Tikkun Magazine, January/February 2002
Modern Fashion or Global Fascism?
By Jeff Gates
Post-September 11, much remains the same. The recession that officially began in March of 2001 got a bit deeper. Globalization remains the defining trend. As before, the key operating principle that underlies the Washington/Wall Street consensus comes to this: "maximize financial returns and--trust us--everything will work out fine." We've now got $17 trillion in the hands of U.S. money managers, invested with faith in that neoliberal premise.
As before, the impact of America's mechanistic economic model ("Do A, get B") poses a clear and present danger to peace and stability worldwide. Its unbridled operations are a key reason wealth is being radically redistributed worldwide: from the poor to the rich, from developing countries to developed countries, from the future to the present. All with the unflinching support of rule-making crafted by the neoliberal-inspired World Trade Organization (WTO).
The culprit is not the transnational corporation, as some critics claim. Nor is globalization a problem per se. The malady lies in today's perilous combination of a narrow bandwidth of values (i.e., financial values) to which the corporate entity gears its global operations, together with the current state of corporate ownership worldwide--abstract, remote and concentrated.
The solution does not lie in abolishing the transnational corporation. That's a prescription WTO protestors lamely proclaim as the cure. Instead, we need to advocate for corporate entities that are more peoplized, localized, and human-sized-in short, more mature. In a private property system, ownership is the means through which private enterprise adjusts its operations to the concerns of those its operations impact. The key to rectifying today's neoliberal policies is to change ownership patterns. Such "up-close capitalism" would offer the community-attuned antidote required to counter today's money-myopic brand of globalization. Absent that property-empowered personal relationship, globalization will continue to seem disconnected, speeded-up, and dumbed-down.
Today's Radical Redistribution of Wealth
Globalization could become a positive force for modernity. Instead, neoliberals insist that globalization operate as a capital market-led, WTO-backed process that radically redistributes well-being worldwide. Here are some examples, with references because these numbers are so unbelievable you might want to look them up for yourself:
* The wealth of the Forbes 400 richest Americans grew an average $1.44 billion each from 1997-2000, for an average daily increase in wealth of $1,920,000 per person ($240,000 per hour or 46,602 times the U.S. minimum wage). [See www.forbes.com.]
* Funds in the hands of U.S. money managers grew from $1.9 trillion in 1980 to $17 trillion in 2000. While those funds were under the control of fiduciaries (half the funds are there due to tax incentives), the pay gap between top executives and production workers in the 362 largest U.S. companies soared from 42:1 in 1980 to 475:1 in 1999. ["Executive Pay Special Report," Business Week, April 7, 2000, p. 100.]
* Prior to the dot-com collapse, Wired magazine projected Microsoft's Bill Gates would become a trillionaire by March 2005 and, by March 2020, a quadrillionaire (a million billionaire). [Evan L. Marcus, Wired, September 1999, p. 163.] With the Bush II Administration reneging on the Justice Department's pledge to bust-up this acknowledged monopoly, baby-boomers can look forward to a future where a single person may have more financial wealth than their entire generation, all 76 million strong. Far-fetched? From 1983-1997, only the top five percent of U.S. households saw an increase in net worth, while wealth declined for everyone else. [Federal Reserve Bulletin, January 2000, p. 10.]
* The financial wealth of the top one percent of U.S. households now exceeds the combined household financial wealth of the bottom 95 percent. [Edward N. Wolff, "Recent Trends in Wealth Ownership," a paper for the conference on "Benefits and Mechanisms for Spreading Asset Ownership in the United States," New York University, December 10-12, 1998.]
* Bush II's proposals to privatize Social Security would redirect $100 billion per year of payroll taxes (the largest levy paid by 80 percent of Americans) into financial markets where, from 1983 to 1998, 53 percent of market gains flowed to the top one percent of households. [Edward N. Wolff, "Where has all the Money Gone?," The Milken Institute Review, Third Quarter 2001, p.34.]
* The top fifth of U.S. households claim 49.2 percent of national income while the bottom fifth gets by on 3.6 percent. [See www.census.gov (Table H-2).] Between 1979 and 1997, the average income of the richest fifth jumped from nine times the income of the poorest fifth to fifteen times. [The Economist, June 16-22, 2001.]
* The share of the nation's after-tax income received by the top one percent nearly doubled from 1979-1997. By 1998, the top-earning one percent had as much combined income as the 100 million Americans with the lowest earnings. [Congressional Budget Office Memorandum, Estimates of Federal Tax Liabilities for Individuals and Families by Income Category and Family Type for 1995 and 1999, May 1998.]
* The long-term fiscal cost of the Bush II tax cut enacted in 2001 is more than double the long-term Social Security shortfall. [Washington, D.C. Center on Budget and Policy Priorities, August 3, 2001. See www.cbpp.org/8-3-01tax.htm.] The top one percent will receive three-eighths of the benefits once that law is fully phased in. Bush's economic stimulus package follows that same pattern.
* The predictable result: excess physical capacity alongside unmet physical needs.
* As of November, industrial production had declined for thirteen consecutive months, the longest period of falling output since July 1932. Operating capacity sank to 74.8 percent in October, the lowest level since June 1983. ["Industrial Production Tumbles," The New York Times, November 1, 2001.]
* The inevitable "overcapacity" recession began well before September 11.
Unjust, Insensible and Unsustainable
Even a cursory glance at what now passes for economic science in the United States should have convinced the global community that our economic model is unworkable and unstable. Instead, at our insistence, globalizers endorsed our neoliberal "Chicago" model and spread it worldwide. The predictable results, courtesy of the United Nations Human Development Program Report (1999):
* Eighty countries have per capita incomes lower than a decade ago. Sixty countries have grown steadily poorer since 1980.
* In 1960, the income gap between the fifth of the world's people living in the richest countries and the fifth in the poorest countries was 30 to 1. By 1990, the gap had widened to 60 to 1. By 1998, it had surged to 74 to 1.
* From 1995 to 1999 the world's 200 wealthiest people doubled their net worth, to $1,000 billion.
* Three billion people presently live on $2 or less per day while 1.3 billion of those get by on $1 or less per day. With global population expanding 80 million each year, World Bank President James D. Wolfensohn cautions that, unless we address the "challenge of inclusion," thirty years hence we may have 5 billion people living on $2 or less per day.
* Two billion people suffer from malnutrition, including 55 million in industrial countries. Thus, in three decades, neoliberal-style globalization could create a world where 3.7 billion people suffer from malnutrition.
* UNDP's assessment: "Development that perpetuates today's inequalities in neither sustainable nor worth sustaining."
The maladies that accompany today's fashionable neoliberal model not only persist, they are poised to grow steadily more perilous. Consider:
* In Indonesia, 61.7 percent of the stock market's value is held by that nation's fifteen richest families. The comparable figure for the Philippines is 55.1 percent and 53.3 percent for Thailand. [Stijn Claessens, Simeon Djankov and Larry H.P. Lang, "Who Controls East Asian Corporations?" (Washington, D.C.: The World Bank, 1999).] Worldwide, there's now roughly $60 trillion in securitized assets (stocks, bonds, etc.), with an estimated $90 trillion in additional assets that will become securitizable with the global reach of today's "emerging markets" development model. With help from their global regulatory agent, the WTO, neoliberalism is evoking a future where a handful of the world's most well-to-do families may pocket more than 50 percent of that $90 trillion in financial wealth.
* The way capital markets are currently structured routinely and richly rewards those who internalize gains and externalize costs (that is, they avoid such costs as paying a living wage or cleaning up environmental toxins). The neoliberals' one-dimensional means for measuring progress encourages managers to embrace manufacturing practices that have proved detrimental to our environment worldwide. As of 1996, the biologically productive area needed to produce the natural resources we consume and to absorb the carbon dioxide we emit was 30 percent larger than the area available. [See Living Planet Report 2000 by United Nations Development Program and World Wildlife Fund.]
* In its July 2001 report, the International Panel on Climate Change reports that relentlessly rising global temperatures-due primarily to hydrocarbon use in industrial economies-are poised to create catastrophic conditions worldwide. Agriculture, health, human settlements, water, Animals--all will feel the impact on a planet that's warming faster than at any time in the past millennium. Throughout the 1,000 pages of predictions in the panel's 2,600 pages of analysis, one theme remains constant: the poor of the world will be hardest hit.
What Dare We Call Neoliberalism?
The neoliberal/WTO model conflicts with the principles that guide free enterprise, private property economies. Consider just these eight inconsistencies:
1. Free enterprise is based on the notion that free markets provide an opportunity for people to freely express their choices and thereby enjoy the dignity of selfdetermination. To equate globally integrated markets with the expression of personal will is misleading, even deceptive. Markets don't respond to people, but to people with money. When we embrace a policy mix, like today's, that concentrates income, that stance is destined to undermine both self-determination and markets.
2. Private enterprise is based on the sanctity of private property. Yet private property depends for its legitimacy on its lack of exclusivity. When we embrace a paradigm, like today's, that radically concentrates ownership, that model poses a clear and present danger to private enterprise.
3. Free enterprise democracies are based on the sensible idea that people should have an influence on forces that have an influence on them. Today's remote-control, globally-attuned paradigm would strike Adam Smith, the father of free enterprise, as a freak of free enterprise. He assumed that capital would remain in the country where it originated. He envisioned not remote financial markets but an engaged and community-attuned humanity (what he called "human sympathies") as the animating force that converts personal gain to the public good.
4. Nothing in the neoliberal paradigm suggests that capital ownership patterns bear any relationship to fiscal foresight, a key operating principle of prudent free enterprise.
5. Nor does anything in the neoliberal model suggest that property patterns are relevant: exclusive vs. inclusive; concentrated vs. dispersed; foreign vs. domestic; individual vs. institutional; remote and abstract vs. up-dose and personal. Policy-making becomes nonsensical when it suggests that private property is essential but its patterns irrelevant.
6. Neoliberals revere Austrian Friedrich von Hayek, particularly his call for "local knowledge" as the means for ensuring "decentralized decision-making"--a key reason cited for the downfall of state-directed economies. Yet neoliberals insist on a model that grants dominance to signals provided by remote, abstract, and "depeoplized" capital markets.
7. Natural capital provides the foundation on which all standards of living are inescapably based. Yet neoliberals insist that dominance be granted a financial model that regards all of nature as essentially cost-free--and treats it accordingly. That naive stance is inconsistent with a political system meant to endure "for the ages."
8. The neoliberal model has failed to shrink the need for government. As the concentration of wealth and income accelerated--relying on neoliberal policies--the ratio of public to private spending grew worldwide, on average, from 30 percent of GDP in 1960 to 46 percent in 1997. ["The visible hand," The Economist, September 20, 1998, p. 17.] Neoliberals (and libertarians) misconstrue the political lesson: a lightly governed future requires policies crafted to ensure that people need government less. Instead, neoliberal policy-making ensures a fiscal nightmare by fostering retirement populations worldwide who possess votes but precious few assets.
In short, neoliberal practices and policies bear no resemblance to economic principles that are either sensible or sustainable. Whatever the neoliberals may be, "conservatives" they certifiably are not. At every turn, their proposals contradict the tenets they espouse.
Rather then integrating the world economy, the neoliberal model divides people, both within and between nations. It also plunders natural resources, imperils posterity, and jeopardizes self determination. Instead of fostering free enterprise democracies, today's finance-obsessive paradigm attunes globalization to such a cramped range of values that the financially fit are seen as sufficient unto themselves while the rest are not worth the bother.
This mechanistic, formulistic approach to globalization guarantees results that are socially unjust, economically unworkable, politically destabilizing, culturally intrusive, and ecologically unsustainable. If left unreformed, the rulemaking arm of neoliberalism (the WTO) is certain to evoke widespread hostility, its operations routinely associated with oppression, exploitation, domination, corruption and, most destabilizing of all, disrespect. Now their fashionable model has evoked a global overcapacity recession, historically the most difficult contraction to undo.
For the United States to retain (or regain) respect in the global community, it is essential that our neoliberal ideologues--of both parties--be replaced with legislators who display some semblance of common sense. The policy choice is not an issue of left versus right, Demopub or Republicrat. It's about scale--big versus small, global versus local. And about which values are granted priority. A policy mix that grants deference to the forces of finance is fine. But for policy-makers to grant those forces global dominance may be how fascism finds its foothold in a globalizing world.
Former counsel to the U.S. Senate Committee on Finance, Jeff Gates is the author of The Ownership Solution (1998) and Democracy at Risk.
Gates, Jeff. 2002. Modern Fashion or Global Fascism? Tikkun 17(1): 30.