There have been moments in modern history when the precise details of dissolution were unclear but where the trajectory set in motion virtually assured that broader circumstance would reassert itself. George W. Bush’s war on Iraq— a war of choice undertaken for domestic political and economic reasons and ‘managed’ by arrogant sycophants and opportunists against the whole of imperial history, is the basis for current geopolitical realignment that few inside the administration likely imagined when the war was undertaken. Likewise, the totalizing logic of neoliberalism embodied in Democrat economic policies since Jimmy Carter occupied the White House have propelled a global economic realignment of which the precise details of dissolution are not yet visible but are nonetheless virtually assured.
Economic globalism, a term apparently only recently recovered ‘inside the beltway’ in the U.S., has imperial roots going back three or four centuries. Capitalist production requires resources (‘human,’ natural) to fuel itself and new customers once domestic customers have been satiated / fully immiserated. These require ‘opening’ markets, over previous centuries accomplished at the barrel of a gun. The modern technique, less confrontational but equally ‘effective,’ is to send in the economists. The pitch, that if you ignore history, existing social relations, power imbalances, current economic distribution and all accumulated knowledge of the world that in some theories some people might benefit (in tightly circumscribed terms) from some economic prescriptions, isn’t generally convincing, hence the existence of Wall Street and the IMF (International Monetary Fund) when back-up is needed.
Graph (1) above: the known salvation of capitalism since FDR occupied the White House in the 1930s is increased government spending in an economic downturn to (1) provide for the most vulnerable citizens that tend to be most impacted and (2) save capitalism from the correct and righteous criticism that it is a sequential catastrophe generating mode of social organization that takes more from most people in its recurrent crises than it provides in economic booms. Following from his ideological predecessor Bill Clinton, Democrat Barack Obama oversaw the slowest growth in government spending since the 1920s in the midst of the worst economic downturn since the Great Depression. Explained by die-hard Democrat apologists as a consequence of Republican obstruction, the more straightforward explanation to be taken from Mr. Obama’s own words is that he is among the more ideologically pure neoliberals in Western governance. Source: St. Louis Federal Reserve.
As an extension of the logic of capitalism, neoliberalism is the tendency toward ‘pure’ form, an entire world made for-sale in faux-competitive markets. In this formulation the ACA (Affordable Care Act), a/k/a ‘Obamacare,’ ties to Barack Obama’s TPP (Trans-Pacific Partnership) ‘trade’ agreement through the imperative of finding new ‘customers’ to buy whatever defective-extractive products are devised to the point when all economic production is owned / controlled by a global oligarchy. It is hardly an accident that extending pharmaceutical patents and protections is a central goal of the TPP. Who better to sell monopoly-priced pharmaceuticals and medical devices to than captive Obamacare customers, the poorer of whom are handed the illusion that its subsidies are for them rather than the corporations feeding off of the American for-profit sick care system.
Loyal Democrats appear at a loss to explain Mr. Obama’s enthusiastic support for the TPP, particularly given the profoundly anti-democratic ambitions found in its ISDS (Investor State Dispute Resolution) provisions. And while economists and Central Bankers frame the (George W.) Bush / Obama bank bailouts as economically necessary, the economic function of funding capitalist production would have been better served if the banks had been converted to public utilities. Additionally, why revive their concentrated economic power when democracy would have been better served if it had been allowed to dissipate on its own? The answer: because predatory banks and bankers are an essential tool of capitalist imperialism and have been for at least a century now. What was recovered in the bailouts was political ‘capital’ for the banks, not a necessary economic function for ‘the economy.’
Graph (2) above: a saying popular on Wall Street since the 1970s is ‘don’t fight the Fed’ meaning that financial markets tend to rise or fall based on Federal Reserve actions. And in fact, a review of U.S. economic history since the end of WWII suggests that every recession since then was intentionally caused by the Federal Reserve raising the Federal Funds rate. What hasn’t worked so well since the Savings and Loan Crisis of the late 1980s, early 1990s, is reviving the economy by lowering interest rates. This latter period approximates the modern epoch of finance capitalism. As there is some question on the part of the center-left contingent of the neo-capitalist right as to who the beneficiaries of Federal Reserve policies have been, they are the owners of financial assets and banks and bankers. Bank profits rise when interest rates fall and they fall when interest rates rise. Source: St. Louis Federal Reserve.
Following from a capital markets view of private debt put forward by Benjamin Graham and David Dodd most of a century ago, banks today lend against existing collateral, not promising business plans. The ‘asset’ sales being forced on Greece by the troika are part and parcel of similar ‘workouts’ forced on ‘debtor countries,’ as if there were such a thing, that find bankers and industrial capitalists owning essential infrastructure in return for cancelling (or extending) predatory debt that the citizens of these countries neither agreed to nor benefited from. The same basic frame was used by the Obama administration against millions of prospective American homeowners when phony ‘mortgage relief’ programs were used by banks to run-up large fees then owed by desperate borrowers. These mortgage loans were washed through Federal mortgage agencies and then sold to hedge fund and private equity ‘investors’ to be foreclosed on and the properties sold.
Graph (3) above: a consequence of the Greenspan, Bernanke and Yellen ‘puts’ has been serial asset bubbles. The first was regional and caused by widespread financial looting in the Savings and Loan Crisis of the late 1980s – early 1990s. Alan Greenspan rapidly lowered the Federal Funds rate after the stock market crash of 1987 and stock prices generally rose through the subsequent recession to ultimately produce the largest stock bubble in world history. Following the dot-com crash of the early 2000s Mr. Greenspan lowered interest rates and kept them low for an extended period contributing to, in conjunction with financial deregulation, the housing boom-bust. Both of the Federal Reserve Chairs that followed Mr. Greenspan continued the practice of using interest rates to manage financial market outcomes. The result is a rapid return to bubble levels for U.S. stocks and high-end housing as the economy relevant to the other 99% of the population has been left to rot. Source: Robert Shiller, Yale University.
The apologia that any of this engineered misery was necessary unites Jimmy Carter through Bill Clinton with Barack Obama. Jimmy Carter appointed ‘sado-monetarist’ (Paul Krugman’s contribution to modern economics) Paul Volcker to Chair the Federal Reserve with the mandate to end 1970s inflation. Mr. Volcker created the up-to-then worst recession since the Great Depression to give economic cover to U.S. domestic, foreign and monetary policies that were the actual sources of the inflation. Bill Clinton ‘ended welfare as we know it’ using an engineered stock bubble as cover for a corporate-state power grab. Barack Obama fully revived the fortunes of predatory ruling and manager classes while crushing their victims using programs he sold as in the public interest. Renewed inner-city violence in the present overlaps to the block with neighborhoods decimated by predatory mortgage loans made by Wall Street bankers bailed out by Mr. Obama.
Graph (4) above: the ‘stagflation’ of the 1970s was caused by a wealth of factors including serial oil shocks that were ‘blowback’ from U.S. foreign policies and the reaction of oil-producing governments to the loss of a hard currency petrodollar peg when Richard Nixon ended the gold standard. Illustrated is the relation of ‘official’ inflation, CPI (Consumer Price Index) Less Food and Energy, to oil prices driven higher by oil shocks. Mainstream economists can theorize as they wish, but the coincidence of the oil shocks with rising ‘core’ CPI (ex-Food and Energy) creates paradox for conventional explanations of 1970s inflation. Rising oil prices were the product of restricted supply, not increased demand. Even if the broader rise in prices were caused by producer efforts to push their rising costs through to customers, the root cause of the inflation was geo-political and geo-economic. Rising food prices were a product of the structure of agricultural subsidies that had already been addressed by Richard Nixon and failed harvests overseas. Crushing aggregate demand, as was Carter appointee Paul Volcker’s strategy through raising interest rates to punishing levels, was to treat metaphorical symptom as cause. Source: St. Louis Federal Reserve.
When Bill Clinton was elected President in 1992 theretofore unknown ‘circumstances’— a greater than anticipated Federal budget deficit, ‘forced’ him to renege on campaign promises of increased social spending (“it’s the economy stupid”) and to launch a neoliberal economic program as a ‘social liberal, fiscal conservative.’ This stance, along with Democrat Jimmy Carter’s economic move hard-right, posed libertarian neoliberalism as the new left, economic ‘freedom’ as the freedom of corporate-state capitalism to do as its owners their agents wished. Barack Obama extended this ‘model’ with consequence-free bailouts of banks and bankers, a corporate takeover of the for-profit healthcare system to deliver it more customers; he cut government spending in the midst of an economic downturn and his global program of corporate-state control is being institutionalized through the TPP (Trans-Pacific Partnership).
Mr. Clinton’s ‘unanticipated’ budget deficit depended on misleading economic mythology for its proffered logic in much the same way that Barack Obama’s use of ‘free-trade’ to sell the TPP does. Federal government spending isn’t constrained by tax receipts— the Federal budget and related ‘deficits’ are accounting conventions, a convenient way of measuring receipts and expenditures, and not a constraint on Federal spending. Likewise, Federal government expenditures are approximately one-third of GDP (Gross Domestic Product) and the so-called ‘private’ sector is a public-private hybrid (‘mixed economy’), not a distinct sector. Military spending, privatized government research and development, property and contract laws and bank bailouts are all public-private undertakings. In this context ‘free-trade’ agreements are institutional adjustments, not declarations of ‘private’ sector independence.
For the multitudes who still take Democrat political pronouncements at face value, why would Mr. Obama make passing the TPP, with its central purpose being to codify and formalize corporate power over markets and civil governance, a major policy objective if his goal is other than to give corporations more power over markets and civil governance? And Mr. Obama and his contingent of national Democrats needn’t even be duplicitous for doing so given that some fair number of them actually believe that corporate control over economic matters and the resulting corporate provision of public ‘goods and services’ are desirable outcomes. What is in play is the Washington Consensus forty years on with a supporting cast of ‘fiscal conservative, social liberal’ Democrats and career intellectuals / apologists who sell their chosen sliver of social understanding as if it were a totality.
The success of Jimmy Carter and Bill Clinton in exorcising the ghost of FDR’s Democrat Party from contemporary Party politics was a bi-partisan affair. The process of redefining political right and left in terms of Democrat and Republican rendered them content-free as a function of which Party leaders hold a particular view rather than the genesis and content of the views themselves. Barack Obama’s actual economic policies, as opposed to his explanations of them, are retrograde to the point of being pre-Great Depression. The residual of FDR’s New Deal lies in Democrat clean-up policies for the serial catastrophes that ‘new’ capitalism creates. Leading liberal economists made their careers as proponents of recovered economic globalism apparently unconcerned (unaware?) that their standing is a consequence of their support for a particular historical trajectory rather than creative and / or analytical insight.
There is no doubt Republicans are ‘worse’ in the sense of being less competent at selling the policies of the radical right to gullible liberals. But with Bernie Sanders having pre-capitulated, Hillary Clinton making implausible noises of faux-opposition against the entirety of her known neocon, neoliberal public life and Republicans endlessly recycling Ronald Reagan’s doddering, murderous, blather the question of the moment is: are competent neoliberal neocons really preferable to incompetent neoliberal neocons? And a question for Mr. Sanders is why the Democrats? The most plausible answer, because the major Parties have a lock on the electoral system, begs the question of why this lock would be used to propel an actual opposition candidate to office rather than yet one more neoliberal, neocon, faux-opposition candidate? Whomever is elected to ‘lead’ will have decades of institutionalized neoliberal ideology to follow.