Robin Hahnel on economic suicide
Source Louis Proyect
Date 12/02/28/15:53
Understanding Economic Suicide
by Robin Hahnel

IN MY JANUARY column I explained that by stonewalling financial
regulatory reform and imposing draconian fiscal austerity in the
midst of the worst economic recession in eighty years ruling
elites in Europe, the US, and Canada have us on track for what
amounts to economic suicide, putting the North Atlantic region
fast on the road to becoming formerly advanced economies. How can
this have happened? Why would our ruling elites engage in such
counterproductive policies?

Collapse of the Political Center Left

Thatcher and Reagan launched the neoliberal counter revolution
against regulated, mildly egalitarian capitalism in the early
1980s. But not until the political center-left had been turned
into a willing center-right did the economic policies of the
traditional political parties become barely indistinguishable.

In the US in the 1990s it was the “liberal” Democrat Bill Clinton
who “ended welfare as we know it,” pushed Congress to pass NAFTA
and bring China into the WTO, and ended any pretence of regulating
the financial industry when he signed legislation repealing the
Glass-Steagall Act separating high risk investment banking from
federally insured commercial banking. Today it is the “liberal”
Democrat Barak Obama who pivoted from a woefully inadequate fiscal
stimulus in 2009 to offer up social security and Medicare for
deficit reduction in 2011. It is Barak Obama who aided and abetted
Wall Street’s successful efforts to take the teeth out of the
Dodd-Frank Wall Street Financial Reform and Consumer Protection
Act of 2010 before he signed it. And it is Barak Obama who
scuttled international negotiations to avert climate change in
Copenhagen and opportunistically absented himself from the debate
as Congress failed to pass any legislation whatsoever to address
climate change.

The situation is no different in Europe. In Greece it was the
Social Democratic government of George Papandreou who imposed
fiscal austerity measure after fiscal austerity measure before he
was finally forced to resign in November 2011. In Spain it was the
Socialist government of Jose Luis Zapatero who presided over one
fiscal austerity package after another when the economic crisis
broke in 2008 until his party was overwhelmingly voted out of
office in December 2011.

It is hardly surprising that Tory Prime Minister David Cameron in
the UK and Conservative Prime Minister Stephen Harper in Canada
have embraced “blame the victim” fiscal austerity as the policy
response long favored by conservative politicians. What has
changed over the past decades is the extent to which only
rhetoric, but not policies, change when center-left governments
replace center-right governments. Now, even when we vote
overwhelmingly for “change you can believe in,” what we get
instead are the same policies enriching the 1% at the expense of
the 99% -- during good times as well as bad. The bottom line is
poor and middle class people no longer have a major political
party who even attempts to act in their interest anywhere in the
North Atlantic region. Center-left political parties now behave as
center-right parties used to behave, no matter what kind of
populist rhetoric they resort to during election season.

Multinational Corporations No Longer Care

But if I am correct that failure to enact meaningful financial
reform and launch a massive fiscal stimulus will doom the formerly
advanced economies in the North Atlantic to stagnation and decline
relative to other regions, why are our major corporations fouling
their own nest? Part of the answer is blind free market ideology.
Part of the answer is an economics profession that has studiously
unlearned lessons taught by the greatest economist of the
twentieth century, John Maynard Keynes. And part of the answer is
insatiable greed run amuck. But beyond all these contributing
factors lies a more fundamental answer to the conundrum: The nest
they are fouling is still our nest, but no longer theirs.

Thanks to three decades of corporate sponsored globalization –
supported by both center right and center left parties -- giant
corporations are now free to (1) locate production wherever wages,
labor standards, environmental standards, and corporate taxes are
lowest, (2) sell products produced elsewhere in the high income
markets of the North Atlantic region, (3) collect royalties on
“intellectual properties” from every corner of the globe, (4)
leverage their global lending business through the roof with a
guaranteed taxpayer bailout in their back pocket whenever a
financial crisis threatens, and last, but not least, (5) rely on
an overwhelming military force paid for by the American taxpayer
to squash any who dare to threaten to take any of these “freedoms”
away from them. So what if the North Atlantic region declines in
relative economic power? So what if the middle classes in Europe
and North America shrink to the size of middle classes in the rest
of the world? So what if the dream that one’s children will have
better economic lives dies for the 99%?

The future for the 1% and their children looks very bright indeed.
They pay less in taxes than ever before. Because their fortunes no
longer depend on one region alone, their income and wealth
continue to rise spectacularly even while the North American
region stagnates. The educational and healthcare systems that are
falling apart are not services they and their children use. The
jobs that are no longer there for many in the 99% are of no
concern to those whose only “work” is to manage their own assets.
The 1% now enjoys the loyal political services not only of right
wing and center-right political parties, but of formerly
center-left parties as well. With military drafts a distant
memory, they need not fear that any hostility that proves
“necessary” might inadvertently claim the life of one of their own
children. In short, they are not fouling their own nest at all.
Their nest never looked better.

Of course sometimes privileged elites discover too late that by
over reaching they drove those whose interests they trample to
revolt. In which case, with hindsight, we might say some day that
they fouled their own nest. But short of losing power, only if
global warming and climate change proves to be the rising tide
that engulfs all boats does the present behavior of our ruling
elites risk fouling their own nest along with ours.

Robin Hahnel is Professor of Economics at Portland State
University. His most recent book is Economic Justice and Democracy
and he is co-author with Michael Albert of The Political Economy
of Participatory Economics. This column originally appeared in
Portland's 'Street Roots' newspaper and exclusively available
online at NLP.

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