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.

The Chile of the Pacific

Milton Friedman from Wikimedia Commons

(The 6th of 8 posts about my new life in New Zealand.)

An Early Laboratory for Neoliberal Reforms

Overall I have enjoyed numerous lifestyle advantages living in New Zealand. There are a few notable exceptions, of course, beyond the emotional isolation of being separated from my family and American friends. Most relate, either directly or indirectly, to New Zealand’s historic role as “the Chile of the South Pacific.” During the 1980s, New Zealand was used as a laboratory for the neoliberal reforms subsequently implemented by Ronald Reagan and Margaret Thatcher.

In theory, neoliberalism is a “market-driven” approach to economic and social policy that stresses the efficiency of free enterprise and opposes government regulation of corporate recklessness and any government role in public services other than law enforcement. In practice, neoliberal policies have been universally pro-corporate and anti-free market, promoting vast amounts of legislation (tax law, government contracts and direct corporate bail-outs) that favor large corporations at the expense of both small business and ordinary citizens.

The University of Chicago is usually credited as the birthplace (in the 1960s) for neoliberalism and Milton Friedman as its father. A frequently overlooked aspect of the CIA’s 1973 coup in Chile was the direct role University of Chicago economists played in assisting Chilean dictator Augusto Pinochet in setting out the neoliberal economic reforms enforced by his brutal regime. New Zealand played a similar role in the early eighties, by trying out neoliberal policies that were later adopted by Britain and the US.

New Zealand: a Second World Country

At present New Zealand is a relatively poor, second world country. It ranks 20th in GDP for OECD countries. Americans are always struck by the high cost of living here relative to wages and salaries. Although average income is much lower than in other developed countries, the cost of basic necessities is just as high. At times it’s much higher, particularly in the case of gasoline, home energy costs and fresh meat and fish.

Central heating is virtually non-existent – in part because so few people can afford it and in part because the (colder) South Island has no access to piped natural gas. Just so no one has any illusions about our climate, the New Zealand winter is relatively short. However except for the far north, it gets just as cold here as in northern California and the Pacific Northwest.

Here We Call It Rogernomics

In 1975 New Zealand was 10th in the OECD in per capita GDP. Prior to the eighties, the UK was always the primary importer of New Zealand lamb and dairy products. In the early 1980s, these policies changed, and Britain began to favor European Union trading partners over commonwealth countries.

Increasingly, however, many economists blame the draconian reforms Minister of Finance Roger Douglas enacted in 1984 for the decline in Kiwi living standards. So-called “Rogernomics” was responsible for the institutionalization of a large and steady wealth transfer (as profits and dividends) to overseas corporations. This in turn has led to a large, chronic accounts deficit (negative balance of trade), which has led to many other economic problems.

It’s only with the 2008 economic collapse and the non-existent US recovery that American analysts are starting to appreciate the devastating impact that “Reaganomics” – the main culprit in the virtual collapse of American manufacturing – had on the US economy.

In a country 1/60^th the size of the US, the damage was much more immediate and obvious.

 

The Common Misfortunes of Capitalism

Note cow in stream

(The 5th of 8 posts about my new life in New Zealand)

Obviously there is both an upside and a downside to living in New Zealand. All developed and developing countries are forced to operate under the same corporate-dominated capitalist system.

New Zealand is no exception and has many of the major economic and social problems other developed countries are experiencing. In a few areas, New Zealand has adopted some of the worst aspects of global capitalism, which results in uniquely negative consequences for the New Zealand public. For the most part, Kiwis retain their commitment to a “democratic socialism” as practiced in most of Europe. The result, in my view, is a society and culture that tends to be far more humane than is found in the US.

That being said, New Zealand shares a number of pernicious social problems found in all modern capitalist countries:

• Worsening income inequality – only 10% of Kiwis have incomes above $72,000 ($58,216) in US dollars), whereas half the population earns less than $24,000 ($US 19,405).
• Irrational and blind adherence to a continuous economic growth paradigm. In a small country like New Zealand, this has a devastating impact, in terms of water contamination, habitat destruction and environmental toxins in the food chain. Over the past two decades, dairy intensification has made the most of New Zealand’s picturesque waterways unsuitable for swimming (due to cow shit and fertilizer run-off.
• Slow uptake of renewable energy production (owing nonexistent finance capital or government subsidies)
• Slow uptake of sprawl prevention strategies essential to the development of cost-effective public transportation.
• Heavy corporate media emphasis on stereotypical female roles, resulting in massive pressure on New Zealand women to look young, thin and sexually attractive. Fortunately cosmetic surgery is much less common here than in the US – there aren’t enough Kiwis who can afford it.
• Factory shut-downs and movement of well-paid union and manufacturing jobs to overseas sweat shops.
• Massive household debt (146% of disposable income largely owing to chronic low wages).
• Diets which are excessively dependent on foreign food imports, as opposed to more sustainable reliance on locally and regionally produced food.
• Factory farming of pigs and chickens. Thanks to the high prevalence of battery hen operations (and constant exposure of chickens to feces), New Zealand enjoys the highest per capita incidence of campylobacter infection in the world.

 

photo credit: Mollivan Jon via photopin cc

The Robber Barons Behind Neoclassical Economics

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