Published on ZNet, by Noam Chomsky, August 27, 2011.
… In the past 30 years, the “masters of mankind,” as Smith called them, have abandoned any sentimental concern for the welfare of their own society, concentrating instead on short-term gain and huge bonuses, the country be damned – as long as the powerful nanny state remains intact to serve their interests.In parallel, the cost of elections skyrocketed, driving both parties even deeper into corporate pockets. What remains of political democracy has been undermined further as both parties have turned to auctioning congressional leadership positions. Political economist Thomas Ferguson observes that “uniquely among legislatures in the developed world, U.S. congressional parties now post prices for key slots in the lawmaking process.” The legislators who fund the party get the posts, virtually compelling them to become servants of private capital even beyond the norm.
The result, Ferguson continues, is that debates “rely heavily on the endless repetition of a handful of slogans that have been battle tested for their appeal to national investor blocs and interest groups that the leadership relies on for resources.”
The post-Golden Age economy is enacting a nightmare envisaged by the classical economists, Adam Smith and David Ricardo. Both recognized that if British merchants and manufacturers invested abroad and relied on imports, they would profit, but England would suffer. Both hoped that these consequences would be averted by home bias, a preference to do business in the home country and see it grow and develop. Ricardo hoped that thanks to home bias, most men of property would “be satisfied with the low rate of profits in their own country, rather than seek a more advantageous employment for their wealth in foreign nations.
In the past 30 years, the “masters of mankind,” as Smith called them, have abandoned any sentimental concern for the welfare of their own society, concentrating instead on short-term gain and huge bonuses, the country be damned – as long as the powerful nanny state remains intact to serve their interests.
A graphic illustration appeared on the front page of the New York Times on August 4. Two major stories appear side by side. One discusses how Republicans fervently oppose any deal “that involves increased revenues” – a euphemism for taxes on the rich. The other is headlined “Even Marked Up, Luxury Goods Fly Off Shelves.” The pretext for cutting taxes on the rich and corporations to ridiculous lows is that they will invest in creating jobs – which they cannot do now as their pockets are bulging with record profits.
The developing picture is aptly described in a brochure for investors produced by banking giant Citigroup. The bank’s analysts describe a global society that is dividing into two blocs: the plutonomy and the rest. In such a world, growth is powered by the wealthy few, and largely consumed by them. Then there are the ‘non-rich,’ the vast majority, now sometimes called the global precariat, the workforce living a precarious existence. In the US, they are subject to “growing worker insecurity,” the basis for a healthy economy, as Federal Reserve chair Alan Greenspan explained to Congress while lauding his performance in economic management. This is the real shift of power in global society.
The Citigroup analysts advise investors to focus on the very rich, where the action is. Their “Plutonomy Stock Basket,” as they call it, far outperformed the world index of developed markets since 1985, when the Reagan-Thatcher economic programs of enriching the very wealthy were really taking off.
Before the 2007 crash for which the new post-Golden Age financial institutions were largely responsible, these institutions had gained startling economic power, more than tripling their share of corporate profits. After the crash, a number of economists began to inquire into their function in purely economic terms. Nobel laureate in economics Robert Solow concludes that their general impact is probably negative: “the successes probably add little or nothing to the efficiency of the real economy, while the disasters transfer wealth from taxpayers to financiers.”
By shredding the remnants of political democracy, they lay the basis for carrying the lethal process forward – as long as their victims are willing to suffer in silence.
Chomsky is emeritus professor of linguistics and philosophy at the Massachusetts Institute of Technology in Cambridge, Mass. (full long text).