| USA
Economic historian Paul Bairoch calls the USA "the mother
country and bastion of modern protectionism". One of the first acts of
the United States' fledgling Congress was the passage of a tariff to
protect manufacturing. (This is not to say that the USA should still
have protectionism. It does not need protection any more. However, if
poor nations did now what the US did then, they should be able to
develop just as quickly)
US free traders got a quick start on hypocrisy, using gunboats
to force Japan to sign a treaty limiting tariffs to 5% on most items.
Around this time US tarrifs were about 30%! By 1866 they were averaging
45% - and this continued until 1883!
Abraham Lincoln was a protectionist: "When we buy
manufactured goods abroad we get the goods and the foreigner gets the
money. When we buy the manufactured goods at home, we get both the
goods and the money."
In the "wild west" settlers followed government-drawn maps, on
government-built roads guarded by government forts.
In 1798 Congress ordered 10,000 muskets from inventor Eli
Whitney, who was struggling in debt - and therefore deserved to be
"weeded out" according to the free market. This has been said to be the
beginning of mass production and standardized parts.
The Agriculture Extension Service helped farmers, who still
hate government.
A heavy tariff on British rails made the American railroads
expensive, until the Americans simply built their own steel industry.
America created the first antitrust laws in the world.
Afganistan and Sierra Leone did not.
As for trade and the depression, the Smoot-Hawley Tariff Act
of 1930 affected less than 1% of trade, and was passed after the
depression had begun, making it too little, too late to have made any
difference. Duty-free imports into the US dropped at about the same
rate as taxed imports between 1930 and 1932.
What was the era of the mixed economy?
60 years of growth and progress.
The Mixed economy in America began with Roosevelt and the New
Deal.
Under the free-market Republican presidency of Herbert Hoover,
the economy shrank each year.
Under Roosevelt, it grew five out of seven years:
Changes in GNP, by President
Year %Change in GNP President
---------------------------------
1930........- 9.4%........Hoover
1931........- 8.5.........Hoover
1932........-13.4.........Hoover
1933........- 2.1.........Hoover/Roosevelt
1934........+ 7.7.........Roosevelt
1935........+ 8.1.........Roosevelt
1936........+14.1.........Roosevelt
1937........+ 5.0.........Roosevelt
1938........- 4.5.........Roosevelt
1939........+ 7.9.........Roosevelt
During World War II, with its massive taxing and spending the
US economy doubled.
The top income tax rate was between between 88% and 91%
percent until 1963, when Kennedy "lowered" it to 70% (still very high
by today's standards).
Before World War II, the U.S. suffered eight depressions; in
the nearly six decades since, it has suffered none.
Republicans also supported the mixed economy: President
Eisenhower funded highways, President Nixon said, "We are all
Keynesians now," and created the Environmental Protection Agency, the
Food and Drug Administration, and the Occupational Safety and Health
Administration.
In the so-called "Roaring 20s" about half of Americans were in
poverty.
By the 1950s, the poverty rate had fallen to 20%. Johnson's
Great Society lowered it to 11.1% in 1973 - at the end of the mixed
economy era. (8)
Between 1945 and 1973, the Gross Domestic Product grew at a
3.4% a year, compared to only 2.5% since.
Individual worker productivity was a record high 2.8% before
1973; but it has averaged only 1% since.
Neo decline
In America, the era of the mixed economy was finished in 1975,
when the SUN-PAC decision legalized corporate Political Action
Committees, the lobbyist organizations that bribe our Congress today.
In the ten years after the SUN-PAC decision, the number of
corporate PACs exploded from 89 to 1,682. (1) By 1992, corporations
formed 67% of all PACs, and they donated 79% of all contributions to
political parties. (2) This meant a huge shift of power from workers to
corporations and owners.
The PACS killed Ralph Nader's campaign for a Consumer
Protection Agency. They deregulated on airlines, trucking, railroads,
oil and interest rates.
They gave themselves a capital gains tax cut (helping the
already rich), and raised Social Security taxes (hitting the poor).They
even persuaded Congress to impose a tax on unemployment benefits! This
was BEFORE Reagan!(3)
Reagan cut the top income tax rate was from 70% to 28%.
Corporate taxes as a percentage of all federal tax collections
dropped to 8%. During the 1950s 27% of federal taxes were paid by
corporations.
Society was hurt by inequality. During the New Deal era, the
incomes of all grew together atabout the same speed, despite their
original differences. But under the corporate special interest system,
the rich got richer and the poor got poorer:
Income Growth by Quintile (7)
Quintile 1950-1978 1979-1993
---------------------------------------
Poorest 20%.......138%.......-15%
2nd 20%........... 98........-7
3rd 20%............106........-3
4th 20%...........111..........5
Richest 20%........99..........18
Another way to measure inequality, the Gini Index, rose from
0.352 to 0.395 between 1979 and 1994 (The scale is from 0 to 1; the
higher the number, the worse the income inequality.) (9)
Disposable personal savings fell from 7.9 to 4.1 percent
between 1980 and 1994. (10)
Combined home mortgage and consumer debt rose from $1.3
trillion to $3.4 trillion between late 1980 and late 1990, about 50
percent faster than the consumer's income grew (due to inflation). (11)
Though Reagan talked about family values, more and more women
worked to make up their husbands lower pay.
On average, the number of hours that wives worked was 32%
higher in 1989 than in 1979. Without the increased work of wives,
incomes for 60 percent of families would have been lower in 1989 than
in 1979. (12)
During the 1980s, temporary work grew 10 times faster than
overall employment; as a result, Manpower, a temp agency, has replaced
General Motors as the largest private employer in the United States.
Workers rights were trampled to the point that even Business
Week reported that from the early 1980s, "U.S. industry has conducted
one of the most successful antiunion wars ever, illegally firing
thousands of workers for exercising their rights to organize."
"Unlawful firings occurred in one-third of all representation elections
in the late '80s, vs. 8% in the late '60s."
Poverty has generally risen, from 11.1 percent in 1973 to 15.1
percent in 1993. (13)
The rich have greatly reduced their charitable giving, causing
the poor to increase theirs:
Charitable donations in the 80s (14)
Percent Percent of
Income 1980 1988 change 88 income
------------------------------------------------------------------
$25,000-30,000.........$665......$1,075.....+62%.....3.6 - 4.3%
$500,000-$1 million...47,432.....16,602.....-65%......1.7 - 3.3
Over $1 million......207,089.....72,784.....-65%.....Not Applicable
In 1990, the poorest income group -- under $10,000 -- actually
gave the highest share to charity: 5.5 percent. (15)
"In New York City in 1990, when 2000 jobs were advertised
in the sanitation department [isn't that your dream job?] At $23,000,
[per year] 100,000 people applied...In Joliet, Ilinois, 2000 showed up
at Commonwealth Edison at 4:30 AM [while conservatives claim unemployed
people are lazy!] to apply for jobs that did not yet exist. In early
1997 [during the so-called boom], 4000 people lined up for 700 jobs at
the Roosevelt hotel in Manhattan. - Howard Zinn, The twentieth
century: a people's history
In short, neoism in American has been 25+ years of economic
stagnation and lessening democracy.
This has caused it to fall far behind
the rest of the industrialized world.
( Footnotes: 1. Hedrick Smith, The Power Game:
How Washington Works (New York: Ballantine Books, 1988), p. 31.
2. Center for Responsive Politics, Washington
D.C., 1993.
3. Smith, p. 31.
5. "Rolling Back Regulation," Time, July 6,
1987, p. 51.
6. AFDC figures from U.S. Social Security
Administration. Food Stamp figures from U.S. Department of Agriculture,
"Annual Historical Review of FNS Programs" and unpublished data.
Current dollars converted to constant 82-84 dollars from CPI-U.
7. U.S. Bureau of the Census, Current
Population Survey, annual.
8. U.S. Census figure reported by Sam Cook, Who
We Are (New York: Random House, 1994), p. 228.
9. U.S. Bureau of Labor Statistics, Measure 15
of the Gini Index (after all taxes and redistribution of income).
10. U.S. Bureau of Economic Analysis, National
Income and Product Accounts of the United States, vol. 2, 1959-1988 and
Survey of Current Business, July 1994.
11. Federal Reserve Board figures cited in "85%
of All Households in Hock," Investor's Daily, April 22, 1991.
12. Congressional Study: Families on a
Treadmill: Work and Income in the 80's, January, 17, 1992.
13. 1993 figure by U.S. Census, Current
Population Reports, P60-188.
14. Internal Revenue Service data of Adjusted
Gross Incomes for itemized reductions. Cited by Business Week, "Look
Who's Being Tightfisted," November 5, 1990, p. 29.
15. Survey by Gallup Organization and
Independent Sector, cited by Boston Globe, "U.S. Charities See Increase
in Gifts," December 16, 1990.
16. "U.S. Once Again Weighs Price of Foreign
Ownership," Christian Science Monitor, November 21, 1988.
17. Jonathon Yates, "Why Make It Easy for
Foreign Investors?" Philadelphia Inquirer, March 20, 1989.)
Year %Change in GDP President
---------------------------------
1990.......+ 2.1%.......Bush
1991.......+ 0.875......Bush
1992.......+ 4.025......Bush
1993.......+ 2.6........Clinton
1994.......+ 4.075......Clinton
1995.......+ 2.15........Clinton
1996.......+4.075........Clinton
1997.......+ 4.325.......Clinton
1998.......+ 4.775.......Clinton
1999.......+ 4.45........Clinton
2000**.....+ 1.65........Bush ** Advance estimate
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Canada
Canada tends to follow American trends,
though slowly. The Canadian mixed economy lasted until the 1980s.
From 1950 to 1980, the average unemployment
rate was 5.4%, compared to 7% during the neo 90s.
Free trade
When neo government minister Donald Johnston
said "free trade agreements are designed to force adjustments on
our societies" he was right. Free trade has had a huge impact on
Canada: in 1989 exports were 25 of the GDP, now it is 40%. Here are the
kinds of changes that the FTA, and NAFTA have forced:
Growth during the 1990s was the second worst
in 100 years - the worst was the 1930, with the great depression.
Average per capita income fell, and only
regained 1989 levels by 1999. Average, of course, includes the rich -
the only people who actually gained from the 1990s were the wealthiest
fifth of Canadians.
Employment is insecure and the social safety
net is frayed. Wages have not grown even though productivity has
(though Canada does not have the same productivity as America, as FTA
and NAFTA salesmen promised).
By 2000 stable, high paying manufacturing
employment was still 6% below its 1989 level.
Unemployment was, again, the worst other than
the great depression.
Unstable self-employment was 43% of new job
creation between 1989 and 1999. Part-time employment accounted for
another 37% of net employment growth during 1989-99.
Temporary work ("temps") grew from 5% to 12%
of total employment during the first half of the decade. Labor force
participation rates dropped sharply, and they are still far below 1989
rates.
Market incomes of the poorest 10% of families
with children fell an astounding 84% during 1990-96, and those of the
next 10% fell 31% (Yalnizyan 1998).
Interestingly, lots of evidence comes from
the same government that had been selling free trade to Canadians. An
Industry Canada study by Dungan and Murphy (1999), found that between
1989 and 1997, 1,147,100 jobs were destroyed by imports, with only
870,700 export jobs were created to replace them, equaling the
destruction of 276,000 jobs. The study did not make headlines.
Other changes
Not all of this disaster is due to free trade
- neos have made other changes. For examplle, from 1992 to 1999 10% of
the GDP went from the public sector (all levels of government) to
private sector. Government is at the lowest level since (drumroll
please) the great depression.
To keep competetive, governments have no
choice but to cut taxes on corporations and raise them for the poor
(through sales taxes, for example).
A 1996 report from the neo government's Privy
Council Office noted: "the basic affordability of the [social
safety net] system and the benefits payment regime has a direct
consequence on competitiveness...By raising the cost of labour as a
productive input, such programs can either drive jobs south or
encourage further substitution of capital for labour" (Privy
Council Office 1997).
Translation: the social safety net means
people get paid more, and leads to development as we build machines do
our work for us. Therefore it is bad. (!) Because of NAFTA, jobs go
where people are not rewarded for their hard work.
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New Zealand
New Zealand is considered an "economic
miracle" and a model to be followed by Neos.
In 1984 the same neo Blitzkieg that hit
Britain and America arrived in New Zealand - under the so-called "labor
party". Even though most people voted against the labor party, it still
got power, the same way the Gore-Nader split in the USA meant that Gore
only got 500,000 more votes than Bush, a small enough margin to let the
Supreme Court choose the president.
Despite the lack of a mandate, the
"Labor" Party did the standard neo policy. The effects:
- the bankruptcy of half the farms in
the country
- the highest youth suicide rate in the
developed world
- huge increases in violent and other
crime
- By the mid 90s the unemployment rate
was about 50% higher, not including those who had given up looking for
work.
-During the neo years New Zealand had
the worst economic growth rate of all OECD countries - NEGATIVE 1
percent! Neo salesmen simply showed off the few individual good years
when growth consisted of the unemployed going back to work again (and
losing their jobs the next year).
-The productivity gains that neos
bragged about were only only a 5% over 7 years - about half the long
run average for the economy. At the same time Australia saw a 21.9%
increase.
- The rise of inequality inside rich
nations was only higher in Britain under Thatcher.
- The collapse of the New Zealand
sharemarket in 1987 was the biggest fall in percentage among the rich
nations, as of 1996 it still had not recovered.
- The Public Health System was partly
privatised, and waiting lists rose.
- Underfunding has left a crumbling
infastructure - literally. 14 young people were killed by a cheaply
built platform at a scenic site collapsed. The Judge of the enquiry
concluded that they had been killed by "governmental department
reforms." It is up to tourists to decide if the scenery of New Zealand
is to die for.
- The GST (a sales tax) is charged on
pretty well everything except financial transactions - meaning that a
homeless person buying a sleeping bag pays tax but a rich kid who makes
a living buying and selling papers does not. There is no capital gains
tax, a real relief for those sweating under the weight of their stocks
and bonds.
- The median equivalent disposable
income has fell by 17.1% from 1983 to 1992 (Stephens et al 1995)
- It has been estimated the government
spent $100 million to privatize telecommunications - in short, people
had to pay for the privilige of being robbed.
-As the neos ran out of things to
privatize, they looked towards schools, hospitals, and the building of
the parliament they bribe.
-Even promises of investment were lies:
In 1993, the proportion of GDP in investments was just 70% of what it
was in 1984.
Even Sir Roger Douglas, the Minister of
Finance during the disaster, admitted in 1992 that the "debt crisis"
that helped him into power, was imaginary. After all, the neos doubled
the "crisis" from $22 billion, to $45 billion in 1994 -- despite
selling $16 billion in state enterprises. By the year 2000 debt levels
were back to the origional "crisis" level. Roger Douglas is currently a
Chamber of Commerce speaker, especially busy in the neo-dominated
Canadian provinces of Alberta and Ontario, selling the same product
that he saw fail so badly.
In short, neos are frauds -literally in
this case, two members of the neo Business Roundtable (BRT) were jailed
for fraud.
But surely they have learned from
their mistakes...
The neos did not make any mistakes. They
knew from the beginning what they were doing.
The 1984 Treasury Report predicted that
wages would fall, but "rapid improvement in productivity could
off-set this to some degree" (p 118). In short, since the rich
would get richer, this would make up for the poor getting poorer.
_Management_ (July 1983:56) assured its
readers that the "social crisis that unemployment poses falls
outside the scope of [this] article but the business community can
ensure that those who are [still] employed are involved and united with
management, thus providing a buffer to the groundswell of unrest."
Translation: they knew they would create unemployment, but with enough
propaganda the employed workers would care more about the situation of
their boss than their co-workers and neibours.
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Conclusions:
Free trade is the result of development,
not the cause. Saying that free trade causes development because
wealthy nations have free trade is like saying we will all become rich
if we buy a mansion, because the rich have mansions.
Neos have responded to their failure by
retreating from reality. In the mid-1980s researchers asked 212
students at the most prestigious American graduate schools of economics
what made a good economist. 65% said "good at problem-solving" while
only 3% thought "knowledge of the economy" was good for anything.
But neos are too educated and
intelligent to destory economies!
If the massive failure of neoism is not
due to ideologically stubborn people in denial of reality, it might be
deliberate. A good economy means workers have an easy time finding
jobs, meaning more bargaining power for them. This is an "overheated
economy", and brings calls from neos to put workers back in their
place. For example, during the Clinton economy:
October 13 1996 Business Week:
"...The latest round of applause was
triggered by the Labor Dept.'s surprising report that September
non-farm payrolls dropped by 40,000 workers...For now, Wall Street
seems content that the latest employment report contains only good
news: the economy is slowing and so is inflation. But if the emerging
trends in wages and labor costs continue, these cheers could quickly
turn into boos."
January 13 1997 Wall Street Journal
(Page. A2):
"...The Labor Department said the
economy added a remarkable 262,000 jobs in December, up from an
upwardly revised 127,000 jobs in November. Nearly every aspect of
Friday's Report came up roses for American workers...and average hourly
earnings shot up 0.5%, even after a 0.8% gain the month before...
But Mr. Dederick and other analysts
stressed that it's a watch-and-wait period, not time to call out the
fire trucks. "Do you push the panic button?" asked Mr. O'Neill of
Harris. "No, we're not ready to do that yet.""
Luckily, worker's wages don't rise
enough to cause panic.
Business Week gives regular warning of
the dangers that employees might actually get rewarded for their hard
work:
"..The economy also seems poised to
rebound after a sluggish third-quarter showing, though not so strongly
as to breed inflation worries, especially since labor costs remain in
check.
...The third-quarter surprise was the
cooling off in wages and salaries, which grew only 0.6%, the slowest
quarterly pace in four years... Companies are using an increasing
number of temporary workers as a way of avoiding benefit costs. And
after having squeezed health-care costs to the bone, the emerging area
for cost control may be workers' compensation, as suggested by efforts
this year to overhaul workers' comp rules in Florida, California and
New Jersey." - Business Week, November 11, 1996, p. 331.
This is all in the worker's interests,
of course. I spend most of my coffee break begging my boss to take away
my benefits - don't you?
The Dec 28 1993 WALL STREET JOURNAL (A1)
Noticed that "What caused truck drivers' work lives to deteriorate,
trucking executives say, is cost-cutting forced by intense competition.
After deregulation opened truck routes to new entrants in 1980,
carriers turned to cheaper, nonunion drivers...." But this is not
the problem.
The problem is in the headline:
"Trucking Firms Find It Is a Struggle
to Hire And Retain Drivers"
The January 24 1995 WALL STREET JOURNAL
saw a clash of ideologies: should we pay workers less, or just hire
less of them:
"BUSINESS AND ACADEMIA CLASH OVER A
CONCEPT: 'NATURAL' JOBLESS RATE
Are too many Americans at work these
days for the economy's own good? Absolutely says Martin Feldstein...
"We are...into the danger zone." Nonsense, retorts Dana
Mead...Economists who talk that way...don't understand how American
companies have tied wage increases to productivity gains, shifted work
overseas and learned to produce more with fewer people. "
Neos know that unions are good for
workers:
December 1996 Money magazine, special
Forecast edition, Pages 50-1.
"...Today's chief threat to the
economy is rising labor costs...after a period during which American
workers have been too worried about job security to press for raises,
unions under the aggressive leadership of AFL-CIO chief John J. Sweeney
seem certain to fight harder in 1997 for a bigger slice of corporate
profits."
Of course, they're really looking out
for the interests of workers, and we're just too stupid to figure out
that lower wages are good for us.
If you read deep into BUSINESS WEEK,
beyond all the pretty pictures, all the way to page 56, you would have
found this dire warning about the horrors of unionization:
"Sweeney's Blitz
Today, though, workers may be
receptive to labor's renewed message, coming as it does after two
decades of wage stagnation and heightened inequality.
In the 1980s, for example, the
10-year average earnings of the bottom fifth of male wage-earners
plunged by 34%. Now more than half of families say two members must
work to make ends meet. And constant downsizing has chewed away at pay
and job stability, even among professionals…"
Now why on earth is anything wrong with
that? Read on:
"If unions do regain power, Corporate
America is certain to feel the squeeze. With just a tenth of
private-sector employees in unions today, most employers have had a
free hand to hold down labor costs. Reunionization would force up pay
and benefits, which typically are 20% higher among union members… "
You have been warned: if we don't act
fast, corporations will have go through such trials as paying benifits!
But the article has a happy ending:
"...Employers still have the upper
hand in most unionization battles."
Neos even know that unions help
non-union workers:
April 1991 FORTUNE magazine (hidden away
on page 214):
"Even many who stayed in
manufacturing lost ground when they were squeezed out of lucrative
union jobs, such as those in autos and steel. Columbia's Bloom says
that in 1980 only 47% of high school graduates over 25 and 40% of
dropouts held union jobs. By 1988 only 31% of graduates and 25% of
dropouts were paying dues.
As membership dwindles, union
settlements no longer piled up wages at non-union shops."
Nov 1995 THE ECONOMIST, Page 19:
"All countries have been buffeted by
the forces of changing technology and stronger global competition. So
why should wage differentials in most of continental Europe have
changed by much less?
The answer is that deregulation in
America and Britain has allowed market forces to do their work, whereas
in continental Europe powerful trade unions, centralized wage
bargaining and high minimum wages have propped up the wages of the
low-paid.
Indeed, pay differentials narrowed
through the 1980s in western Germany, where trade-union membership has
held steady at around 40% of workers over the past 20 years; in
America, membership has fallen from 30% to 12% since 1970. A study by
Richard Freeman of Harvard University confirms that, in general, wage
inequalities are smallest in highly unionised countries.""
May 1994 Barron's:
"NOT TO WORRY...
The 'Nineties,' need we remind you,
are a period of insecurity and cost control, a time when workers feel
lucky to have a job, let alone one that pays well...If American labor
sought inordinate increases, manufacturers could simply move production
abroad and employ foreign labor at a far cheaper rate."
Inflation a common excuse
Of course, inflation is only caused when
workers make more money. For some reason that neos never explain, CEO
and executive pay does not cause inflation.
May 8 1995 Bussiness Week:
"WHY INFLATION ISN'T SPROUTING
Labor markets are their tightest in
five years...labor costs are growing at the slowest pace on record..."
Evil!
Well...Massive wealth with little work
has a corrupting influence, as the writers of the bible pointed out.
One could say that neos are drugged with money - and a junkie needs a
fix, regardless of education.
December 1996 FORTUNE, Page 72.
"Mr. Price is on the Line
One reason Price gets his way is that
many investors simply agree with what he's trying to accomplish. And
what exactly is that? He doesn't bother hiding the sanctimonious
rhetoric of the 1980s raiders-- --that they were trying to take over
companies and show the world how they should be run.
He admits flat out that all he's
trying to do is get the stock price up and if his tactics are a little
rougher-- --all right, a lot rougher----than those of most other mutual
fund managers, well, it works , doesn't it?"
(Note: by "rough" they don't mean
foreplay with spanking. They mean fireing the employees who built the
company in the first place and then profiting when the stocks jump up.)
There is no "conspiracy", none is
needed. The rich and powerful have always had the same interests from
the beginning of time. They have always managed to find noble excuses
for what they do, for slavery, conquest, genocide, and so on. Power
corrupts anyone that touches it. Greed is a disease, it is not
hereditary and it can be cured. This is no more good or evil than the
laws of gravity.
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