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American Wealthy Threaten Democray
More than a decade ago, the United States passed France to have the highest inequality ratios of any major Western nation. More and more of the country's richest clans have been setting up family offices, captive trust companies and other devices to manage and entrench their swelling fortunes
Maybe it's time for a new set of Fourth of July orations. Only at first blush is there silliness to the idea of the United States--the nation of the Minutemen, John and Samuel Adams and Thomas Jefferson--becoming a hereditary economic aristocracy. When you think about it, there is evidence for serious concern.
More than a decade ago, the United States passed France to have the highest inequality ratios of any major Western nation. More and more of the country's richest clans have been setting up family offices, captive trust companies and other devices to manage and entrench their swelling fortunes. The elimination of the inheritance tax being sought by the Bush Administration will only make that entrenchment easier.
Politically, we already have a dynasty at 1600 Pennsylvania Avenue: the first son ever to take the presidency just eight years after it was held by his father, with the same party label. This dynasticism also has its economic side: both Bushes, père et fils, having been closely involved with the rise of Enron, another first for a presidential family, more on which shortly.
If we lack an official House of Lords, there are Bushes, Tafts, Simons, Rockefellers, Gores, Kennedys and Bayhs out to create a kindred phenomenon. Laura Bush is the only wife of a 1996 or 2000 major-party presidential nominee who has not yet entertained seeking a US Senate seat in her own right. The duchesses of Clinton, Dole and Gore have already considered (or acted).
A soft, blurry kind of cultural corruption has all but muted discussion. Dynasty is no longer a bad word, and in the wake of this semantic revision, the inheritance tax supported by Presidents from Lincoln to FDR has been renamed the "death tax" by George II and may be heading toward extinction. Small-business men from Maine to San Diego are already dreaming of founding personal dynasties, built on lobsters-by-mail or Buick dealerships.
Progressive taxation--only a memory for most--died in the 1980s as regressive FICA taxes replaced income levies as the heaviest tax paid by a majority of American families. The First Amendment to the US Constitution, in turn, is not far from being twisted by the courts to include fat-cat political donations within the protection of free speech. Cynics might suggest that George Orwell set his book 1984 two decades too early.
But democracy is being eroded more by money and its power than by skilled semantics. For want of insights and data often unobtainable from the corporate media, the public opinion vital to US democracy has trouble remaining vigorous and informed. Many politicians are themselves part of the national economic elite, and others depend on that elite for campaign funding. History tells us that America overcame kindred problems in the Progressive era a century ago. The national will to do so again, however, is hardly clear.
The menace of economic and political dynastization is that it flies under the radar of the Americans who grew up believing that the democratic values of World War II and Franklin D. Roosevelt, carried by another leadership generation into the 1960s, would last forever. Instead, the 1980s and '90s ambulanced many of those values to an ideological emergency ward. But much of the liberal and progressive community--caught up in older micro-issues--has found the changing über-philosophy difficult to grasp.
A similar thing happened in the mid-to-late-nineteenth century, when aging Jeffersonians and Jacksonians remained lulled by the egalitarian implant of those earlier days, as well as by the post-1783 elimination of the British system of entail and primogeniture, which kept estates intact at death. Finally, in the 1880s, it became clear that the advent of large corporations, enjoying a long legal existence and constitutional rights equivalent to persons, had provided the framework for the rise of a new aristocracy. Hundred-year-old reforms and shibboleths had become irrelevant.
By this point, the average American had stopped believing the old Fourth of July speeches about how the forefathers had anticipated every danger. From Maine to California, citizens saw railroads taking control of state politics. Muckraking journalists began to employ a new descriptive term: plutocracy. As the trusts and monopolies flourished while America's largest fortunes grew tenfold and twentyfold between 1861 and 1901 thanks to stock values, it became clear that some critical safeguards were missing. Luckily, the need to bridle railroads, trusts and monopolies, and to tax the incomes and inheritances of the rich, voiced with increasing clarity by Theodore Roosevelt, Woodrow Wilson and the Progressives, brought significant results by 1914. FDR added further reforms during the New Deal years.
As of 2002, alas, old New Deal memories and 60 cents will get you a candy bar. The transformation of the US economy and its supporting politics since the 1960s has been staggering; and especially so since the 1980s, with the growth of financialization, wealth concentration, economic elitism and dynastization. Millionaires' income tax rates dropped so fast in the 1980s, for example, while those of people in the middle rose with FICA increases, that in 1985 the two almost met.
Back in 1937, an economics writer named Ferdinand Lundberg wrote about how "America's Sixty Families" (and another hundred lesser clans) owned a huge chunk of US business through their corporate stock holdings. Six decades later, the current "overclass" probably begins with the largely overlapping quarter-million "deca-millionaires" ($10 million and up) and the quarter-million Americans with incomes in excess of $1 million a year. But for sticklers, the 2000 equivalent of the rich families of 1937 could be the roughly 5,000 clans having assets of $100 million or more.
Today, following the havoc of the biggest two-year major market debacle since 1929, many of the Internet fortunes are gone, while the established rich are very much with us and, by and large, sleeker than ever. This was also true in 1937, parenthetically, when researcher Lundberg's discourse paid hardly any attention to the nouveau-riche aviation, radio, motion picture and electric gadget fortunes of the Roaring Twenties. Most had shriveled or vanished between 1929 and 1932. The old money was back on top.
So it is again, although a third of the tech billionaires of 1999 have kept billionaire status, a much better ratio than in 1929-32. Nevertheless, what is striking in the current lists is the entrenchment of established families through the good offices of the Dow Jones and the S&P 500. The top 1 percent of Americans own about 40 percent of the individually owned exchange-traded stock in the United States, and own an even higher ratio of other financial and corporate instruments.
The median US family, depending on the calculus, has only $6,000 or $9,000 of stock, a benefit overshadowed during the 1990s because its debt level rose by a good deal more. The financialization of America since the 1980s--by which I mean the shift of onetime savings deposits into mutual funds, the focus on financial instruments, the giantization of the financial industry and the galloping preoccupation of corporate CEOs with stock options instead of production lines--has been a major force for economic polarization. This is because of its disproportionate favoritism to the top income and wealth brackets. The never-ending stream of 1980s and '90s bailouts of banks, S&Ls, hedge funds, foreign currencies and (arguably) stock markets by the Federal Reserve has been another prop.
The upper-tier hogging of the economic benefits of the 1990s can be approached from a number of directions, but hardly anyone controverts that the top 1 percent made out like bandits. The New York Times, for example, reported that 90 percent of the income gain going to the top fifth of Americans went to the top 1 percent, who are only a twentieth of that top fifth. Some scholars bluntly contend that attention should focus on the top one-tenth of 1 percent, because these are the raw capitalists and money-handlers, not the high-salaried doctors, lawyers and Cadillac dealers.
In 1935, Franklin Roosevelt proclaimed that "the transmission from generation to generation of vast fortunes by will, inheritance or gift is not consistent with the ideals and sentiments of the American people," but politics became friendlier to wealth in the 1960s and '70s, and positively effusive in its courtship during the 1980s and '90s. Over the past two decades, the same soaring costs of seeking office that drove middle-class office-seekers to sell their souls to big contributors also made dynastic heirs appealing to political parties that were looking for self-funding nominees or those whose famous names gave them a built-in fundraising edge. Two billionaires, Ross Perot and Donald Trump, actually sought the presidency or talked about it during the 1990s.
The number of US senators with serious multimillion-dollar fortunes, in the meantime, has begun to approach the high set back in the early 1900s, when senators were appointed by state legislatures to whom money spoke easily and powerfully. This ended in 1913, when the Seventeenth Amendment to the Constitution provided for popular election of senators, although the submergence of politics in today's money culture has accomplished somewhat the same thing, despite popular election.
As for Presidents, nineteenth- and twentieth-century White House service was not much of a pathway to getting rich. Most had government pensions and some other income, but few who didn't come to Washington rich left that way unless they inherited. What seems to have happened over the past twenty years, however, is that several Presidents--George H.W. Bush and the Hamptons-craving Bill Clinton--have decided to swim with the money culture. While Clinton was governor of Arkansas, wife Hillary held a number of corporate directorships. Now Clinton's post-White House speechmaking and deal-seeking looks perfectly normal in an ethically loose sort of way.
The first Bush Administration probably represents the critical transition, both in the grabby behavior of family members and in the gravitation of top officeholders toward political investment banking, scarcely camouflaged lobbying and defense contract involvement. These practices, indeed, were vaguely reminiscent of the Whig grandees who ruled eighteenth-century England under the first George I and the first George II. One even gets the sense that the Bushes and their entourage came to see this kind of profiteering as their due, much like the families and associates of Walpole, Pelham and Newcastle.
George H.W. Bush's father and grandfather, investment bankers at old white-shoe firms, both had high reputations, but erosion soon set in. Even as the senior Bush was seeking a second term in 1992, the newspapers buzzed with the financial and deal-making escapades of his brothers and sons.
The most interesting Bush family involvement is with Enron. Over the twentieth-century emergence of modern government ethics, no presidential family has had a parallel relationship. As a senator, Lyndon Johnson buddied with Texas companies like Brown & Root, but its fingerprints on his presidency weren't all that notable. Georgia's Jimmy Carter was close to his home-state corporate giant, Coca-Cola, and Richard Nixon brought the Pepsi-Cola account to his law firm during the 1960s.
Episode by episode, none of the Bushes' Enron involvement seems to be illegal. Before 2000-01, moreover, the ties weren't overwhelming in any one national administration. However, the only way that a chronicler can seriously weigh the Enron-Bush tie is by a yardstick the American press has never really employed: the unseemliness of a sixteen- or seventeen-year interaction by the members of an American political dynasty in promoting and being rewarded by a single US corporation based in its home state.
Enron was organized in 1985, and within a year or two, Vice President Bush was chairing the Reagan Administration's energy deregulation task force and his son George W., through one of his succession of minor energy companies, had an oil-well deal with Enron Oil & Gas. The first Bush Administration saw passage of the Energy Policy Act of 1992, which obliged utility companies to transmit energy shipped by Enron and other marketers, while the Bush-appointed Commodity Futures Trading Commission created a legal exemption allowing Enron to begin trading energy derivatives. Enron chief Ken Lay, one of Bush Senior's top election contributors, was made chair of the President's Export Council.
Several years later, when George W. became governor of Texas, Lay asked him to receive visiting dignitaries from places Enron hoped to do business with, and by the time Bush got to the White House, Enron was his biggest contributor. Former Enron officials, advisers and consultants wound up getting several dozen positions in the new Administration, including White House economic adviser, Secretary of the Army and US Trade Representative. These were important to Enron on issues ranging from energy policy to its ambition to open up foreign markets by bringing exports of energy and water services under the WTO trade framework.
Had Bush tried to bail out Enron in November or December of 2001, his personal and dynastic ties to the company would have come under intense scrutiny. Without that bailout, most of the Washington press corps has been content to leave alone the much larger story--the apparent seventeen-year connection between the Bush dynasty and Enron.
Even without such information, it seems clear, counting campaign contributions, consultancies, joint investments, deals, presidential library and inaugural contributions, speech fees and the like, that the Bush family and entourage collected some $8 million to $10 million from Enron over the years, which is more than changed hands in Harding's Teapot Dome scandal. Depending on some still-unclear relationships, it could be as high as $25 million.
Obviously, this sort of dynastic financial outreach is not confined to Republicans. When Bill Clinton left the White House in a glare of unfavorable publicity over his last-minute pardons, especially that of fugitive financier Marc Rich, some of the focus was on money paid to or arrangements made by his wife's two brothers. Nor is it confined to Presidents. Texas Senator Phil Gramm and his wife, Wendy, got themselves referred to in Barron's Financial Weekly as "Mr. and Mrs. Enron" for his legislative work on the company's behalf at the same time that she was taking home money and company stock as an Enron director.
Because the dynastic aspect of American wealth and politics has been growing much faster than public (and press) appreciation of its ballooning significance, much of this record has received little attention. The neglect, however, is something that American democracy cannot afford. If Americans still believe in what Franklin Roosevelt said back in 1935 about the unacceptability of inherited wealth and power--and frankly, even if few have thought about it--a whole new political, ethical and economic agenda calls out for immediate and vocal embrace.
It's easy to limn broad outlines--further reform of campaign finance (perhaps including a constitutional amendment), federal tax changes, maintenance of the federal inheritance tax (certainly on estates over $3 million or so) and regulatory overhauls to curb the widespread corporate abuses pushed into the spotlight by Enron, Tyco and the accounting and brokerage firms. Still, a century ago, and then again in the early 1930s, the critical impetus for Americans' insistence on reform came from stock-market crashes and deep economic downturns. In 2002, we have had the first but not yet the second--and since 9/11, antiterrorism has been a rallying point, with patriotism offered to the electorate in lieu of economic concern.
As for economic and political dynastization, the United States is not the first republic to tilt in this direction. Rome did, and in the eighteenth century even the once proudly middle-class Dutch Republic let many of its offices become hereditary. Let's hope Americans do not also allow political and economic inheritance to displace democracy.
More than a decade ago, the United States passed France to have the highest inequality ratios of any major Western nation. More and more of the country's richest clans have been setting up family offices, captive trust companies and other devices to manage and entrench their swelling fortunes. The elimination of the inheritance tax being sought by the Bush Administration will only make that entrenchment easier.
Politically, we already have a dynasty at 1600 Pennsylvania Avenue: the first son ever to take the presidency just eight years after it was held by his father, with the same party label. This dynasticism also has its economic side: both Bushes, père et fils, having been closely involved with the rise of Enron, another first for a presidential family, more on which shortly.
If we lack an official House of Lords, there are Bushes, Tafts, Simons, Rockefellers, Gores, Kennedys and Bayhs out to create a kindred phenomenon. Laura Bush is the only wife of a 1996 or 2000 major-party presidential nominee who has not yet entertained seeking a US Senate seat in her own right. The duchesses of Clinton, Dole and Gore have already considered (or acted).
A soft, blurry kind of cultural corruption has all but muted discussion. Dynasty is no longer a bad word, and in the wake of this semantic revision, the inheritance tax supported by Presidents from Lincoln to FDR has been renamed the "death tax" by George II and may be heading toward extinction. Small-business men from Maine to San Diego are already dreaming of founding personal dynasties, built on lobsters-by-mail or Buick dealerships.
Progressive taxation--only a memory for most--died in the 1980s as regressive FICA taxes replaced income levies as the heaviest tax paid by a majority of American families. The First Amendment to the US Constitution, in turn, is not far from being twisted by the courts to include fat-cat political donations within the protection of free speech. Cynics might suggest that George Orwell set his book 1984 two decades too early.
But democracy is being eroded more by money and its power than by skilled semantics. For want of insights and data often unobtainable from the corporate media, the public opinion vital to US democracy has trouble remaining vigorous and informed. Many politicians are themselves part of the national economic elite, and others depend on that elite for campaign funding. History tells us that America overcame kindred problems in the Progressive era a century ago. The national will to do so again, however, is hardly clear.
The menace of economic and political dynastization is that it flies under the radar of the Americans who grew up believing that the democratic values of World War II and Franklin D. Roosevelt, carried by another leadership generation into the 1960s, would last forever. Instead, the 1980s and '90s ambulanced many of those values to an ideological emergency ward. But much of the liberal and progressive community--caught up in older micro-issues--has found the changing über-philosophy difficult to grasp.
A similar thing happened in the mid-to-late-nineteenth century, when aging Jeffersonians and Jacksonians remained lulled by the egalitarian implant of those earlier days, as well as by the post-1783 elimination of the British system of entail and primogeniture, which kept estates intact at death. Finally, in the 1880s, it became clear that the advent of large corporations, enjoying a long legal existence and constitutional rights equivalent to persons, had provided the framework for the rise of a new aristocracy. Hundred-year-old reforms and shibboleths had become irrelevant.
By this point, the average American had stopped believing the old Fourth of July speeches about how the forefathers had anticipated every danger. From Maine to California, citizens saw railroads taking control of state politics. Muckraking journalists began to employ a new descriptive term: plutocracy. As the trusts and monopolies flourished while America's largest fortunes grew tenfold and twentyfold between 1861 and 1901 thanks to stock values, it became clear that some critical safeguards were missing. Luckily, the need to bridle railroads, trusts and monopolies, and to tax the incomes and inheritances of the rich, voiced with increasing clarity by Theodore Roosevelt, Woodrow Wilson and the Progressives, brought significant results by 1914. FDR added further reforms during the New Deal years.
As of 2002, alas, old New Deal memories and 60 cents will get you a candy bar. The transformation of the US economy and its supporting politics since the 1960s has been staggering; and especially so since the 1980s, with the growth of financialization, wealth concentration, economic elitism and dynastization. Millionaires' income tax rates dropped so fast in the 1980s, for example, while those of people in the middle rose with FICA increases, that in 1985 the two almost met.
Back in 1937, an economics writer named Ferdinand Lundberg wrote about how "America's Sixty Families" (and another hundred lesser clans) owned a huge chunk of US business through their corporate stock holdings. Six decades later, the current "overclass" probably begins with the largely overlapping quarter-million "deca-millionaires" ($10 million and up) and the quarter-million Americans with incomes in excess of $1 million a year. But for sticklers, the 2000 equivalent of the rich families of 1937 could be the roughly 5,000 clans having assets of $100 million or more.
Today, following the havoc of the biggest two-year major market debacle since 1929, many of the Internet fortunes are gone, while the established rich are very much with us and, by and large, sleeker than ever. This was also true in 1937, parenthetically, when researcher Lundberg's discourse paid hardly any attention to the nouveau-riche aviation, radio, motion picture and electric gadget fortunes of the Roaring Twenties. Most had shriveled or vanished between 1929 and 1932. The old money was back on top.
So it is again, although a third of the tech billionaires of 1999 have kept billionaire status, a much better ratio than in 1929-32. Nevertheless, what is striking in the current lists is the entrenchment of established families through the good offices of the Dow Jones and the S&P 500. The top 1 percent of Americans own about 40 percent of the individually owned exchange-traded stock in the United States, and own an even higher ratio of other financial and corporate instruments.
The median US family, depending on the calculus, has only $6,000 or $9,000 of stock, a benefit overshadowed during the 1990s because its debt level rose by a good deal more. The financialization of America since the 1980s--by which I mean the shift of onetime savings deposits into mutual funds, the focus on financial instruments, the giantization of the financial industry and the galloping preoccupation of corporate CEOs with stock options instead of production lines--has been a major force for economic polarization. This is because of its disproportionate favoritism to the top income and wealth brackets. The never-ending stream of 1980s and '90s bailouts of banks, S&Ls, hedge funds, foreign currencies and (arguably) stock markets by the Federal Reserve has been another prop.
The upper-tier hogging of the economic benefits of the 1990s can be approached from a number of directions, but hardly anyone controverts that the top 1 percent made out like bandits. The New York Times, for example, reported that 90 percent of the income gain going to the top fifth of Americans went to the top 1 percent, who are only a twentieth of that top fifth. Some scholars bluntly contend that attention should focus on the top one-tenth of 1 percent, because these are the raw capitalists and money-handlers, not the high-salaried doctors, lawyers and Cadillac dealers.
In 1935, Franklin Roosevelt proclaimed that "the transmission from generation to generation of vast fortunes by will, inheritance or gift is not consistent with the ideals and sentiments of the American people," but politics became friendlier to wealth in the 1960s and '70s, and positively effusive in its courtship during the 1980s and '90s. Over the past two decades, the same soaring costs of seeking office that drove middle-class office-seekers to sell their souls to big contributors also made dynastic heirs appealing to political parties that were looking for self-funding nominees or those whose famous names gave them a built-in fundraising edge. Two billionaires, Ross Perot and Donald Trump, actually sought the presidency or talked about it during the 1990s.
The number of US senators with serious multimillion-dollar fortunes, in the meantime, has begun to approach the high set back in the early 1900s, when senators were appointed by state legislatures to whom money spoke easily and powerfully. This ended in 1913, when the Seventeenth Amendment to the Constitution provided for popular election of senators, although the submergence of politics in today's money culture has accomplished somewhat the same thing, despite popular election.
As for Presidents, nineteenth- and twentieth-century White House service was not much of a pathway to getting rich. Most had government pensions and some other income, but few who didn't come to Washington rich left that way unless they inherited. What seems to have happened over the past twenty years, however, is that several Presidents--George H.W. Bush and the Hamptons-craving Bill Clinton--have decided to swim with the money culture. While Clinton was governor of Arkansas, wife Hillary held a number of corporate directorships. Now Clinton's post-White House speechmaking and deal-seeking looks perfectly normal in an ethically loose sort of way.
The first Bush Administration probably represents the critical transition, both in the grabby behavior of family members and in the gravitation of top officeholders toward political investment banking, scarcely camouflaged lobbying and defense contract involvement. These practices, indeed, were vaguely reminiscent of the Whig grandees who ruled eighteenth-century England under the first George I and the first George II. One even gets the sense that the Bushes and their entourage came to see this kind of profiteering as their due, much like the families and associates of Walpole, Pelham and Newcastle.
George H.W. Bush's father and grandfather, investment bankers at old white-shoe firms, both had high reputations, but erosion soon set in. Even as the senior Bush was seeking a second term in 1992, the newspapers buzzed with the financial and deal-making escapades of his brothers and sons.
The most interesting Bush family involvement is with Enron. Over the twentieth-century emergence of modern government ethics, no presidential family has had a parallel relationship. As a senator, Lyndon Johnson buddied with Texas companies like Brown & Root, but its fingerprints on his presidency weren't all that notable. Georgia's Jimmy Carter was close to his home-state corporate giant, Coca-Cola, and Richard Nixon brought the Pepsi-Cola account to his law firm during the 1960s.
Episode by episode, none of the Bushes' Enron involvement seems to be illegal. Before 2000-01, moreover, the ties weren't overwhelming in any one national administration. However, the only way that a chronicler can seriously weigh the Enron-Bush tie is by a yardstick the American press has never really employed: the unseemliness of a sixteen- or seventeen-year interaction by the members of an American political dynasty in promoting and being rewarded by a single US corporation based in its home state.
Enron was organized in 1985, and within a year or two, Vice President Bush was chairing the Reagan Administration's energy deregulation task force and his son George W., through one of his succession of minor energy companies, had an oil-well deal with Enron Oil & Gas. The first Bush Administration saw passage of the Energy Policy Act of 1992, which obliged utility companies to transmit energy shipped by Enron and other marketers, while the Bush-appointed Commodity Futures Trading Commission created a legal exemption allowing Enron to begin trading energy derivatives. Enron chief Ken Lay, one of Bush Senior's top election contributors, was made chair of the President's Export Council.
Several years later, when George W. became governor of Texas, Lay asked him to receive visiting dignitaries from places Enron hoped to do business with, and by the time Bush got to the White House, Enron was his biggest contributor. Former Enron officials, advisers and consultants wound up getting several dozen positions in the new Administration, including White House economic adviser, Secretary of the Army and US Trade Representative. These were important to Enron on issues ranging from energy policy to its ambition to open up foreign markets by bringing exports of energy and water services under the WTO trade framework.
Had Bush tried to bail out Enron in November or December of 2001, his personal and dynastic ties to the company would have come under intense scrutiny. Without that bailout, most of the Washington press corps has been content to leave alone the much larger story--the apparent seventeen-year connection between the Bush dynasty and Enron.
Even without such information, it seems clear, counting campaign contributions, consultancies, joint investments, deals, presidential library and inaugural contributions, speech fees and the like, that the Bush family and entourage collected some $8 million to $10 million from Enron over the years, which is more than changed hands in Harding's Teapot Dome scandal. Depending on some still-unclear relationships, it could be as high as $25 million.
Obviously, this sort of dynastic financial outreach is not confined to Republicans. When Bill Clinton left the White House in a glare of unfavorable publicity over his last-minute pardons, especially that of fugitive financier Marc Rich, some of the focus was on money paid to or arrangements made by his wife's two brothers. Nor is it confined to Presidents. Texas Senator Phil Gramm and his wife, Wendy, got themselves referred to in Barron's Financial Weekly as "Mr. and Mrs. Enron" for his legislative work on the company's behalf at the same time that she was taking home money and company stock as an Enron director.
Because the dynastic aspect of American wealth and politics has been growing much faster than public (and press) appreciation of its ballooning significance, much of this record has received little attention. The neglect, however, is something that American democracy cannot afford. If Americans still believe in what Franklin Roosevelt said back in 1935 about the unacceptability of inherited wealth and power--and frankly, even if few have thought about it--a whole new political, ethical and economic agenda calls out for immediate and vocal embrace.
It's easy to limn broad outlines--further reform of campaign finance (perhaps including a constitutional amendment), federal tax changes, maintenance of the federal inheritance tax (certainly on estates over $3 million or so) and regulatory overhauls to curb the widespread corporate abuses pushed into the spotlight by Enron, Tyco and the accounting and brokerage firms. Still, a century ago, and then again in the early 1930s, the critical impetus for Americans' insistence on reform came from stock-market crashes and deep economic downturns. In 2002, we have had the first but not yet the second--and since 9/11, antiterrorism has been a rallying point, with patriotism offered to the electorate in lieu of economic concern.
As for economic and political dynastization, the United States is not the first republic to tilt in this direction. Rome did, and in the eighteenth century even the once proudly middle-class Dutch Republic let many of its offices become hereditary. Let's hope Americans do not also allow political and economic inheritance to displace democracy.
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JoJo ain't no rich motherfucker. JoJo ain't no poor motherfucker. JoJo sure aint no Maoist, motherfucker.
I ride JoJo like my last bitch, a 19 year old motherfucker. JoJo buck and scream like a virgin, motherfucker. But JoJo a slut, motherfucker. JoJo can't handle the manhood of the Maoist motherfucker.
I one hard, strong motherfucker, motherfucker! I the Maoist Motherfucker!
A strong case can be made that the "communists" in China and Russia were fulfilling the historic mission of the bourgeoisie -- overthrowing the feudal system. In both countries the bourgeoisie was weak and unable to articulate, let alone come close to fulfilling, the basic aspirations of the majority of the population. While I don't believe that an authentic socialist revolution was impossible in either of those countries, it is important to see how the "communists", by developing a truly national economy and extending wage-labor, were in fact building state capitalism.
Reactionaries like Ronnie Ray-gun of course have a field day equating socialism with statism (granted, his mission is made easier by the fact that totalitarian statist regimes called themselves socialist). But I'd be curious to know whose side Mr. Ray-gun would have taken during the Spanish Civil War when the Stalinist Communist Party, in alliance with large land-holders and sections of the Catholic Church, fought the libertarian socialist (anarchist) revolutionaries who controlled large portions of northern Spain. George Orwell, in Homage To Catalonia, described anarchist controlled areas as the only place he'd ever experienced where "the workers were in the saddle".
No, because economic systems by themselves do not create or destroy humanitarian values -- that blame rests on the base nature of human beings.
What I don't understand is how you ever came to believe that 1) a true lasting peace for each and every human being is at all possible, 2) that an economic system is the means to accomplish this, 3) ever understood history without first framing it in a political debate.
In what world do you live in anyway? At your next opportunity, ask someone who spent most of their life in a disadvantaged country if (and how) they think world peace is possible. Real peace is not an eradication of individuality, competition, aggression, and violence, but tolerance, understanding, and acceptance of others AND of humanities fundamental limitations.
Frankly, your living in an culture that is the closest human beings have ever come to that lofty goal -- I can think of no other that has encompassed all of the world's vast diversity and still maintained humanitarian ideals without systemic state violence and governmental upheaval. I doubt that you can point to a better example.
I wonder if you've ever talked to someone from a "disadvantadged country" who's conveyed to you the murderousness nature of Capitalism + American Power? Maybe you should try it out sometime.
From very the beginning, dating back to Colonial America, this countries' rulers have had a messiah complex. This complex justified the genocide of the Native Americans and was expressed in Frontier expansionism, as well as the Monroe Doctrine and Manifest Destiny. It continues to be expressed today, and, judging from your post, absorbed by many in the form of a mindless belief in American superiority.
The relative wealth of the USA can not be understood separate from the realities of almost 250 years of chattel-slavery, Native American genocide, and imperialist expansion dating all the way back to the mid-19th century.
The US came out of WW2 relatively unscathed and became the premier power militarily and economically. The Soviets provided the US ruling class a perfect rationale for imperialist policies that it had pursued for decades prior to the Russian Revolution. You surely know of all the coups that the US/CIA fomented around the world to maintain its hegemony, correct? You surely know of all the client dictatorships that it installed and feted, wined and dined, correct? You surely know of all the MILLIONS that died as a direct result of US policy, correct?
The fact of the matter is that the US is in decline. The glory days, politically and economically, lasted between 1945-1973. Between 73-95 real wages in America declined. The speculative boom economy between 95-00 saw a tiny recouping of lost real wages, but we are seeing that evaporate. Global capitalism is beset by over-capacity (in a world in which 12,000,000 under the age of 5 die of malnutrition every year) and moribund demand. Sure, there will eventually be a new "upturn" but if the past thirty years are any indication it will be anemic in the wage department. Capitalism, in my opinion, has no means of circumventing these crises' but through expansion temporally (through debt) and spatially (through capturing new markets). Meantime, biological diversity will continue to whither under the weight of the capitalist growth imperative and the numbers living in abject poverty will continue to increase. What a great system!
You say that America has lived up to some vague lofty goals. I beg to differ. Consider:
-- 20% of children in California live in poverty (with official poverty being counted as a family of four making $17,000 annually!)
-- considerably more than a million americans in prison
-- thousands and thousands of murders every year
-- millions and millions without adequate health coverage
-- tens of thousands homeless
-- millions and millions on anti-depressants
-- tens of thousands dead in auto accidents every year
-- lengthening work-weeks; stupid, pointless, go-nowhere jobs
-- general alienation
-- strip malls every fucking where
-- ecological destruction
-- Ken Lay
Use your head -- what you're describing is heaven -- try and be practical. What country is without significant problems? More importantly, where in this world is there a more integrated, more advanced, society?
Hey, have you ever spoken to a native Eur-Asian who lived under in the old Soviet-Block or Chinese Communist rule? What a barrel of laughs they had -- good times, good times. How many died laughing? Who can count?
Boy, now that there are so few of those model societies left, I long for a vacation in grey gloom of P'yongyang or Najin. Just listen to former Workers Party Secretary, Hwang Jang-yop, fondly reflect on the beauty of his former home:
* (The first of the camps were established in Dukchang mines, near Pukchang, South Pyongan province, in 1958, and followed by additional camps at Seungho-ri in Pyongyang, and other locations around the country. Internment was reserved for "factional elements" at first, but the criteria were expanded to include all voicing criticism of the elder and younger Kims, turning the critics into political prisoners.)
* Concentration camps for persons of very short stature were set up in Jungpyung, in South Hamkyung province, after express orders from Kim Il-sung to isolate them to "prevent dwarves from multiplying."
* Dramatic increases noted in the number of public executions: Kim Jong-il has ordered zero tolerance for assault against PSB personnel, and authorized them to shoot to kill following a mob assault against policemen in 1992, thus precipitating the increase in executions.
I can't wait to be freed from the shackles of capitalism and embrace the humanitarianism of Marxism; where there is no state police, no oppression, no injustice, no violence, no. . . .
In response to my post in which I attacked your entire political world-view you really came out swinging and attacked.... North Korea! What will you pointless reactionaries do when that absurd state-capitalist troll in Pyongpang goes the way of the Do Do Bird? He's such a terrific straw-man, I'm sure you'll miss him immensely.
For your information, of the tens of millions of anti-capitalists around the world you probably couldn't fill a small bodega with the number that have anything good to say about the North Korean regime.
Like so many rightists that come on Indymedia your response to my post was no response at all. To say, as you did in response to my post, that all countries have problems is so pathetically complacent, and I take it as a concession that you agree with what I said but don't give a shit or don't agree but lack the brains to refute it.
Impressive.
In 1988, certainly i met people who were interested in the USA and to varying degrees people complained about conditions under the Stalinists. I've never had sympathy for those regimes, although the situation isn't/wasn't nearly as simple nor as monolithically horrible as you depict it.
Returning in 98 was fascinating. The changes were glaring. Poland had been the worst of the bunch and seemed to have improved in that things seemed a lot more lively. But you know what? In the month i was in the East Bloc NOT ONE PERSON told me that life was better since the Stalinists had been ousted. I'm not saying that nobody would make such a claim; I just never heard anyone do so -- a notable fact I think. Indeed, even those who were doing decently lamented how much worse life has become in so many ways: crime, poverty, lack of community, inflation, greed. I was told several times that all people think about is money -- how to get it, how to keep it etc etc. It's pretty fucking corrosive.
But, of course, a right wing phillistine like you, "works for me", doesn't care about such concerns.
It's funny that you assumed I am a right-wing proponent when I have never voted Republican in a presidential election -- and seldom do otherwise. Instead I'm part of the new silent majority, the generation that grew-up under your shadow, who do not fit neatly into any existing political roles -- and do not want to. It's you, the conservatives, and the rest of the political status-quo that have a perverse interest in perpetuating rigid and outdated models of thought.
But, of course, a left wing phillistine like you, "aaron", doesn't care about such concerns.
As for the Soviet-bloc countries, in 1998 their transition to a free market economy was still in the very early stages. Now that four more years have past and capitalism is taking root, ask those same people what they think of their life now.
Communism had the better part of the 20th century in a variety of locations to prove itself -- let history speak. If your embarrassed by North Korea, well you should be, it just goes to show that real life does not correspond to dreamy ideals. It's much tougher, requiring a much more practical, rational approach.
But, of course, a left wing phillistine like you, "aaron", doesn't care about such concerns.
nessie--
The link you provided is a syllabus, not actual scientific research. Go ahead and try to find the data to support your claim. You can't. Why I'd eat my computer if you could ever find research published in a legitimate journal of science that indicated any society lived without violence and warfare.
And as for your basis for anarchism, you can't see the forest for the trees. You falsely assume that some hypothetical "horizontal" system would prevent base human traits from registering on society. You seriously misunderestimate the motivation of human beings. Unless YOU employed some kind of state police to keep the status-quo, those individuals you hold responsible for our collective misery would use whatever system given to do what they always do. Certianly the history of communism provides ample evidence.
Capitalism is by far the most effective system to date to deal with humanity, and America is the best example of what is possible. It falls very short from the ideal, but it rises to the top of what is practical.
The 60's have been over for a very long time -- put away those silly, unrealistic dreams and start working on new ones that the real world can actually use in the 21st century.
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"we, the nation of america, rule this planet. lets not kid ourselves, alright? lets not fuck with ourselves about this fact, alright? alright. i want to give a speech about the cost of ruling the world, about the price the world has to pay in order for america to reign supreme.
first off, we have had to lie and kill. we have had to lie to americans at home as we kill innocent civilians abroad. in wars ongoing accross the face of the earth, we have had to kill innocent people to get what we want. in afghanista, in iraq (although we still do not have what we want...), in libya, in grenada, we have blood on our hands. we admit this, and we apologize for this. in places such as the phillipines and columbia, proxy armies are fighting for our interests. in times past, it was similar in places such as honduras, guatemala and nicaragua. we have blood on our hands. the tentacles of our influence and the web of our interests have spread everywhere on the face of the earth. we admit this, and we apologize for this.
as for capitalism, all i can say is, what other way is there? communism hasn't worked. socialism hasn't worked. all there is, is capitalism. and capitalism, frankly, isn't perfect, and frankly in many ways, it sucks.
we admit this. we will try not to give so many speeches full of effusive, blind and unjustified praise for capitalism. we admit there are problems and things that need to be addressed.
in order for americans to enjoy the life they live, we have had to make the world safe for the unhindered expansion of the capitalist market. admittedly, the collapse of communism upon itself has helped. however, we have had to over look china's human rights violations in order to become its primary trading partner. this illustrates a problem of capitalism. it has no morals, no principals and no interests other than its infinite expansion. instituionalized greed can turn any man into a two-faced, lying hypocrite. it is a difficult situation. on the one hand, we could simply be like gordon gecko in the movie "wall street": "greed is good". we could simply admit this dirty fact. or we could try to give flowery moral reasons about the freedom inherent in capitalism, that man is in charge of his own fate, while workers get laid off and the unemployed seek jobs that have disappeared overseas. the hypocritical version or the honest truth? which one should we sell capitalism to the world with? we admit this, and we apologize for any problems this has caused.
there are also other prices to pay. we have had to transport jobs that unemployed americans could be working, overseas, where labor is cheaper. in order for americans to enjoy the prices they find at wal-mart, we have had to export labor overseas. in order for americans to pay $1.50 for a gallon of gas, we have had to engage in military actions abroad, to ensure we have a nice, safe, never ending supply of oil. in fact, the entire automobile, trucking, train and airline industry in america rests on the entire oil industry. and the entire oil industry rests on american military might. we admit this, and we apologize for the loss of life. we apologize for the actions of our corporate/political/military interests in places like the west coast of africa and the jungles of venezuela and columbia.
finally, the most important apology is this. we are sorry for lying to the world abroad and americans at home. we are sorry for saying one thing as we do something else. for instance, we are sorry for telling the nation that every military action is about protecting america's "freedom" and america's constitutional rights, when really it is about protecting powerful economic interests. we are sorry for using fancy language, "democracy", "freedom", "human rights", as some kind of disguise for what we are really fighting for. we are bullshitting you with fancy speeches, and we want to apologize for this.
we want to apologize for trumpeting ourselves as if we were perfect. we want to apologize for lecturing other nations about how to exist, while we have a less than perfect record at home. as tom paine said,
"When it shall be said in any country in the world, my poor are happy; neither ignorance nor distress is to be found among them; my jails are empty of prisoners, my streets of beggars; the aged are not in want; the taxes are not oppressive... when these things can be said, then may that country boast its constitution and its government."
we want to apologize for giving thundering speeches about the wonders of capitalism, as if it was god's gift to the world, while denying that capitalism is in fact very much less than perfect, and full of side effects and flaws. we admit that we get carried with capitalism. there really is no defense of capitalism, other than it is all there is now, and its the best human kind has so far.
speaking on behalf of the powerful and wealthy in america, i want to apologize for the way in which we have allowed the powerful and wealthy to take over the political system in this country and turn it into a whorehouse of influence. the stinky, latent facsism it reeks of. we admit that most legislation being generated by the u.s. government is ridden with special interests, with lax rules, with loopholes, and really does nothing for the benfit of u.s. citizens, and everything for the benefit of powerful, wealthy interests. its a dog and pony show. we admit that we see corporations as "super citizens" and listen to their interests and concerns first. we admit this. we apologize for this.
we admit we are lying to you. we admit we are two faced. we admit that we give you nice speeches and everything you want to hear and believe, while behind the scenes we play as dirty as possible. we admit we contradict ourselves. we admit to the world that we should shut the hell up about proclaiming how perfect we are, because all our mistakes stick out like a sore thumb. we admit we should be damn thankful for what we have acheived. we will climb down off our high horse and let our record speak for itself.
we admit that we've fucked up. we admit that we lie like there's no tommorow. we admit that we can do better. america has a lot to be proud of, but this does not mean we should rest on our laurels or preach to the world that we have everything figured out.
so hopefully this speech has shown that we can be honest if we want to be. that we can cut the bullshit we spew accross america and the world, and own up to the problems, and be thankful for what is working well."
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this kind of speech would help a whole, whole lot. but it is not forthcoming. in fact, george bush, or any other u.s. president, would rather die than give a speech like this.
As far as 1998 being the early years of "free-market" reforms in the former Soviet Bloc and your contention that conditions have improved since then: WRONG!!! In 1998, most of those countries had been irradiated by market reforms for six or seven years and the global capitalist economy was booming. Since 1998, as you surely know, your dear market bubble has burst. Poland, which I identified previously as a seeming relative success story (mainstream commentators have generally seen it as such), is now in the grips of a horrible recession. Unemployment is close to 20% and the New York Times recently had a cover story reporting that capitalism is increasingly coming under attack. (It quoted a Warsaw graffiti as emblematic of sentiments these days: "Free Markets, Enslaved People") Next to South Koreans, East Europeans work more hours than any people in the world -- or I should say, those who have a job do -- and wages are crap and the social safety net has been eviscerated. Crime is up, poverty is up etc etc.
I gotta go, but one last thing: You seem to be fixated on North Korea. I agree Kim should be strung up by his toes, his regime demolished etc etc. But the difference between you and I (or one difference) is that I'm also critical of the private capitalism and it's impact around the globe. If North Korea is an embarressment to the legacy of Stalinism (state capitalism), why aren't El Salvador, Morocco, Bolivia, Nigeria, the Phillipines(etc) -- not to mention, East St. Louis, Harlem, and all the ghettos accross America -- an embarressment to the legacy of private corporate capitalism? How much solace would your smug denunciations of North Korea be to a mother in Paraguay who's just witnessed her child whither away before her eyes from hunger?
And the reason I keep coming back to North Korea is because it is the last of a dying breed, which says alot about the practicality of Communism.
Now I could quote you numerous economic forecasts for the future of Russia, but I think that would fall on deaf ears. However, if I were to point you to highly respected critic of IMF policy, then I think you just might listen. . . .
Joseph Stiglitz
Among the economic policy elite, Joseph Stiglitz is a heretic. The most prestigious critic of the International Monetary Fund (IMF) and the "Washington consensus," Stiglitz has voiced his views in the corridors of power. In 1993, he became a member of the President's Council of Economic Advisers, and later its chairman. In that role, he cautioned against free market "shock therapy" for Russia. Then, in 1997, he became chief economist of the World Bank, where he tried to push the institution in a more progressive direction. He also stepped up his criticisms of IMF and U.S. economic policies toward Russia and East Asia. These criticisms did not endear him to Treasury Secretary Lawrence Summers, who allegedly pushed him out of the World Bank in December.
Stiglitz is a giant among economists; peers assume he will win a Nobel Prize. When he was a junior at Amherst, the economics faculty met and decided that they had nothing more to teach him. One of them was deputized to call MIT to have him admitted to study there. After two years, he went to Oxford as a research fellow, then returned to MIT as assistant professor, and from there he went to Yale. Two years later, the Yale faculty voted to make him a full professor--at twenty-six. He has taught in Nairobi and at Stanford, Oxford, and Princeton. In his field, he helped create a new branch, the economics of information, and he is a leader in the economics of the public sector.
As chairman of the Council of Economic Advisers, Stiglitz was the highest official charged with analyzing the impact of economic policies on Americans. As chief economist of the World Bank, he was the top official responsible for analyzing how economic decisions affected the world's poor. He has been strategically placed to judge the winners and losers of global economic policies.
Stiglitz is an avuncular man of fifty-seven with close-cropped gray hair and a beard. He favors a loose gray V-necked sweater over a blue shirt and black pinstriped trousers. For a Washington official, he is astonishingly amiable and inspires warm affection, almost reverence, among his staff and close associates.
I spoke with Stiglitz several times in April. He was generous with his time, unpretentious, and genial. He tends to talk not in sound bites or clichés but in professorial explanations. I spoke with him for three hours and read over his recent speeches. Here is an edited transcript of his views.
Q: What was your reaction to the protests in April against the IMF and World Bank in Washington?
Joseph Stiglitz: I thought they were very effective in conveying the sense of values and concerns that a lot of young people, and people generally in the U.S., have beyond the narrow materialistic issues. They are concerned about poor people in developing countries, about democracy and democratic participation, governance issues, and the environment. There were people advocating protectionist issues, or who were more violent than I would approve of, but the point of marches is to convey a sense of values and concerns. How can one object to Americans caring about issues that go beyond our borders, to caring about poor people?
Q: What do you think of the call to shut down the IMF and the World Bank?
Stiglitz: The world needs an international development agency. I don't think anybody really thinks that one should get rid of the World Bank. Reform is one thing, but getting rid of it I think would be wrong. The IMF is a more complicated issue. I think there is a broad sentiment among both the left and the right that the IMF may be doing more harm than good. On the right, there's the view that it represents a form of corporate welfare that is counter to the IMF's own ideology of markets. But anybody who has watched government from the inside recognizes that governments need institutions, need ways to respond to crises. If the IMF weren't there, it would probably be reinvented. So the issue is fundamentally reform.
Q: The IMF has extraordinary powers to affect countries in times of crisis. Who does it represent? Who controls it?
Stiglitz: Finance ministers and central bank governors have the seats at the table, not labor unions or labor ministers. Finance ministers and central bank governors are linked to financial communities in their countries, so they push policies that reflect the viewpoints and interests of the financial community and barely hear the voices of those who are the first victims of dictated policies.
Q: How does this play out in the IMF's decisions?
Stiglitz: In the midst of the East Asian crisis, there were choices. One choice would have been to encourage countries to implement a bankruptcy law that could have threatened the interests of the lenders. But the mindset of IMF officials was so strong that they acted as if there were no choices.Even as debate on reforming the international economic architecture has proceeded, the people who would inevitably face many of the costs of the mistaken policy have not been invited to the discussions. Workers' rights should be a central focus of development. But nowhere, in all of these discussions, did issues of workers' rights, including the right to participate in the decisions which would affect their lives in so many ways, get raised. Conditionalities are adopted without social consensus. It's a continuation of the colonial mentality. I often felt myself the lone voice in these discussions suggesting that basic democratic principles be followed. I recommended that not only should workers' voices be heard, but they should actually have a seat at the table. You have the old boys' club discussing how the old boys' club should be reformed.
Q: Who wins when the U.S. and the IMF impose their bailouts on countries in crisis?
Stiglitz: These policies protect foreign creditors. If I came to the problem of what can I do to maintain the Thai economy from the perspective of the chairman of the collection committee of the international creditors, I might mistakenly say the most important thing is to make sure people don't abrogate their debt. Senior people in the IMF actually said that not paying the debt was an abrogation of a contract, whereas anybody who knows about capitalism knows that bankruptcy is an essential part of capitalism.
In East Asia, you had private debtors. The appropriate response when you have private debtors who can't pay is bankruptcy. It is not the nationalization of private debts, which the IMF has facilitated in many countries. Nationalization of private debts undermines prudential lender behavior and is a government intervention in the market. But that's not the view you'd take if you were chairing the creditors.
The IMF insisted that both Russia and Brazil maintain their currency at over-valued levels. Who are you protecting when you try to maintain that exchange rate by having high interest rates? You're protecting domestic and foreign firms that have gambled on the exchange rate. And who is paying the price? The small businesses that did not gamble [and no longer can afford loans], the workers who are going to be put out of jobs.
The lenders in the more advanced countries tend to recover most, if not all, of the amounts lent, with the costs of the bailout (including the costs of economic restructuring) being largely borne by workers. There is a transfer from the workers to the large international banks and other creditors in the U.S., Germany, and Japan.
Q: How else do IMF and World Bank policies affect workers?
Stiglitz: During my three years as chief economist of the World Bank, labor market issues were looked at through the lens of neoclassical economics. "Wage rigidities"--often the fruits of hard-fought bargaining--were thought part of the problem facing many countries. A standard message was to increase labor market flexibility. The not-so-subtle subtext was to lower wages and lay off unneeded workers.
They had a strategy for job destruction. They had no strategy for job creation. Many of the policies the IMF pursued as they were killing off jobs made job creation almost impossible. In the U.S., you couldn't have job creation with interest rates of 30 or 40 percent. They had a philosophy that said job creation was automatic. I wish it were true. Just a short while after hearing, from the same preachers, sermons about how globalization and opening up capital markets would bring them unprecedented growth, workers were asked to listen to sermons about "bearing pain." Wages began falling 20 to 30 percent, and unemployment went up by a factor of two, three, four, or ten.
Q: How would you define "the Washington consensus"?
Stiglitz: It is a set of policies formulated between 15th and 19th streets by the IMF, U.S. Treasury, and World Bank. Countries should focus on stabilization, liberalization, privatization. It's based on a rejection of the state's activist role and the promotion of a minimalist, noninterventionist state. The analysis in the era of Reagan and Thatcher was that government was interfering with the efficiency of the economy through protectionism, government subsidies, and government ownership. Once the government "got out of the way," private markets would allocate resources efficiently and generate robust growth. Development would simply come.
The Washington consensus also considers capital market liberalization essential, and the IMF took it as a central doctrine. Capital market liberalization includes freeing up deposit and lending rates, opening up the market to foreign banks, and removing restrictions on capital account transactions and bank lending. The focus is on deregulation, not on finding the right regulatory structure.
Q: What did the Washington consensus tell the former Communist countries to do?
Stiglitz: Countries were told they had no incentives because of social ownership. The solution was privatization and profit, profit, profit. Privatization would replace inefficient state ownership, and the profit system plus the huge defense cutbacks would let them take existing resources and have a higher GDP and an increase in consumption. Worries about distribution and competition--or even concerns about democratic processes being undermined by excessive concentration of wealth--could be addressed later.
Q: How did U.S. Russia policy develop?
Stiglitz: In the early 1990s, there was a debate among economists over shock therapy versus a gradualist strategy for Russia. But Larry Summers [Under Secretary of the Treasury for International Affairs, then Deputy Secretary of the Treasury, now Secretary] took control of the economic policy, and there was a lot of discontent with the way he was driving the policy.
The people in Russia who believed in shock therapy were Bolsheviks--a few people at the top that rammed it down everybody's throat. They viewed the democratic process as a real impediment to reform.
The grand larceny that occurred in Russia, the corruption that resulted in nine or ten people getting enormous wealth through loans-for-shares, was condoned because it allowed the reelection of Yeltsin.
Q: What effect did the policies pushed by the United States and the IMF have on the Russian people?
Stiglitz: Both GDP and consumption declined. Living standards collapsed, life spans became shorter, and health worsened. Russia achieved a huge increase in inequality at the same time that it managed to shrink the economy by up to a third. Poverty soared to close to 50 percent from 2 percent in 1989, comparable to that of Latin America--a remarkable achievement in eight years.
Q: How did that happen?
Stiglitz: Put yourself in the shoes of one of these oligarchs who has been given a gift of $10 billion. Russia is in a deep depression. Nobody's investing. There is a widespread political consensus that the way you got your wealth is illegitimate. Through political connections, you got the government to give you a huge oil field. You sell oil. What do you do with the revenue? You have a choice: You can invest it in the booming New York stock market, or you can invest it in Russia, which is in a depression. If you invest it in Russia, you are risking that eventually there will be a new government that says, "Yeltsin was a crook, and you got the money in an illegitimate way." And the IMF invites you to take the money out, because free capital markets are the way of the future. Then, to make your life even easier, in August 1998 the IMF comes in and says we'll give you $5 billion or $6 billion to up the exchange rates so you can get more for your rubles to take over to Cyprus in the next day or so.
Q: What would you have done?
Stiglitz: The incentives worked.
Rather than providing incentives for wealth creation, privatization provided incentives for asset-stripping, with huge movements of capital abroad--$2 billion to $3 billion a month. Policies seemed almost deliberately designed to suppress new enterprise and job creation. The excessive focus on macrostabilization led to interest rates of 20, 30, 40, 250 percent. There is little domestic or foreign investment except in natural resources. How many Americans will start a business if the interest rates are 150 percent?
Q: How did the East Asian crisis happen?
Stiglitz: In East Asia, reckless lending by international banks and other financial institutions combined with reckless borrowing by domestic financial institutions precipitated the crisis, but workers bore the costs. The roots of the crisis in East Asia were in private sector decisions. The biggest problems were the misallocation of investment, most notably to speculative real estate, and risky financing, especially borrowing short-term debt on international markets.
Q: The first country to be hit was Thailand. What happened there?
Stiglitz: The crisis began as a currency crisis with large devaluations in Thailand in July 1997. Pressed by the U.S. Treasury and the IMF on financial and capital market liberalization, Thailand had opened itself to capital flows and foreign banks.
There was a real estate bubble. Bank contraction in Japan led to credit contraction in Thailand, and the real estate bubble burst. When capital stopped flowing in, there was pressure for the exchange rate to fall, the government tried to support it, and in a short time it spent enormous amounts of money and used up its reserves.
The IMF organized a typical rescue package, based on fiscal austerity and high interest. There were massive bankruptcies. The magnitude of unemployment was hard to believe. Real wages went down 20 to 30 percent. The crisis spread to Indonesia, Malaysia, and the Philippines, and eventually Korea. Stock markets lost 40 to 80 percent of their values, and banks failed.
I talked to [IMF Deputy Director] Stan Fischer and others at the beginning of the crisis. They had a peculiar view: "If you're right, we'll correct the policies." But there are important irreversibilities. If you destroy a firm, you can't pull it out of bankruptcy overnight. They ignored that. They ignored that high interest rates wouldn't attract capital and increased the probability of default.
Q: What should the IMF have done in East Asia?
Stiglitz: If you had approached the problem of East Asia from the perspective of what would be best for the global economy, you would say that the countries needed more resources so they wouldn't bring down their neighbors. That was the philosophy of Bretton Woods [the founding conference for the IMF and World Bank in 1944] to stop a global slowdown.
But what did the IMF do? It went to the countries and told them to be more contractionary than they wanted, to increase interest rates enormously. It was just the opposite of the economic analysis that was the basis of the founding of the IMF. Why? In order to make sure that creditors got repaid.When you're facing the threat of recession, you need to have an expansionary monetary and fiscal policy. Pre-Keynesian, Hooverite views are dead everywhere except on 19th Street in Washington.
Q: Is there a double standard on trade liberalization?
Stiglitz: As people in Seattle were saying, the international institutions go around the world preaching liberalization, and the developing countries see that means open up your markets to our commodities, but we aren't going to open our markets to your commodities. In the nineteenth century, they used gunboats. Now they use economic weapons and arm-twisting.
When you have a march in Seattle, you hear voices saying maybe trade policies haven't been done in the interest of broader constituencies but in the interest of special interests.
All of a sudden people get woken up to a different perspective.
Q: What was your reaction to the protests against the WTO in Seattle?
Stiglitz: The Seattle march was a wake-up call to much of the world that had taken the advantages of globalization for granted, that many people saw globalization through different lenses, saw the process being pursued behind closed doors for the benefit of special interests--banks, businesses, and the rich.
Q: How were decisions on these issues made in the Clinton White House when you were on the Council of Economic Advisers?
Stiglitz: The decision-making process in the White House does not let most issues get up to the President. The Council thought opening up global markets to derivatives that would destabilize other countries wasn't likely to create a lot of jobs in the U.S. and might adversely affect U.S. interests by causing global economic instability.
Larry Summers opposed us.
Q: If there's a disagreement of this sort, doesn't the issue go to the President?
Stiglitz: Treasury made sure there was a consensus not to bring it to the President. I knew the President agreed with me. That was why some of my concerns never went to the President. But it wasn't as if I felt isolated. Treasury is only one view within the Administration, and even some people in the Treasury would agree with me. At the World Bank, Jim Wolfensohn [the president of the Bank] agreed with me on most of the substantive issues. There were other people who agreed with me strongly on the general principle of open discussions.
Q: How did top U.S. officials try to shut you up?
Stiglitz: Stan Fischer wrote an op-ed in the F.T. [Financial Times] that all he's asking countries to do is to have a balanced budget. Not since Herbert Hoover have we heard something like that! We have fought against a balanced budget amendment to the Constitution on grounds that it would eliminate the ability to use fiscal policy as an anti-cyclical device in a recession.
I wrote an op-ed saying we don't believe in a balanced budget during recession in the U.S., why should we be telling that to other countries? The reaction that I got from the U.S. Treasury and the IMF was enormous. There were phone calls to Jim Wolfensohn, mainly from the Treasury but also from the IMF, not to allow me to talk to the press. Wolfensohn, who believed I was right, tried to manage the difficult process of how do you keep at bay your largest shareholder, how do you maintain relations with your sister institution in a world of clubs in which you don't criticize each other. He told me to tone it down. I had made my point.
Q: I heard that Summers told Wolfensohn that if he didn't fire you, he wouldn't be reappointed.
Stiglitz: I heard the same rumors. I have no way of knowing. In an article in the Financial Times when I left, somebody observed that these guys are smart enough that they wouldn't leave fingerprints.
Lucy Komisar is a New York journalist who writes about international political and economic topics.
Yes it is. The proof is in the pudding. The USSR is a fine example of communism. Would I believe the Bolshiveks? I would believe them before I would believe nessie. At least they knew who they were: Communists.
>What the hell do you get when you abolish capitalism? (A: freedom, justice, equality, peace)
Before anyone had even heard of capitalism, freedom existed in some places and not in others, justice existed in some places and not in others, equality existed in some places and not in others, and peace existed in some places and not in others. Abolishing capatilism, communism, socialism, fascism, anarchism, or any other "ism" isn't going to change that. Neither will establishing any single one of these "isms" on a world-wide basis. Freedom, justice, equality, and peace are a product of each individual.
>When there are no corporations who's going to make stuff? (A: the workers)
Using the word "workers" is so demeaning. Producers make things. If people wish to produce goods under the manner of a corporation, they should be free to do so, If they wish to produce goods in their garage, they should be free to do so. To say you want freedom and then take away the option of forming and producing under a corporation is not freedom at all, it's someone's version of freedom. To say you want freedom and then take away the option of people who prefer to produce under a "boss" is not freedom at all, it's someone version of freedom. Goods desired by a large population of people are produced more inexpensively when done in mass. Thus, the birth of corporations.
What you have here is someone who has declared capitalism his enemy, and will use any and all means possible to tie any failures that have occured since the beginning of recorded history to it. So, communism that failed wasn't really communism, it was a form of capitalism; socialism that failed wasn't really socialsim, it was a form of capitalism; anarchy that failed wasn't really anarchy, it was a form of capitalism; etc. etc. etc, you get the picture.
To believe that anyone who holds this point of view could offer anything of substance to a politial discussion is balderdash. In a world of 4 billion people, if even 40 million believed this way, that is only 1% of the population, which makes them politically insignificant. That this frustrates them is their problem.
Bureaucratic collectivism in the Soviet Union bore no relation to the vision of socialism articulated by Bakunin, Kropotkin, or Marx. The Soviet system was Leninism, a supposed "short cut" to socialism which even many Bolsheviks agreed had little to do with real communism. So if you're going to believe the Bolsheviks, believe these Bolsheviks.
<Abolishing capitalism, communism, socialism, fascism, anarchism, or any other "ism" isn't going to change that. Neither will establishing any single one of these "isms" on a world-wide basis. Freedom, justice, equality, and peace are a product of each individual.>
Capitalism is an "ism" (i.e.,an ideology) but "equality" is not? If ten people in a group of twelve want peace but two don't, then the ten should wait until the two change their minds, since peace is a "product" of each individual?
<Using the word "workers" is so demeaning. Producers make things.>
This is correct. "Worker" is an anachronism from the days when most people performed manual labor, and the term encourages passivity in those who embrace it ("I'm just a worker"). Producer is indeed a more accurate term. But that undermines your next argument:
<If people wish to produce goods under the manner of a corporation, they should be free to do so>
So if people want to sell themselves into slavery, they should be free to do so? In fact, many "libertarians" like Robert Nozick make precisely this argument.
The modern corporation is a hierarchical dictatorship that nobody would produce for if they could avoid it. As Noam Chomsky reminds us, the corporation is essentially a Leninist organization that robs people of their right to own their own labor.
<To say you want freedom and then take away the option of forming and producing under a corporation is not freedom at all, it's someone's version of freedom.>
Again, take away "corporation" and replace it with "slavery" and see what you get.
< Goods desired by a large population of people are produced more inexpensively when done in mass. Thus, the birth of corporations. >
So much for all those people choosing to work out of their garages.
The corporation was born when capitalists stole collective labor and forced the government, literally at gunpoint, to endow corporations with rights properly belonging to peoples, not entities.
<What you have here is someone who has declared capitalism his enemy, and will use any and all means possible to tie any failures that have occurred since the beginning of recorded history to it. So, communism that failed wasn't really communism, it was a form of capitalism; socialism that failed wasn't really socialism, it was a form of capitalism; anarchy that failed wasn't really anarchy, it was a form of capitalism; etc. etc. etc, you get the picture. >
Therefore, since apartheid South Africa called itself capitalist, and Chile under Pinochet called itself capitalist, and King Leopold of Belgium called himself capitalist when he massacred millions of Africans, and the countries utilizing slavery in the 19th century called themselves capitalist, we must conclude you support these policies since, after all, you call yourself a capitalist.
<To believe that anyone who holds this point of view could offer anything of substance to a political discussion is balderdash. In a world of 4 billion people, if even 40 million believed this way, that is only 1% of the population, which makes them politically insignificant. >
Since the wealthy of this world are an even tinier fraction of the 4 billion, we should ignore their views too? Sounds good to me!
Capitalism already provides a means to do what you claim only a revolution can provide. A group of "employees" can form a company, become incorporated, and distribute the shares (all or a majority) to themselves. The real problem lies with organizational. Someone has to have the authority to choose a particular direction, to make split second calls, and to provide a vision for the future. Even employee owned companies have structure ("workers" and "bosses")
Here's a very help site you might wish to take a closer look at:
COG: The Capital Ownership Group- http://cog.kent.edu/index.html
The Capital Ownership Group (COG), a non-profit network of professionals, business, labor and government leaders and staff, academics and activists on six continents, works to broaden ownership to deal with the negative effects of globalization. Funded by the Ford Foundation, COG has developed and operates an on-line virtual think tank and conference center from Kent State University in Ohio. Over 280 participants are registered in one or more of the 10 existing working groups. Another 12 working groups are currently being developed. COG has responded to over 400,000 data requests from people in 98 countries. The site is navigable in English, Spanish, Russian and Chinese. Registration for most of these groups is open to anyone.
COG Programs include: 1) On-line conference center enabling collaborative research and a forum for development of policy proposals and implementation efforts); 2) On-line library including research reports, case studies, and proposed legislation; 3) Creation and publication of the policy working groups’ output and summaries; and 4) An international policy conference in October 2002. A recent international strategy conference expanded the number and narrowed the focus of working groups to enable concrete action. The work of the first six groups is now published on-line in Ownership for All. Summaries of Ownership for All are also available or can be obtained in hard copy on request by sending a message to COG.
COG’s mission is to: create a coalition that promotes broad ownership of productive capital; reduce inequality of income and wealth; increases sustainable economic development; expand opportunities for people to realize their productive and creative potential; stabilize local communities by improving living standards; and enhance the quality of life for all.
>If ten people in a group of twelve want peace but two don't, then the ten should wait until the two change their minds, since peace is a "product" of each individual?
Huh!?! Where do you get that out of "Freedom, justice, equality, and peace are a product of each individual"? You gotta think outside the box. What I'm saying are these things start with the individual.
>So if people want to sell themselves into slavery, they should be free to do so?
If someone wished to do that, why shouldn't they? And who are you to them them they can't?
People who work for a corporation are not slaves, despite those who would say they are.
Noam Chomsky's a fucking idiot.
>So much for all those people choosing to work out of their garages.
How does a corporation prevent people who chose to work out of their garage from doing so?
>Therefore, since apartheid South Africa called itself capitalist, and Chile under Pinochet called itself capitalist, and King Leopold of Belgium called himself capitalist when he massacred millions of Africans, and the countries utilizing slavery in the 19th century called themselves capitalist, we must conclude you support these policies since, after all, you call yourself a capitalist.
If you see me saying "capitalism that failed wasn't really capitalism, it was a form of (insert favorite scapegoat here)" then I would be in the same boat. But, I'm not.
>Since the wealthy of this world are an even tinier fraction of the 4 billion, we should ignore their views too? Sounds good to me!
The point regarding anarchists being insignificant is largley based upon the point of view they spew. They deserve to be ignored, and therefore are. If you are one, the same applies to you. Should the wealthy of the world have their point of view ignored, that's their problem.
Just remember, you asked.
Just remember, it's all Bullshit!!
The current regime ruling North Korea is thriving, but that doesn't mean it's desirable.
I personally have no desire to live in anarchy.
>We're thriving. Why is it that our critics here never address that issue.
Anybody's little twelve year old cousin can post a web site on the internet. It's not exactly 'thriving'.