Douglas virtually gutted the economies of the UK and New Zealand. The result has been years of declining or negative growth rates, virtual destruction of manufacturing, massive job loss, wage stagnation and higher deficits and overseas borrowing.*

As an article of faith, neoliberals maintain that mass layoffs of public service workers will reduce government deficits. The reality, as Mitchell ably demonstrates, is the exact opposite. When you lay off 400,000 public servants (as David Cameron did between 2010 and 2016), they quit paying taxes and increase government costs by claiming unemployment and other benefits.

Britain’s EU Membership: Setting the Stage

According to Mitchell, Britain’s decision to join the EU in 1973 set the stage for the neoliberal revolution that subsequently occurred in both countries. EU membership forced Britain to end their special trading relationship with New Zealand (an other Commonwealth countries), resulting in significant economic decline in both countries. Neoliberal trade liberalization was meant to stem these losses. Instead the loss of tariff and other import protections quickly destroyed manufacturing in both countries.

New Zealand, which was fortunate in having agricultural exports to fall back on, succeeded in developing alternative trade relationships with Australia, China and other Asian countries. Nonetheless, thanks to their 1980s neoliberal experiment, New Zealand has one of the highest levels of foreign ownership (of land, homes and companies) in the developed world. It also has the highest house prices, the second highest prison population and extremely high child poverty levels (1/3 of Kiwi children grow up in poverty). Meanwhile it’s failure to provide jobs for young adults means a sizeable proportion leave New Zealand permanently for other developed countries.

Brexit and Trump: The People Rebel

Mitchell describes the rise of left and right wing extremist groups in Europe, the Brexit vote and the election of Donald Trump as a direct popular reaction to the immense human misery caused by neoliberal policies. In New Zealand the 1996 citizens referendum adopting proportional representation was a direct reaction against both major parties (Labour and National) advancing neoliberal policies.

At this point, the traditionally pro-corporate International Monetary Fund (IMF) and Organization for Economic Cooperation and Development (OECD) have both come out against austerity and similar “deflationary” neoliberal policies. Instead they argue strongly for increased stimulus (public) spending to stabilize the world’s developed economies.


*Similar effects under American neoliberals Reagan, Bush Sr and Jr, Clinton and Obama inflicted similar damage on the US.

The Battle of Newbury Bypass: How Organizing and Persistence Pay Off

Tales of Resistance: the Battle of Newbury Bypass

Directed by Jamie Lowe (2016)

This inspirational video is about the massive British resistance movement that arose in the 1990s to oppose the frenetic highway building spree of Margaret Thatcher and her successor John Majors. It culminated in the Battle of the Newbury Bypass, which destroyed nine miles of pristine old growth forest to build and extension to the M3. The stand-off between tree sitters and police lasted three months. The protestors were eventually evicted and the highway built – but at immense cost to the government. By the time the protest ended, public opposition to the highway expansion scheme was so strong the government had to end it.

The documentary depicts quite elegantly the advanced technical expertise required to carry off a massive tree sitting campaign, as well as the powerful sense of community that evolved between the protestors who assembled from across the country. Surprisingly the hardest aspect of this type of direct action is boredom, ie the long wait for the police to take action.

The footage of the police and security personnel brutally removing protestors from hundreds of trees is ugly enough. The scenes of majestic hundreds of years old oaks and evergreens being felled are heart wrenching.

The BBC

The Rise and Fall of Britain’s Working Class

the-people

The People: The Rise and Fall of the Working Class 1910-2010

By Selina Todd

John Murray Publishers (2015)

Book Review

The People is about the rise of the British working class during World War I and its systematic erosion during the seventies as the Thatcher government systematically dismantled Britain’s manufacturing base.

British workers first began to see themselves as a cohesive force during 1914-18 as hundreds of thousands left domestic service (where most were employed) for the war industry. Working class consciousness reached its zenith during World War II, in part due to discriminatory treatment by the Churchill government. Working class women were often forced to leave well-paying jobs to be conscripted into the munitions industry. In contrast, middle and upper class women were exempted from conscription because they did “voluntary” work. Middle and upper class families also found it easier to be exempted from the mandatory evacuation scheme. The latter required rural families were required to accept child evacuees from urban centers without compensation.

The Churchill government provided virtually no funding for the mandatory evacuation scheme (which was organized mainly by schools and charitable groups), nor for benefits for families who lost housing, jobs and breadwinners due to German bombing, nor for proper air raid shelters. Government provided shelters were so wet and filthy, Londoners spontaneously seized and occupied the subway system, and there was nothing the government could do to stop them.

According to Todd, the austerity cuts that have turned Britain into a low wage economy actually started in 1976 (three years before Thatcher was elected prime minister) with public spending cuts imposed on the UK as a condition of an IMF loan. For the most part, this “free market” attitude continued under Blair and New Labour.

In her Afterward, Todd sees evidence of a growing popular discontent over inequality in the rise of UKIP (the United Kingdom Independence Party) and the Scottish independence referendum. The latter, she maintains, was actually more about inequality. More recently, this discontent has manifested in the election of left wing Jeremy Corbyn to run the Labour Party and the successful Brexit referendum.

The Billionaires Who Helped Destroy Democracy

The Mayfair Set: Four Stories About the Rise of Business and the Decline of Political Power

Directed by Adam Curtis (1999)

Film Review

The Mayfair Set is a four part documentary series profiling the right wing financiers responsible for the financialization of the British-American economy in the seventies and eighties. It also explores the simultaneous transfer of real power away from elected representatives to banks and financial markets. “Mayfair Set” refers to a private London gambling club – the Clermont Club – where many of these future billionaires were members.

Part 1 – concerns British aristocrat Colonel David Sterling, founder of the British SAS (Special Air Service). In the sixties and seventies, Sterling created a series of private mercenary armies to fight independence movements in Africa and elsewhere. In addition to secretly fighting Egypt’s invasion of Yemen in 1962, he also set up numerous arms deals for Saudi Arabia,* with the assistance of notorious Saudi arms dealer, Adnan Khashoggi.** He also created the Saudi air force.

Part 2 – concerns two right wing Clermont Club members John Slater and Tiny Rollin. Slater was a corporate raider who almost singlehandedly wiped out Britain’s manufacturing sector in the seventies and eighties. He did so by targeting specific companies for hostile takeover, stripping their assets, sacking thousands of workers, and investing the proceeds in the share market. Rollin was responsible for bilking newly independent African nations of their mines, factories and plantations.

Part 3 – concerns Slater’s fellow corporate raider, Michael Goldsmith, who emigrated to the US in 1980 and paired up with junk bond guru Michael Milken to destroy America’s manufacturing base by initiating dozens of hostile takeovers of US companies. In 1990 Milken was sentenced to 3 ½ years prison on 94 counts of fraud, racketeering and insider trading.

Part 4 – concerns the rise to power of Clermont Club darling Margaret Thatcher and her (controversial) embrace of Egyptian businessman Mohamed Al-Fayed. Al-Fayed saved her government when currency speculator George Soros led a vicious attack on the British pound in 1992. Al-Fayed would subsequently blow the whistle to the Guardian on all the British MPs who accepted bribes from him. Al-Fayed was father to Dodi, the boyfriend killed in the car crash with Princess Diana.


*British arms sales to Saudi Arabia, which continue to the present day, have become extremely controversial owing to the Saudis’ carpet bombing of Yemen and the resulting humanitarian crisis.  See Shelve UK arms sales to Saudis over Yemen, say two MPs’ committees

**Khashoggi first came to public attention for his role in the Iran-Contra scandal, in which George Herbert Walker Bush and other members of the Reagan administration illegally sold weapons to Iran to finance their illegal war against Nicaragua’s Sandinista government. Khashoggi also had direct links with the alleged 9-11 terrorists (see Spike the News) and was the uncle of Dodi Al Fayed, the boyfriend killed in the car crash with Princess Diana.

 

Margaret Thacher: Channeling Churchill’s Messianic Vision

The Living Dead

Part 3 “The Attic”

By Adam Curtis (1995)

Film Review

In Part 3 of The Living Dead, his series exploring the elite’s selective rewriting of history, Adam Curtis explores Margaret Thatcher’s dramatic reprisal of Britain’s “glorious golden age.” According to Curtis, Thatcher rose to power thorough detailed study and imitation of Winston Churchill’s speeches and rhetoric. In this respect, she was very different from most “perception management” artists in that she really believed she was going to restore Britain to its former power and glory.

Curtis suggests that Churchill was also convinced he was going to restore Britain to its eighteenth century imperial magnificence and became really depressed when he failed to do so.

The documentary offers quite a convincing analysis of the “messianic vision” that facilitated the rise to power of both Churchill and Thatcher. In Thatcher’s case, it was based on her romanticized childhood reading of history and incorporated a substantial amount of fantasy. This vision, strongly enforced in Britain’s private schools and military academies, emphasizes morality, discipline, patriotism, tradition, hierarchy, idealization of the monarchy, and respect for authority. Although this intensely hierarchical system only benefits a tiny minority of British society, its romantic pageantry is often extremely effective in winning middle and working class votes.

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.

How European Banks Hijacked the Euro Monetary Union

Buy, Buy Europe

Pieter De Vos (2013)

Film Review

This is a five-part miniseries describing how European banks have hijacked the euro monetary union to vastly increase their wealth. The upcoming Brexit vote in Britain makes this a particularly relevant topic.

Part 1 A Bank Crisis a Week

The series begins by describing the history of the European monetary union. Built at the height of neoliberalism it adopted all the rhetoric of Ronald Reagan, Margaret Thatcher and Alan Greenspan promising that globalized capitalism and free markets would end economic crises, increase prosperity and end inequality.

What really happened is that creating the euro massively increased inequality between northern and southern Europe and between workers and the super rich.

In seeking to make European banks as strong and competitive as US and British banks, Eurozone leaders ceased regulating them. Wall Street is often blamed for the EU’s 2008 meltdown. In actuality, deregulated European banks were equally guilty of risky speculation in derivatives and subprime mortgages.

Following the 2008 economic crash, European banks required massive government bailouts to keep European economies from collapsing. Promised banking reforms to prevent a recurrence of 2008 never happened. And according to the IMF, the global banking system is even more unstable today as it was right before the meltdown.

Part 2 Austerity Till the Grave

The bailouts required to keep their banks (and economies) going virtually bankrupted all Eurozone governments. All borrowed deeply (from the global banking system they had just bailed out) to keep their governments going. As a condition of this borrowing, the banks required them to reduce their deficits via deep austerity cuts. To qualify for further loans, they all cut pensions and benefits and laid off public service workers.

This segment focuses on Spain, where workers are organizing to block evictions, and Greece, where unemployed parents are forced to drop their kids off at orphanages because they can’t get welfare benefits to support them.

Part 3 Tax Haven Europe

This segment begins by profiling the Greek shipping magnates who run the largest merchant fleet in the world and pay virtually no tax. Corporations and the super rich pay far less tax than working people in all the EU countries. This massive tax avoidance forces all European governments to acquire major debt to keep from collapsing.

The documentary offers the example of Belgium, where the average tax rate is 12.5% and the most profitable corporations pay only 5% of their earnings in tax.

The filmmakers maintain that workers create wealth, though I doubt most neoliberals would see it that way. In 1981 Europe, 74% of the wealth workers created was returned to them as wages and government benefits. By 2012 only 49% of this wealth was returned to them and the super rich claimed the rest.

Part 4 Bratwurst, Lederhosen and Minijobs.

This was the most eye-open segment for me. It exposes the punitive conditions imposed on German workers from 2000 with the goal of making German export industries more competitive. Under former chancellor Gerhart Schroeder, massive wage reductions were imposed on all German workers – something IMF chief Christine LaGarde likes to call “labor market reform.”

Among other labor “reforms,” were a massive increase in “minijobs” – low wage part-time temporary positions that pay an average of 400 ($US 448) euros a month. Given Germany’s high cost of living, both parents need to work 2-3 “minijobs” (if they can find them) to cover a family’s basic needs.

The result was truckloads of cheap German imports flooding into southern EU countries (Greece, Spain, Portugal and Italy), shutting down local industries that couldn’t compete.

In this way, Germany’s vicious attack on their own workers forced wages down in other EU countries. This, in turn, forced countries like Greece and Spain to borrow lots of money from German banks to keep their governments going.

Ironically Germany currently has the highest number of working poor (7 million) of all EU countries.

Part 5 What Kind of Europe Do We Want?

It’s vital for people to understand that the mantra EU governments repeat ad nauseum – that saving the euro is essential to strengthening the EU and restoring prosperity – is pure propaganda. Seven years of austerity is massively increasing deficits and debt by putting so many people out of work.

The truth is that the Eurozone has been hijacked by banks and multinational corporations who are determined to use trade agreements to lock member countries into austerity and statutory destruction of Europe’s proud tradition of democratic socialism.

The only solution is a public takeover of too-big-to fail banks. Continuing to bail them out, while allowing them to privatize all the profits, is simply legalized theft of public monies. And a yes vote on Brexit.

 

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.

The 1% at Their Finest

The Super Rich and US

BBC (2015)

Film Review

The Super Rich and Us features casual cameos of British billionaires openly displaying their narcissistic indulgence in trophy assets. There is also a brief appearance by economist and author Thomas Piketty (Capital in the Twenty-First Century). The goal of the documentary is twofold: to debunk trickle down theory and to critique government policies that have made Britain one of the most unequal nations on the planet.

The filmmakers maintain that Britain’s top 1% generates and consumes all the so-called growth the UK has experienced over the last five years. None of it derives from increased investment, job growth, wages or productivity.

The British 1% has doubled their income between 1980 and 2015, while income for everyone else has stagnated or declined. Likewise the Conservative government’s 80 billion pounds in austerity cuts is roughly equal to the bonuses banks paid out to CEOs.

Why Britain Has the Most Billionaires

The UK has more billionaires per head (104) than any other country. This stems largely from a policy decision to compensate for factories moving overseas by making the country a tax haven for rich colonials seeking to avoid taxes in their own country – under the delusional belief it would make everyone else richer.

In the 1980s, Margaret Thatcher significantly reduced taxes on Britain’s native millionaires and billionaires. She argued, as Reagan did in the US, that taxing the rich made society poorer. These policies, which have changed little over thirty years, have made Britain the world’s favorite tax haven, as international pressure forces other traditional tax havens (Switzerland, Luxemburg, Cayman Islands, etc) to shut up shop.

Trickle Up vs Trickle Down

Thanks to the wholesale repeal of banking and corporate regulations, none of this surplus wealth trickled down to the rest of the population the way Thatcher claimed it would. Instead the super rich have been sucking up shrinking lower and middle classes resources into their vast reservoir of private wealth. The main reason trickle down doesn’t work is that the 1% spends their surplus wealth on diamond jewelry, yachts, sports cars and other luxury goods that generate income for only a handful (if any – most of these goods are imported) of working people.

The film contrasts British tax policies with those of Sweden and Denmark, which the rich pay a fair share of taxes. Not only do both have GDPs equal to or higher than the UK’s, with numbers that reflect genuine improvement in productivity and job and wage growth. When polled, eighty-eight percent of Danish people are perfectly happy with their tax rate because they see it reflected in generous government services.

Human Beings as Machines

Trapped: What Happened to Our Dream of Freedom

Adam Curtis

BBC (2007)

Film Review

Part 2 The Lonely Robot

Part 2 takes a close look at the role American economist James Buchanan played in extending free market economic theory to human biology, politics and governments. The Impossibility Theorem is fundamental to Buchanan’s concept of “market democracy.” According to the Impossibility Theorem, collective will is impossible in a democracy because the desires of millions of individuals are too varied and complex. Buchanan maintained the only way to respond democratically to people’s wishes was to allow them to fully pursue their selfish self-interest in the marketplace.

Clinton Dismantles New Deal Welfare Programs

A direct result of Buchanan’s influence over Margaret Thatcher, John Major, Tony Blair, Ronald Reagan and Bill Clinton was massive cuts in taxes and social services, coupled with a repeal of corporate regulation. The most immediate result was a massive increase in inequality. Corporate elites became much, much richer – while nearly everyone else became much poorer. Ironically the gap between rich and poor would increase far more rapidly under liberal-leaning Blair and Clinton than under Thatcher and Reagan. Clinton will go down in history as the president who dismantled the welfare programs Roosevelt enacted under the New Deal.

Meanwhile overconfidence in computers and so called “behavioral economics” (free market theory) would result in government departments run by targets and incentive schemes. Sociopaths and economists quickly learned how to game the system by cheating on their targets.*

The Selfish Gene Hypothesis

Likewise biological scientists used free market and game theory to promote the Selfish Gene hypothesis. This theory conceptualized a simplistic view of human beings as machines that were controlled entirely by their genes. It held that genes, which were likened to on-board computers, compelled people to act selfishly to guarantee their genes’ survival.

This mechanistic view of human biology would lead to a profound change, led by psychiatrists and drug companies, in the way Brits and Americans viewed themselves. The new checklist diagnostic system the American Psychiatric Association (APA) launched in 1979 (see Part 1), coupled with the aggressive marketing of selective serotonin reuptake inhibitors (SSRIs) would lead people to view themselves as machines – machines that needed to be fixed if they experienced unpleasant emotional states, such as worrying, conflict, insecurity or anxiety.

People Pop Pills to Cope with Deteriorating Social Conditions

Because these checklists deliberately ignored life circumstances that might cause unpleasant feelings, common reactions to life stresses became medicalized. This, in turn, led to an expectation that people would take pills to adjust to steadily worsening social conditions.**

The theoretical basis of behavioral economics began to unravel in the 1990s. The Selfish Gene hypothesis was abandoned when new genetic research revealed that cell’s ability to choose, based on environmental conditions, which parts of the DNA molecule become operational.


*More recent research shows that only two sectors of society are driven purely by self-interest: sociopaths and economists.

** For example, loss of good paying and secure jobs, loss of representation in a rigid and corrupt government and overall loss of control over our lives.

Free link to film: The Trap 2 The Lonely Robot [BBC]