Wednesday, April 29, 2020

The Death of Electoral Politics in the United States of America - Part I



Well, it's gonna be Joe Biden versus Donald Trump. How utterly ridiculous. Back in 2016 I'd said that if I was a US-American citizen and my choice was between Trump or Hillary Clinton, my answer would have been "Neither." To this day I maintain that H. R. Clinton's threat to shoot Russia planes out of the skies over Syria was batshit lunacy. Trump was/is awful. Hillary was awful.
The Left should fight back against whomever of these monsters win. But the Left can't fight. But at least the Left shouldn't vote for their own oppression.
Many US-Americans agreed with me. Hillary won the popular vote. But enough Democratic voters stayed home, joining the roughly 50% who don't bother to vote ever, that Trump squeaked-out an Electoral College victory with his rat-shit supporters, Republican gerrymandering and electoral fraud.

And Trump, being Trump (which is to say a grifting, bloated, combed-over, sprayed-orange, rapist, racist travesty of a human being) has gone on to be remarkably stupid, incompetent, vile and destructive as anyone's worst fears. At the same time though, US-Americans' material living standards haven't altered in appreciable ways from the Obama years. (Thanks to Trump's budget-busting tax-cuts, things were going to get worse eventually, as the oligarchy would demand spending cuts on social services to make up for the revenue lost with.)

The Hillary Clinton/DLC-wing of the Democratic Party responded to her humiliating loss by blaming it on Bernie Sanders (which reveals that Hillary can add "ingrate" to her list of character flaws), progressive voters (who she had deliberately shat upon) and, most laughably, the Russia of Vladimir Putin. Providing yet more evidence for why she was a terrible candidate, Hillary managed to miss or ignore the real reasons for her loss (her terrible record and policies and Republican cheating) for imaginary ones.

There were encouraging signs that the most energetic, hopeful segments of the party's base were mobilizing and coming up with candidates and policies that spoke to the people left behind by the Democratic leadership. This leadership was in thrall to the billionaire donor class and pursued policies that only advanced the interests of the oligarchs first and foremost. Only as an afterthought did the Democratic leadership speak of policies to address the needs of the increasingly put-upon majority. And then the pursued only such remedial policies as would not negatively impact the oligarchs.


The results have been disastrous for ordinary people and in response some voters have chosen more clearly left-wing politicians such as Alexandria Ocasio-Cortez, Ilhan Omar, Kshama Sawant, ... as well as championing long-time leftistcareer politicians like Bernie Sanders and (and in the UK) Jeremy Corbyn to be their standard-bearers. Groups like "Justice Democrats" and "Democratic Socialists of America" were articulating a coherent plan to elect genuine progressives and building a movement to takeover and transform the Democratic Party along more clearly leftist lines.

I have to say now that the "centrist" wing of the Democratic Party, ... the pro-corporate wing, ... has clearly defeated this insurgency. Again, let's go back to the reaction to Hillary Clinton's Electoral College loss to Donald Trump in 2016. Bernie Sanders had been an "Independent" Senator from Vermont who tended to caucus with the Democrats. He called himself a "socialist" but most sane commentators say he is clearly an FDR-style social democrat. Regardless, that passes for "radical communist" in the insane political culture of the USA. Sanders was perceptive enough to recognize the enormous level of dissatisfaction in the US electorate after eight years of Barack Obama.

For instance, health care worries have grown enormously as employers have increasingly slashed their health insurance benefit plans for their employees. Increases in personal costs and stagnation or decreases in incomes has led to greater precariousness and rising bankruptcies, stress levels, sickness, anger, depression, etc.

More and more US-American workers experienced greater financial precariousness overall. Doctored statistics cannot mask people from the very real decline in well-paying, unionized jobs in manufacturing or the public sector and the rise of low-paying service sector, "precariat" jobs in the "gig economy." These factors reveal their complete and utter failure with the decline of life-expectancy as a result of "Shit-Life-Syndrome." Sanders was aware of the discontent after Obama implemented bush II's bail-out and protection from prosecution of Wall Street criminals. His imposition of a Republican-designed health insurance program that failed to contain costs; His expansion of the USA's imperialist wars; his inaction on Global Warming; his betrayal of unions.

Unlike the clueless, out-of-touch Hillary Clinton and her ilk, Sanders was aware of these factors and he tried to get someone to run against her status-quo platform to at least pressure Clinton to run a more left-wing campaign. When nobody (including Wall Street critic Elizabeth Warren) agreed to run, Sanders chose to do so himself. He ran a very respectful, policy-centered campaign against Hillary Rodham Clinton. But, unfortunately, Sanders ran a left-wing campaign. And the oligarchic status-quo viscerally loathes the left. In an oligarchy, "centrists" are shit-headed psychopaths. Time after time our political culture reveals its preference for fascism over even mild social democracy. And why shouldn't they? Just look at how most (non-Jewish) German capitalists were able to maintain their fortunes and power under Hitler and how their domination would have been greatly reduced or even eliminated under socialism or communism. (At least until 1942.) That's why they donated money to his party and happily went along with his token policies of social cohesion. No. Capitalist oligarchy despises socialists and will do everything in its power to demonize, isolate, and destroy it.


Now seems a good time to mention the confirmation that the right-wing of the British Labour  Party actively, deliberately sabotaged their own party's chances in the 2017 UK elections. (When their Parliamentary Labour Party openly engaged in obstruction and rebellion, and the UK media adhered to a policy of 70-80% lies and smears when reporting on Jeremy Corbyn, including the bullshit "anti-Semitism" charges that other hypocrites and liars pretended to care about? (These hypocrites openly celebrate the Israeli Defense Force shooting Palestinian children's heads off and laughing in the faces of their parents.)

I'm going to stay on this topic of the "liberal" or "centrist" [Which in the UK means a Blairite Labour Party, or a writer for the disgraceful anti-Corbyn Guardian newspaper.] attacks on Jeremy Corbyn, because it another symptom of the same disease that causes centrists in the USA to attack Bernie Sanders and his supporters. I'll quote from that Jonathan Cook link:
Ideas of endless economic growth, inexhaustible oil, and an infinitely adaptable planet no longer make sense to a generation looking to its future rather than glorying in its past. They see an elite with two heads, creating an illusion of choice but enforcing strict conformity. On the fundamentals of economic and foreign policy, the Red Tories are little different from the Blue Tories.

Or at least that was the case until Corbyn came along.

Corbyn and his supporters threaten a paradigm shift. The old elites, whether in the Labour parliamentary party or the Guardian editorial offices, sense the danger, even if they lack the necessary awareness to appreciate Corbyn’s significance. They will fight tooth and nail to protect what they have. They will do so even if their efforts create so much anger and resentment they risk unleashing darker political forces.
Consider the meaning of all of this: These deluded psychopaths expect leftists to toe the line for all the destructive, neo-liberal consensus drivel that centrists absorbed like mindless sponges, and vote for policies that hurt them. At the same time, these centrists hurl unwarranted abuse at their intellectual betters on the left. But when, after enduring years and years of these stupid, oligarchic policies, the left gets to handle the reins, these entitled, spoiled, soiled brats do everything they can to sabotage us. Even to the extent of denying the dreams of millions of their party's supporters and trying to engineer their own electoral defeat!

When in 2017, despite their best efforts, Corbyn led the Labour Party to its greatest increase in its share of the voters since the party's 1945 landslide victory, the response of these evil morons wasn't to consider whether they'd been wrong. They didn't think that maybe their responsibility for Corbyn's narrow loss had robbed their party of the chance to reverse literally deadly Conservative cuts to the welfare state. No, these fucking assholes responded to Corbyn's moral victory and near-win by sulking and continuing to sabotage him until the peculiar issue of "Brexit" and Labour's own indecisive response to it finally did him in. (The party membership and traditional Labour voters were deeply polarized on the subject and Corbyn tried to straddle both sides of the issue, pleasing neither.)

[Two things: 1.) That link for the literally deadly results of Tory-Blairite austerity comes from the shameful Guardian. I've long pointed out that "liberal" media outlets (including Canada's own Toronto Star) are capable of accurately reporting the harmful effects of neo-liberalism. They're just generally incapable of connecting them to their own support for these policies and of grasping how pitiful their incremental reforms are for addressing these problems.  and 2.) When, in the face of traitorous insubordination and anti-democratic sabotage, Corbyn took tepid steps to remove Blairite malcontents, they universally portrayed this reasonable behaviour as his revealing his inherent Stalinist tendencies. He was conducting a "witch hunt" against politicians and bureaucrats for simply thinking differently from him. This sort of disgusting hypocrisy is par for the course for this scum. And this sabotage and deceit is a prime reason for the rise of Leninism. Part of the Leninist tactical arsenal is ruthlessness in response to the ruthlessness, shameless hypocrisy, contempt for laws and principles, that the enemies of socialism resort to. I do not advocate Leninism. But I do believe that leftists are going to have to do the hard work of articulating a strategy of ruthlessness when confronted with nauseating behaviour of this kind.


And, I feel compelled to add that this psychopathy is expressed in Canada by columnists like the braying, cowardly jackass Terry Glavin (who, it must never be forgotten, when asked FIVE TIMES to account for the child-raping proclivities of the Afghanistan regime that he supports, deleted each and every such request). Glavin's whole stupid editorial celebrating the defeat of Corbyn, ... saying it "puts a spring in the step of social democrats" and his asinine references to Labour's proud heritage (under Tony Blair!), needs to be assessed with these new revelations of anti-democratic thuggery. Of course, Glavin would probably emerge from the process only slightly more of a pompous ignoramus, anti-democratic, hypocritical thug than he already is.


Which brings me, at long last, back to Bernie Sanders and progressive politics in the USA. There are only two political parties with any degree of electoral feasibility in the USA. The Democrats and the Republicans. The Democratic Party had, by the late-19th Century, become the party of the agrarians. This included mid-Western independent farmers, and Southern plantation owners. To a lesser degree it represented the non-Anglo-Saxon urban working class (Irish, Italian, Slavic, etc.,). The Republican Party's main sources of strength were industrialists and financiers. They also represented the Anglo-Saxon working and professional classes who could expect to obtain work in the industries made possible by Republican tariffs. In fact, the Civil War was fought over the Republican desire to foster national industrialization at the expense of the South which exported its cotton to British textile manufacturers. This national economic realignment would inconvenience the cotton industry and work towards its relative diminishing in influence as domestic manufacturing became a bigger part of the economy. Before the Civil War, westward expansion had been a source of contention as competing interests struggled to make the new states forming in the territories either "slave" or "free" because this would affect the balance of power in the Senate, which would impact on the relative success of free trade versus protectionism.

Up until the 1930s the issue of which party was more "progressive" was open for debate. Independent farmers versus plutocratic banking and railroad interests? The Democrats would be "progressive." The Party of Lincoln versus the Party of Slavery? The Republicans would be "progressive." Industrialization versus agriculture? If industrialization is progressive then it was the Republicans who were progressive. The party that protected the urban poor was the Democratic Party. But urban Democratic politics were dominated by corrupt "machine" politicians whose record of accomplishment was mixed at best.

A large minority of mid-Western farmers tired of Democratic Party compromises with Big Finance and Big Industry and formed the People's Party. This "Populist" movement was never as widespread as some left-wing historians make it out to be, but it did work to force the Democratic Party to embrace more of their free trade and looser monetary policies than it had previously. Did the Democratic Party cynically or genuinely recapture these lost voters with the candidacy of William Jennings Bryan?

Was the Progressive Movement entirely about exerting democratic control over industrial capitalism and corrupt urban politicians? Or was it also an elitist movement, welcomed by some of the more forward-thinking capitalists for reducing cut-throat competition, and championed by urban intellectuals who wanted policies decided by educated experts and not by grasping Irish criminals and their uneducated slum-dwelling voters?

I will say this about US-American national politics up until the 1970s: There was PROGRESS, a PROGRESSIVE TREND to it. Certainly it was often vile and loathsome and a farce. Certainly US society was marked by open, murderous racism, rampant inequality and cruelty. But such is the world we live in. That was the way that it was. We obviously would have preferred a different world. But we did not have a different world. However false, or slow, or hopeless US politics appeared to those at the time who embraced the values we still embrace today, of democracy, human rights, respect for truth, ... it is possible to perceive improvement.

For the most part, the Republican Party dominated national politics before 1930 (just as the Conservatives tended to dominate in Canada against the Liberals). This reflected the relative balance of power of industrial capitalism and finance over other sectors of the population. At present, in the USA, we see the dominance of Wall Street (finance), Silicon Valley, Fossil Fuels, Retail Giants (Wal-Mart, Home Depot, Amazon), and to a degree, the Auto Industry. Oh yes, and Entertainment and the Military Industrial Complex.

So, the thing was, the USA being so technologically advanced, geographically vast and resource-rich, and with a large domestic market, rose from within a formerly British-managed international economy, to become the largest single economy in an international system that it dominated with Europe (which functioned as a sort of collective, led by Germany, Britain and France) up until 1914.

The First World War of 1914-18 devastated this international system. Europe went from being it's co-ruler to a US supplicant. Czarist Russia collapsed in 1917 and out of the chaos that followed, the Communist Bolshevik Party of Vladimir Lenin emerged victorious and pulled the Russian Empire (now the USSR) out of the world system altogether. At the same time, domestically, the USA began to perfect the new system of Fordist mass-production. Mass production required mass markets. But capitalism had crushed the labour movement during the 1920s and wages were basically stagnant. The way to stimulate demand was to extend credit to people, and, relatedly, to allow people to purchase consumer durables on "installment plans."

During the interwar period, the European economy and financial system relied on US loans to keep it afloat. US loans restarted and the sustained the devastated German economy, allowing it to pay their reparations to Britain and France, who were, in turn, enabled to repay their war loans to the USA. With unions prostrate, the vast majority of the wealth created in the 1920s flowed to the already wealthy who (as wealthy people tend to do) turned to financial speculation. Investment money began to concentrate on Wall Street, and, a whole number of factors served to provoke minor financial crises throughout 1929, until in late October, a giant stock market crash provoked a wider worldwide economic crisis known as "The Great Depression."


The Great Depression threw all the rules out the window. The Republicans under Herbert Hoover (an intelligent man with noteworthy accomplishments) were in power in 1929 and they were overwhelmed by the crisis. In 1933 the Democrats came to power under Franklin Delano Roosevelt, taking both the Senate and the House. With the votes of powerful bloc of racist Southern senators and congress members, Roosevelt and the Democrats were able to quickly implement pro-worker and pro-farmer legislation that limited the abilities of bankers and other big capitalists to call the shots.

Roosevelt was no radical. But he was obviously the best that could have been hoped for at the time. He was a patrician with no set ideology other than that the capitalist system in the United States tended to work, and that when it was in a crisis, whatever needed to be done to preserve that system should be implemented. More hidebound members of the ruling classes resisted him, and perhaps but for a failure of nerve they would have prospered if they'd overthrown him. There was no mass movement for socialist revolution in the USA in the 1930s. Left-wing ideas were definitely in the air, and there were left-wing institutions and sentiments scattered throughout the population. But the USA might just as well have gone fascist as socialist. And despite the essentially modest nature of FDR's reforms, there were many in the ruling class who genuinely (delusionally) thought him a revolutionary threat and who entertained thoughts of a coup against him.

But Roosevelt introduced Social Security, the National Labor Relations Act, as well as smaller projects like the Tennessee Valley Authority and the make-work projects (including theater groups) that made a huge difference in people's lives. He was no true friend of ordinary US-Americans but he pushed in a positive direction to save capitalism and, through the Great Depression and the Second World War, implemented lasting reforms from which ordinary US-Americans could fight for, and build more. In so doing, FDR made the Democrats the clear party of progressive forces in US society. And, while he never attempted to do more than the least that was possible to end the racist Jim Crow system in the US South (the core of the Democrats' legislative strength) he did desegregate institutions when possible, and always at the urging of his incredible wife, Eleanor Roosevelt.

The Great Depression destroyed the already reeling German economy. The failed responses of the traditional elites, and, sadly, of the German Social Democratic Party, allowed for a resurgence of Adolph Hitler's Nazi Party. Hitler had enjoyed a brief surge of local political influence during the political and economic chaos of the immediate postwar years. His party grew again with the inflation crisis of 1923. It then stagnated until the crisis of 1929 when it began to grow from strength-to-strength until 1933 when Hitler himself became Chancellor and the Nazis became the largest bloc in the German Reichstag.

The point being that extreme economic times reveal the intellectual bankruptcies of the status-quo. More extreme viewpoints get a hearing. And in Germany, the Communists grew at the expense of the Social Democrats and the Nazis grew at the expense of traditional parties. The vast majority (around 70%) saw Hitler as a buffoon. And in more regular times he would have remained as such. Obviously he had some capabilities of oratory and some talent for remembering details, but he had been a crackpot up until 1918. His fans in the 1920s and 1930s were not unusual people who came under the mysterious sway of a demon sent from Hell. They were the same sorts of bumpkins and boors who attend "Ford Fest" or who joined Mike Harris's "Commonsense Revolution" or who attend Trump's rallies. They're this guy. No. I'm not saying that everyone who attends "Ford Fest" or votes right-wing is a Nazi. I'm saying that that's where Nazis come from. Incoherent, ignorant, and/or stupid people who, in a crisis, yearn for an authoritarian "big daddy" to protect them from the scapegoats they've been brainwashed into hating. The more desperate the times, the more extreme their messiahs.

Long story short: The Great Depression brought Hitler to power. Hitler started World War Two. And mobilizing for war was what ended the Great Depression. American industry grew enormously. Gigantically. Humongously. Hitler's Germany attacked the Soviet Union before having defeated Britain, allowing Britain to serve as a staging area for a US-led assault on continental Europe while German soldiers got fed into a meat-grinder on the Russian front. The Soviet Union emerged from the war with the structure in place and the industrial capacity in place for a massive military presence. It was totally exhausted though. Britain was bankrupt. France was humbled. Japan was devastated. The United States emerged from the conflict enormously more powerful and wealthy as well as a new cultural hegemon. Before the war there had been a lingering sense of US-American cultural inferiority to Europe. This had pretty much vanished by 1945. The USA had either rescued or conquered Western and Central Europe. (British accents might sound sophisticated to US-Americans, and Continental intellectuals might appear inscrutable, but this is all overwhelmed by US-American self-confidence and belligerence.)

In his book Capitalism in the 21st Century, Thomas Piketty writes that it was elite failures represented by World War I, the Great Depression, and the vindication of theories of the power of state to influence the economy during World War II, that produced the only genuine alteration of political-economic inequality since the start of the 19th Century. While they helped to push the reforms of Roosevelt and other managers of the capitalist system into certain directions, the trade union movement and other people's movements did not steer events.


After Roosevelt, through the years of Harry Truman, John F. Kennedy, and Lyndon Johnson, the Democrats retreated and advanced, with the USA now at the unquestioned lead of a world system that was being ideologically challenged by the Soviet Union and the Peoples Republic of China. This was the Cold War and it caused the USA to things both good (pay attention to the worst excesses both at home and among some of their allies/vassals in order to deny opportunities to their socialist opponents) and bad (imperialism, the arms race, crushing moderate reformers, etc.,).

It was in the years of Lyndon Johnson and his successor, the Republican Richard Nixon that the USA got as close as it ever would to social democracy with Johnson's "Great Society" and Nixon being capable of creating something like the Environmental Protection Agency. These were the postwar "golden years" of the international capitalist society. But they could not last.

The managers of capitalism chafed under the restrictions of the postwar period. They resented the ability of the state to control them. They loathed having to negotiate with unions. They despised the aspirations of the peoples in the formerly colonized countries. Through public relations, advances in manufacturing technology, and violence, they sought to extricate themselves from these snares and to build a world where they could be free to exploit and profit and just do whatever the hell they wanted with their capital.

The economic crises of the 1970s gave them their chance. Capitalist elites used the "discrediting" of Keynesian theory to advance the genuinely discredited theories of Milton Friedman, Ludwig von Mises, and Friedrich Hayek, of small government, perpetually tight money, and deregulation. The elections of Conservative Margaret Thatcher in the UK in 1979 and Republican Ronald Reagan in 1980 brought these theories to power. (To be fair, one-time Reagan economic adviser and "Counterpunch" contributor Paul Craig Roberts has offered a coherent defense of "Reaganomics" here and elsewhere. But the jist of Reaganism and Thatcherism remains the same: Let the wealthy keep more of their money, and they'll invest it in job creation. Weaken those institutions of the state and workers that advance their interests and "entrepreneurs" will lead us to a Promised Land of productivity and wealth and rainbow coloured ponies for everyone.)


And that's what happened (except for the Promised Land of rainbow ponies).  The late-capitalist economies have increasingly turned to "financialization" as a source of "wealth creation." Manufacturing has increasingly been sent to low wage countries or automated. White collar jobs in both the private and public sectors have been slashed. Environmental regulations have been reduced or eliminated. It's been called "neo-liberalism." It is an ideology that has ruled the roost throughout the world since 1980. That makes it forty years of increasing influence on policy. Forty years of accumulated evidence. And it has failed. In 2008, an [essentially] unregulated, over-financialized economy imploded as a result of its own criminal fraud and the perpetrators were able to use the tax dollars of their victims to bail them out. In 2016, as a result of a deliberate policy of mass stupefication, a bloated travesty of a man, a mentally-ill long-time rapist and grifter managed to eke out an Electoral College victory over a psychopathic, mass-murdering, corrupt career politician. The response of this conman to the COVID-19 pandemic (some caricature of "market forces" being used to barely disguise oligarchic self-enrichment) has resulted in catastrophic failure that the rest of the world views with increasing derision or horror.

How did it come to this? Where did a monstrous idiot like Trump come from?

Recall that there was an economic crisis in the 1970's: "Stagflation." A stagnant economy with rising inflation. According to prevailing "Keynesian" economic theory, inflation was a product of an overheating economy. One could not have inflation if the economy was stagnant. Because a stagnant economy means that people aren't buying things which means no shortages or bidding-up of prices. But that's what we had.

As I said, for right-wing lunatic economists and political thinkers, this "discredited" the vague Keynesian policies that had produced a "golden age" for the major capitalist countries. And the way to respond to this "discrediting" of Keynesianism was to return to the policies that hadn't achieved anything like what had been achieved from 1939-73 and which should have been discredited in October of 1929.

I suppose (since this blog post is already way longer than I thought it would be) I might as well describe some more elements of the postwar boom.


Military spending ended the unemployment of the Great Depression. The state, which the discredited mainstream economists had said was incapable of ending the Great Depression paid for and built and managed a massive industrial enterprise called the Second World War. Again, in the capitalist countries, capitalist owners and managers were allowed to contribute their expertise and profit from their participation (within reason). I can't say enough about the excellence of Maury Klein's contribution to the scholarship on this important topic.

Military production was the perfect thing for Fordist mass-production techniques. Large factories, producing large quantities of the same thing, that were purchased all at once. These Fordist factories required large numbers of human labourers. These labourers unionized to keep pace with the cost of living (which was controlled more by anti-inflation bureaucracies than had been the case in World War I). These workers found it easier to unionize because of Roosevelt's past reforms and because of the nature of Fordism.

After the war, the USA's leadership reflected upon the stresses of having to build a military machine almost from scratch, and allowed themselves to exaggerate the military threat from the Soviet Union, and produced a system of "military Keynesianism." The state would subsidize the economy but mainly for war production. The military would sop-up the unemployed. Veterans returning from the wars received post-secondary educations and easy access to credit for homes or business start-ups under the GI Bill.

The US economy managed a fairly smooth transition to peace-time industry, and pent-up savings and veterans' benefits allowed consumers to purchase the new automobiles, houses, washing machines, radios, etc., that were being built. The USA contributed to European and Japanese reconstruction, which itself produced (inevitable) economic growth in those economies. Europe and Japan rebuilt on social democratic lines due to the discrediting of right-wing parties which had dithered through the Great Depression or which had actively collaborated with the fascists. The European welfare state was able to finance itself by selling its own products to the enriched USA once it was able to do so.

Eventually, by the 1960s, this economy was beginning to run out of steam. The USA was finding itself shut-out of Europe and Japan as these countries reconstruction came to an end and they regained the capacity to supply their own goods and even compete with US-American companies. Furthermore, two decades of economic expansion began to push up the prices of natural resources (including petroleum), some of which were located in the periphery countries.

Europe had to give up its empires after World War Two and then the USA had to compete with the Soviet Union (and later Communist China) for the loyalty of the de-colonized countries.

Inflation was beginning to become a problem. So too was the "military-industrial-complex" that Republican President Eisenhower referred to in his farewell address. The US Pentagon system had become a bloated, corrupt, drag upon the US economy which only got worse in the US War on Vietnam. From 1941, the US government and then the USA itself, was spending dollars around the world on natural resources, military bases, wars, consumer goods, etc., and US $ were in excess of its gold reserves. By 1971 inflationary pressures forced the USA off the "gold standard" for currencies that had prevailed since the Bretton Woods system of 1944. (Canada had left the gold standard in the 1950s, but as a small, wealthy economy, with moderate fiscal and monetary policies, this did not cause much of an impact.)

The 1973 OPEC price revolution was a significant, but only a contributing factor to the inflationary cycle of the postwar period. Allowing the wealthy keep all of their treasures, while pretending to be able to satisfy the demands of the working classes, while simultaneously manipulating the population to increase its demands through advertising, while spending enormously on weapons, will inevitably lead to inflation. And when businesses and workers both had the power to demand price or wage increases, and governments felt obligated to maintain living standards, the inflation only got worse. But rising prices (especially fuel prices) discouraged investment and spending. Which produced "stagflation."

Here's a nice summary of the monetarist description of 1970s stagflation by a mainstream pro-finance writer. Note: J. K. Galbraith maintained for decades afterwards (he lived to be 97) that wage and price controls are the most humane way to control inflationary pressures. Meanwhile, right-wing economists, most famously Milton Friedman, argued that tight monetary policy is the only effective antidote to inflation. "Inflation is always and everywhere a monetary phenomenon" is the supposedly profound conclusion Friedman reached after years of study. It's about as useful as saying "Death is always and everywhere a stopping of the beating of the heart." WHY do policy makers occasionally feel compelled to print money? What factors cause a human heart to stop beating?

Politicians allowed for the printing of money in the 1960s and 1970s because so many groups in society had the power to demand (and temporarily get) a larger share of the national income. Internationally, exporters of crucial raw materials were able to use the economic boom and the competition for their loyalty during the Cold War to demand higher prices for their products. Politicians would not/could not refuse them outright so they were accommodated, and money was printed to cover the difference in the hopes that kicking the can down the road would eventually allow things to resolve themselves on their own. Capitalists want to maintain their profits and wealth? Allow them to raise prices. Workers want higher pay? Give it to them and raise prices. Households got higher money incomes. Everyone wanted more (sometimes just to stand still) and governments could not stand up to them.

In 1979 there was a revolution in Iran and initial panic-buying of oil threatened another inflationary cycle as had occurred earlier in the decade. THAT was when monetarists gained influence in the Thatcher and Reagan administrations and policy makers severely tightened monetary policy.

The long and the short of it is that the ruling class (which actually saw small declines in their overall wealth due to inflation rates exceeding the interest on their savings) decided that the problem was all these uppity workers and Third Worlders and state bureaucracies being able to obtain a greater share of the wealth and control over the economy. Smack them down and let the wealth flow mainly to the rich, and inflation will settle down and things could get "back to normal."


That's essentially it. That's neo-liberalism. Removing restrictions on capitalism and diminishing the power of workers to demand a greater share of the product that they help create.

Under Friedmanite monetarist policies, interest rates (the price of money) rose to above 20% (that was the prime rate). Unemployment skyrocketed as borrowing to buy a house (construction, real-estate, and all connected sectors) or a car (the auto industry, oil industry) became unaffordable. Government revenues fell as expenses rose, necessitating borrowing (at over 20% interest) leading to massive deficits and increases in overall debt.

Friedmanites would continue to point to the crisis of the 1970s to discredit Keynesian policies. But their ignoring of the absolute carnage caused by their own policies (or their ridiculous excuses and blame-shifting) de-legitimizes them. Even their political practitioners retreated from them when the disastrous results became apparent. Still, every crisis is an opportunity. Sure, you could deliberately wreck the economy and throw a lot of people out of work and ramp up the deficit. But then, given the fact that you hate social programs that give confidence to the working class, emboldening them to form unions, and you hate the taxes that pay for this, why not use the deficits you created to call for austerity? After all, social programs caused the unemployment. Not the high interest rates you imposed. That's right! Blame the victims of your policies to justify your further victimization of them!!


But that was just the beginning. I hesitated to go into detail about right-wing foreign policies but everything is related. And this is another world-historical moment. It's also part of a process of oligarchic concentration of power that's been ongoing since forever but which has accelerated since 1980.

When OPEC raised the price of oil the wealthy countries suffered, but the "less developed countries" ["LDC's" is the name we'll use while accepting all the caveats that our industrialized, ecodical, oligarchic monstrosities are properly "developed."] were harmed even more. Their exports dropped and the price of fuel increased. Bad scene. OPEC nations attempted to mitigate this somewhat by granting or loaning some of their new wealth to their fellow LDCs. But a bigger factor was the US banks. The OPEC countries took their new wealth and either spent it right away on weapons from the USA, Europe, and/or the USSR, or they put it in [mainly] US-American banks. US banks meanwhile had to find productive, interest-earning outlets for this money. Nobody in the wealthy countries was borrowing to anything like the necessary amount (due to stagflation) but LDCs would be a different matter.

For the LDCs, the crisis of the oil shock was yet more confirmation that being exporters of raw materials sucked. Your commodities were subject to massive swings in prices. Your unemployment rate was dependent upon decisions made elsewhere. The means to self-defense is industrializaton and diversification. Create domestic industries with their concomitant requirement for skilled workers. Create viable domestic economies this way. Happily, Western bankers are running all over the planet trying to recycle petro-dollars to help with low-interest loans. They were pushing on an open door. Plus, these countries needed massive loans just to meet their balance-of-payments requirements. Big LDCs like Argentina and Mexico took on billions in loans. Then, in 1979, when monetarist high-interest rate policies were employed to meet the Second Oil Shock, these LDCs found themselves incapable of rolling over previous debts at these new, higher rates of interest.

This began the Third World Debt Crisis. Enter the International Monetary Fund (IMF). The IMF's original role had been to help countries' currencies remain within the ranges of values they had until Nixon abandoned the Gold Standard. From that date until 1982 the IMF was adrift without any real purpose. With the debt crisis the IMF got a new lease on life as an institution to "help" Third World debtors  restructure their economies to regain the confidence of currency speculators and other financial parasites. Despite the fact that commercial banks had pushed loans on these countries without caring about their viability, or even if they were for genuine economic development, the commercial banks were not going to be allowed to suffer for their thoughtlessness. Even if the loans had been incurred by dictatorships to finance the expansion of the military and the police to stamp down on domestic opposition and pro-democracy movements, these loans had to be honoured.

The IMF sent teams of negotiators to these countries and created Structural Adjustment Programs (SAPs) that "adjusted" spending away from frills like healthcare, education, food subsidies, industrialization, and towards debt repayment. Public assets were privatized and often sold-off to foreign buyers. This all served to make the 1980s a "lost decade" for all of Latin America. These SAPs produced riots and sometimes civil wars in these countries, to which many governments responded with death squads and massacres.

This imposition of what would become the "neo-liberal consensus" (privatization, deregulation, austerity, "free trade," increasing exports of raw materials and low taxes) was and is advertised as promoting economic growth. The proponents of these policies might even believe their own shit. But the reality doesn't support their beliefs and this reality isn't hard to discover. They slow growth. They entrench and increase poverty and inequality. And they don't even reduce the debt burdens on the countries in question. All they do is reorient economies towards debt service. Often the IMF "loans" these countries the money to repay the bankers and transfer the debt to the IMF. So these poor country governments now pay the IMF (which is funded by all the member nations' governments) which has now assumed the risk of default. But defaults are discouraged because they send a bad signal to the financial parasite community that needs constant coddling and bail-outs and "confidence" that they will never suffer consequences for their actions or even inconvenience.

We'll return to this issue of LDC poverty later. But I want to conclude this section by pointing out that this was one element of the long-term trend of the past forty years: that of governments no longer promising to do anything for their people. Before the 1970s, the LDC's were often engaged in their own "de-colonization" from the European age of empires that could not be sustained as the 20th Century continued. Even when they hadn't been formally integrated into another country's empire, they were often snared into a colonialist relationship with a greater power (such as the USA). With the post-1945 trend towards greater independence and autonomy (partially fueled by the Cold War) all LDC's pursued policies of autonomous development (with varying degrees of integrity and commitment). One such policy was "Import Substitution." LDC's pursued protectionism from foreign manufactured imports and struggled to substitute them with their own domestic manufacturing. Some of these programs fell victim to incompetence or corruption. Others could not advance because the economic system was rigged.  Whatever the case, in this and many other areas, policies of national economic development were abandoned after 1982 and instead their populations were subjected to no-growth "pro-growth" IMF policies. Governments abandoned the effort to improve the lives of their populations.


Coming in Part Two!

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