Saturday, 7 November 2009

The Truth about Free-Market Fundamentalism.

Ride the Wave.

The reaction to the financial crisis of 2008, and the controversial bail-outs, have consisted mostly of populist arguments against government intervention in the market. We have seen this on both sides of the Atlantic. In America, the nationalist Michael Savage accused George W Bush of being a "fiscal socialist" for pouring $700 billion into Wall Street. The pundits of Fox News, and by extension Rupert Murdoch, have continued to accuse Barack Obama of being a "socialist" for bailing out yet more needy corporations. In Britain we have seen similar tactics, although far less overt forms of populism, from the media. In a nutshell The Sun has stabbed New Labour in the back. It appears that the Conservatives and the Republicans are attempting to surf their way to power on a wave of right-wing populism. Apparently, these free-marketeers are here to save us from the horrors of the free-market. But it seems doubtful that working-class British and American people truly feel that the Right represents them. A lot of Americans and Brits are simply angry, disillusioned and apathetic with the Establishment and the parties that be.

On both sides of the Atlantic, we have seen one rhetorical question posed endlessly by the media: "Why should tax-payers flip the bill?" The obvious answer they hint at is: "There is no reason we should reward failure!" But as most things, this is not a simple and necessarily correct answer. This answer has been given by the same breed of free-market fundamentalists responsible for the financial crisis in the first place. These are the same individuals who want the separation of market and state. Remember, the Conservatives were the politicians who have been demanding greater deregulation and tax cuts under New Labour. Which is something often neglected deliberately by the media, who have instead resorted to condemning Labour's rampant spending. It is almost as if they believe the government should be focused with having something left over. It is as if they think governments should be run like businesses, aiming to have something left over at the end of the day - namely, profits.

The fact is that this financial crisis was caused by a flawed system, a banking structure that had been deregulated, that had benefited greatly from massive tax cuts which simply rewarded bankers who were running amok. But naturally, the flawed system will not be changed. Instead, the media will chew up the current incumbents like dog meat. Offering the rabble what they might consider a brief but stimulating catharsis. Instead of satisfying real demands for substantive change. Of course, the Randian dinosaur that is Alan Greenspan is partly to blame for the current debacle. It was "Saint Alan" who made the mistake of trusting bankers to have a rationally self-interested approach to lending. A rational egoist would not be looking for the kind of wild speculation -
the short-term propellant that is doomed to end in a crash - that the bankers looked for. What "Saint Alan" failed to take into account was the fact that the bankers can afford to take stupid risks, because they can always count on the state to bail them out. But if Greenspan hadn't made this mistake, someone else would have. No one will seek to restructure this fundamentally flawed system and on it shall go without the dinosaurs.

Greed is Good.

The laissez-faire crowd of libertarians and fiscal conservatives in American politics are mostly all talk when it comes to the free-market. Take William Weld as an example. In 1991 Weld became the first Republican Governor of Massachusetts, since 1975. Weld has been referred to, in the past by the Boston Globe, as a "libertarian with a religious belief in free-markets." Though, the description had clearly been made in ignorance of Weld's true policies. It is true that Weld decreased the size of government in Massachusetts, but for the poor - specifically cutting Medicaid by 15% and decimating worker's compensation, thus doing considerable harm to the people in need of health treatment. As he was "rolling back" the state, for the poor, Weld deliberately increased subsidies to corporations and businesses active in Massachusetts before slashing taxes and regulation in their favour. As an "odd side-effect" of Weld's policies Georges Bank was closed off because a large amount of fish had been wiped out. Which is an "odd side-effect" of subsidising and deregulating prosperous fishing companies. Weld was soon in Washington, looking to his fellow politicians for a federal bail-out and a stamp of "natural disaster" onto a mess that he was responsible for.

The kind of "free-marketeering" perpetrated by the likes of William Weld is not unusual. We can see the big difference between reality and rhetoric under the likes of Blair and Bush, Major and Clinton, Thatcher and Reagan. There is a tendency in the media to ignore the subsidies, massive tax cuts, deregulation and protectionist policies promoted by many of these politicians. This is particularly true of the Thatcherites and the Reaganites in the 1980s, who are often described as being heavily influenced by the work of Adam Smith, but they were more influenced by Friedrich Hayek, Milton Friedman and Ludwig von Mises. We're not told of the fact that both Thatcher and Reagan favoured devolution to the extent that was beneficial to "Big Business". It is easier for businesses to intimidate states with threats of leaving for another state, in order to get what they want, when there is little interference from centralised government. Which is probably why Thatcher favoured devolving power to local government and stood in opposition to the European Union. For corporations, doing business in Europe is worth billions in revenue, but if power was centralised in Brussels it would be harder for corporations to say "We're going unless you'll give us a tax cut." Everything about Thatcherism and Reagonomics is geared to benefit private enterprise.

The supply-side policies pursued by Thatcher and Reagan essentially led to high unemployment and social deprivation, for the poor. For example, privatisation is the process by which Thatcher removed numerous aspects of British industry, from the public sector, and handed them over to the private sector. The most well known example being the mines, most of which have been closed since because they were not profitable. An institution of the public sector can hire more workers, since they aren't focused on profit.
But a company in the private sector cannot function without making a profit, at least not for too long. For these companies to make a profit they will pursue low wages and high work hours, for the workers that they can't afford to make redundant. But for businesses to possess the power to do such things, unions must be weak and workers must be desperate. This is the reason behind the war waged against unions and welfare by the Thatcherites and Reaganites a like - to ensure profitability for private power. By 1990 British workers had been subjected to some of the biggest wage cuts in the Western world. Though, American businesses had succeeded in accomplishing the same goal about 5 years earlier thanks to the Reaganite Revolution, as illegal firings increased by a third as the state "failed" to enforce the law.

Country First.

We all know how patriotic our politicians can be, in times of war and remembrance for those who fought for the freedom we enjoy today. "Country First" was one of many slogans used by the McCain-Palin campaign team in 2008. Millions of dollars, that should have gone to the Third World in the form of food aid, were cut so that the bail-outs could be pursued in Western states. In Britain, we've seen striking workers demanding "British jobs for British workers". In Greece, police resorted to firing tear gas at farmers who were determined to receive even more subsidies. Even though typically governments do utilise policies which protect goods and capital that is in their country's economy. However, this is not necessarily the kind of activity which protects the jobs of working people and as previously stated the government is usually not on the side of the working women and men. Which is why 1% of the American population gained $1 trillion dollars between 1978 and 1990, thanks to Reagan and Bush who chiselled down taxes on rich from 70% down to nearly 25%.

The Republic of Mali has been described as a landlocked West African nation, it is the seventh largest country in the African continent and has a population of around 13 million. Around half of the population live on less than $1.25 a day. The life expectancy in Mali is at 48 years for Men and 52 years for women. 90% of the population are Muslim, 1% are Christian and 9% adhere to an "indigenous religion". Like most African nations it has been the subject of political instability, coups and anti-communist dictatorship. And yet it would appear that there are Malian Politicians who actually believe in the free-market. The Malian economy is "built" on agriculture, specifically cotton in the South and cattle in the North of Mali. Unfortunately, the politicians of the United States and the European Union are far less faithful to the free-market ideal, despite all their rhetoric. As a result, Malian beef and cotton producers cannot compete on a level playing field with their European and American counterparts.

Why would such a thing happen? Because the US government subsidises American cotton farmers with more money than the Malian government spends in it's entire budget. Nor can the Malians compete with the Europeans, since the EU subsidises each farmer with 500 euros per each cow and that is even more than the per capita GDP in Mali. The Minister for the Malian economy once said: "We don't need your help or advice or lectures on the beneficial effects of abolishing excessive state regulation; please, just stick to your own rules about the free-market and our troubles will basically be over." His words fell on deaf ears in America and Europe. Thus, Mali's economic woes are far from over. But Mali is merely one example of the devastation reaped by American and European protectionism. The politicians placing tarrifs on imported goods and restrict imports by establishing administrative barriers often claim to be "putting country first". But "putting country first" has a price - which will be paid exclusively by the Third World.

First as Tragedy, Then as Farce - by Slavoj Zizek (2009)
Free-Market Fantasies: Capitalism in the Real World - by Noam Chomsky (1996)

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