Corporatism at work

(There is a need)…to reconceive, in the most fundamental sense, the very ideas of bank, money and credit card.  Dee Hock, CEO emeritus of VISA International.[1]


Failing to emphasise the insidious role played by business and banking, in the deconstruction of  western societies, would be to thoroughly misrepresent the times in which we live.  Highlighting the problem’s second facet is fraught with difficulty because the general public just assumes the commercial world, with which they are familiar, simply has to be – it is what it is.  Vacant expectation is in play.  They are never presented with alternatives and therefore suspend critical judgement, even if they have some vague concerns about big business. There are entrenched assumptions that corporatism is classical free market capitalism and that our present banking system is the only way to create the credit needed to oil economies.  An inherent mistrust of anything that smacks of the conspiracy theories, abounding around global corporatism, is matched by the almost total ignorance of the real nature of banking and the real problems with multinational corporate commerce.  Worse still, public ignorance extends to assuming any evils they see in corporate activity is the fault of capitalism and should be countered with a more socialist response.  This is rank nonsense, but street-level liberals believe it as an article of faith. The fault lies with large scale monopoly control and financial systems that benefit those able to manipulate money markets and credit creation.  Capitalism needs to be kept at a scale that makes avoiding inequalities and abuses of power possible. My earlier definition of real capitalism in Part 1/5 applies, as does my discussion on economics, drawn from Keen’s work (2/35). 

There are veiled suspicions that a dangerous agenda lies behind the machination of the world’s super wealthy and super influential.  Their disdain for human rights and the environment, especially after numerous oil spills, their penchant for exploiting low wage economies and the debt mountain created by corporate banking, in a central banking alliance with the liberal political elite, has left these corporations surrounded by recriminations and mistrust.  Conspiracy theorists also believe they are intent on dramatically reducing the human population too.  Little is done by the politicians to address the real issues and our judicial system is open to abuse by corporations with the resources to conduct sustained litigation.  Liberals involved in the green movement and those concerned for social justice issues do raise concerns from time to time, but that is about as far as it goes.

There is no doubt that banking and corporate interests collaborate with politicians to prosecute the liberal agenda.  Big government, as the Nazi’s proved, is good for big business.   Many politicians and academics sit on the boards of corporations.  Political parties snap up corporate donations and appoint prominent business executives to senior government positions. They maintain close links with media moguls. The 2011 revelations about Rupert Murdoch’s News of the World antics are a case in point.  During investigations into the widespread interception of private communications, the close working relationship between the British government and media executives was revealed.

The Liberal elite in government and academia are joined at the hip to a corporate elite with almost complete dominance over the means of consumer and food production, credit creation, the petro-chemical industry, pharmaceutical drug manufacture, the mass media and arms manufacturing.  No effective mechanisms exist to counter the meteoric rise in politically and economically dangerous corporate monopolies.  Here are some examples:

·      Five companies control over 70% of the world’s cereal markets and control cereal genetics as well, taking legal action against individuals storing their own seed.

·      Five companies control most of the world’s consumer durables market.

·      Another five companies control over half the world’s production of cars, airliners, electronics and steel.

The most recent and blatant example of the partnership between liberal politics and corporations came with the 2008 money market meltdown.  Charles Ferguson, in his award winning documentary Inside Job, uncovers the close working relationship between the banking sector, central banking (the U.S. Federal Reserve), private and public sector regulators, politicians and Ivy League economists (academia).  The creation of a derivative market, based on sub-prime mortgage lending, is a blinding example of the way money market manipulations can reap huge benefits for a few at the expense of ordinary people, when the people have lost control of their government. 

This was not some back-street scam.  Nearly all of the most ‘respected’ names in the international financial world were involved, but those responsible were never brought to justice.  In fact, quite the opposite; the U.S. government refused to pass regulatory laws to protect the public, credit rating agencies gave high risk derivatives Triple A ratings and President Obama has since failed to follow through on his promise to bring in sweeping financial reforms. 

Many of the high rollers in this money market shell game received huge bonuses, others continue to be rewarded with senior positions in the American government.  Banks like Bank of America and Morgan Stanley have become bigger and taxpayers bankrolled bailouts against their will.

Simon Johnson, professor of entrepreneurship at MIT, has noted that activity across the top six banks in the U.S.A. represented about 20% of GDP in the 1980’s, but by 2009 had increased to over 60% - a growing monopoly by anyone’s standards.  Meantime the downstream effects of the financial crisis had serious repercussions for the world economy.  The financial machinations of a self-appointed elite can run over the wellbeing of whole nations, simply because the mechanisms to control them have been suppressed.

Of course, this was not the first time that the banking and finance elite made hay while the sun went down on the world economy.  For centuries bankers and opportunists have taken advantage of engineered boom and bust cycles.  The Great Depression was the most well-known example prior to the 2008 crash.  Go to You Tube and watch three documentaries The Secret of Oz, Russo’s Freedom to Fascism and The Money Masters for a fuller understanding.[2]    

In the Secret of Oz the banking industry’s successful campaign to control the money supply in the U.S.A. is chronicled in some detail.  For example, the amount of money in circulation was repeatedly reduced in the period following the American Civil War.  Between 1866 and 1886 the bankers reduced available money by a whopping 84% causing a massive contraction.  It is believed their aim was to convince the federal government of the need to form a central bank in private hands; something they achieved in 1913.  At that point America joined the other Western nations in institutionalising the supply and control of credit creation (money) in the hands of private corporates.  The Great Depression was triggered by a similar contraction in the money supply by 33% and most recently by 40% during the 2007-08 recession.  At the same time the cry went up for a world financial system – the obvious next stage after the creation of central banks.

While liberals were asserting their ideological dominance over the western world corporations took a vice-like grip on commerce and trade. The rise on rise of both corporatism and statist liberalism occurred over the same period in history.  Most of the Western world’s leaders, including those classed as conservative, accept liberalism’s doctrines, which dovetail beautifully with corporatism’s modus operandi: large scale with central control. The two are compatible bedfellows.   The West’s liberal politicians have largely hitched their political success to complicity with a financial elite in control of credit creation and the large corporations upon which they assume the West needs to depend.  The European Union and Euro Zone are the most obvious examples of this alliance. 

Many liberals like Chris Hedges, Chomsky and the late Christopher Hitchings lament this turn of events, but their support for liberal doctrines helped expose the West to the corporatisation of politics.  They failed to see that the liberal political class and corporatism happily cooperate.  Politicians almost never publicly challenge current economic orthodoxy with all the downstream harm it causes.  Large corporations now wield enormous power that makes challenging them politically dangerous.  Here is a short list from Michael Moore’s film, Capitalism: A Love Story, which catalogues aspects of change and cost brought on by the liberal and corporatist alliance in the USA, between 1980 and 2000:

·      Household debt rose from 47% of GDP to 111%

·      Personal bankruptcies leapt from 257,000 to 2,039,000, an increase of 610%

·      Incarceration in prisons went from 507,000 to 2,293,157, an increase of 355%

·      The number of people on antidepressants doubled from less than 5% to 10%.

·      Health care costs rose from 9.1% of GDP to 16.2 %, a 78% increase.

·      The ratio of CEO pay to worker pay went up by 649%.

·      The Dow Jones index went up a whopping 1,370%.[3]

Other facts also need to bear on an understanding of our corporatist times and the huge social inequalities they create (Kelly, 2003):[4] The promised trickle-down effect of lower corporate taxes, corporate tax loopholes and reductions in the top marginal rate of tax on corporate executive earnings never materialised. Generally, people have been hurt rather than helped by neo-liberalism.  Huge income disparities and extreme wealth inequalities are the most obvious manifestations of the flawed corporatist model.

While the workforce has dramatically improved business productivity, remuneration has dropped significantly in relative terms, as corporations reap the profits, while keeping worker salaries as low as possible (Kelly, Figure 2, p. 38). Average hourly pay in the U.S. has increased by only by $1.25 in the last 50 years (adjusted for inflation), while the corporate banking and finance sector (Foroohar, ibid, 2016) takes 25% of all corporate profits but only delivering 4% of jobs.  It is busy sucking resources out of the productive sector to create an unproductive super wealthy elite.

The 40 hour working week has not survived. Businesses are demanding more and more time from their workers.  Even as far back as 1998 30% of workers were spending more than 50 hours at work in the U.S.A. and real wages were less than a decade earlier.  By 1998 a climbing trend left 30% of workers only able to earn poverty level wages (Kelly, p.25). On top of that unemployment levels in the West now routinely hover in the 6-10% range, thanks to neo-liberal global trade and investment policies.  If those who have now abandoned efforts to get permanent employment are taken into account the real rate of unemployment has to be at least double official figures.

Faced with all of this many people have been enticed into, or compelled to accept, high levels of debt.  Once again the corporate bankers benefit. To make matters worse the corporate sector has engineered policy to cement their hold on power and wealth.  They have secured legislation that has broken the back of unions.  Although some unions went too far, workers did have some clout in the corporate world.  Now they have next to none.  The answer is not a return to unionism but the sort of commercial reforms outlined in Part Four. Corporations have also secured intellectual property rights over important industries like food production, drug manufacturing and computer software. Vast wealth has been accumulated by this means alone.  Government fiscal policies have allowed corporations to play their money markets to reap large profits.  These examples spotlight the ways the few ensure they bask in plenty while large numbers struggle.  Liberal politicians, while trumpeting economic and social inclusiveness, have played a key role in creating an exclusivist system that now spans the globe.

Mark Aneilski, a Canadian economist, includes in his book, The Economics of Happiness: Building Genuine Wealth, some damning facts out of Canada’s Alberta, which demonstrate the disastrous effects of the neo-liberal credit for usury system are everywhere. Between 1961 and 1999 taxes increased 494%.  Total debt increased 262%.  Poverty went up by 37%.  Family breakdown skyrocketed by 312%.  So, government raises taxes massively and people are forced into more and more debt, while social dysfunction undergoes a quantum leap.  This set of figures graphically illustrates the problem replicated across the western world.

By 2000, 51 of the 100 largest economic entities were corporations.  Only 49 were nation states.  The largest 1000 corporations produce 80% of the world’s productive output.  Couple these facts with the exploitation of the world’s labour markets, the self-serving practices outlined here and the absence of any effective accountability and the scale of the problem becomes clear.  Between 1980 and 1992 the 500 biggest corporations in the U.S.A. raised their asset value by 227%.  In 2011 the Fortune 500 corporations made a combined profit of $567 billion (U.S.).  Executive salaries increased, but worker wages declined and the number of workers employed dropped by 28%.  Corporate global monopolies and the manufactured recession from 2008 is carving up western economies and maintaining the rest of the world in poverty.[5]  The corporate-liberal partnership has concentrated the bulk of the world’s wealth and power in the hands of a few, defying political, geo-political and common-sense prudence.

[1] Quote taken from Thomas Greco’s book, The End of Money and the Future of Civilisation (p.9).

[2] Other video material (check You Tube for availability) supporting the contention that a plutocracy is subverting democracy for their own ends includes:  Michael Moore’s Capitalism: A Love Story; Robert Kenner’s Food Inc; Tracy-Louise Ward’s Pig Business and the La Rouche Political Action Committee’s 1932.

[3] Moore is a rank socialist but he and I find a common cause in our concerns over the damage caused by liberal-corporatist policies.

[4] These facts are drawn from Marjorie Kelly’s 2003 book, The Divine Right of Capital: Dethroning the Corporate Aristocracy.

[5] See Thom Burnett and Alex James 2007 book, Who Really Runs the World: The War Between Globalisation and Democracy, p.121.