This observation is really so simple that I’m not sure it’s worth posting, but I had never thought of it in precisely this way. If you’ll note, Republicans and “sensible” Democrats all agree that we need to cut Social Security in some way, but at the same time, Republicans massively expanded Medicare under Bush (with the prescription drug benefit) and then campaigned against any cuts to the program in 2010. What is the difference here, given that both seem to target the same population and both are going to generate increasing costs in the medium term (and Medicare much moreso)?
The difference, it seems to me, can be found in a simple truism: money is power. All things being equal, having more money makes you more powerful. Social Security gives direct cash payments to retirees, and even though in practice they are constrained as to how they can spend it (needing food, etc.), they are in principle free to spend it however they wish — so it increases their power. Medicare, by contrast, gives money to doctors, hospitals, and pharmaceutical companies (and also private insurance companies through subcontracting, subsidies, etc.), increasing the power of corporations and the wealthy elites.
Similarly, why is export-driven growth such a big article of faith under neoliberalism? Why not promote domestic consumption instead? After all, the money spends no matter who your customers are, and it might even be cheaper to sell to locals than to ship everything to developed nations. The answer: in order to promote domestic consumption, you need to make it so that the local population has more money and therefore more power. Hence China, an authoritarian regime, opts for export-driven growth — and international organizations centered in the developed world preach the gospel of export-driven growth because it puts developing nations in a position of permanent dependency.
Another question: why would anyone object to extending unemployment benefits when it’s obvious there are no jobs? Wouldn’t removing further money from the system just make things worse? The answer: in a world where uninsurance benefits are relatively generous, the employer has less control over the worker. In a world where they’re stingy, the employer only has to keep working conditions 1% better than “dying on the street.” Productivity gains galore!
It’s become something of a cliche to reverse the traditional Republican denunciation of “class warfare” by saying that actually it’s the rich who are at war with everyone else — but I think the spuriousness of the original claim tends to make us underplay its reversal. This really is a “total war.”
It’s not a war where someone has invaded another country and the goal is to push back to the previous boundaries. Instead, it’s a war of conquest where the goal is to reduce the target population to a position of utter servitude and submission. The ruling classes ideally want to have all the power and for everyone else to have none. They can’t really achieve that, as they depend on everyone else for workers and customers, but they distribute power to the lower levels grudgingly but strategically, always looking for ways to minimize the expenditure and carefully target it so as to maximize the dynamic of dependency.
As for what everyone else can do to change this, I don’t know.
Tuesday, January 4, 2011 at 11:23 am
“The rich will do anything for the poor except get off their backs!” Karl Marx
Tuesday, January 4, 2011 at 12:28 pm
“Similarly, why is export-driven growth such a big article of faith under neoliberalism?”
I have to say I’m more than a bit astonished at this statement. If neoliberalism has any economic theory (and surely it does), it’s the economic theory of neoclassical economics. And a central part of neoclassical economics is Hecksher-Ohlin trade theory, which precisely denies the particular importance of export-driven growth over other types of growth.
“Hence China, an authoritarian regime, opts for export-driven growth”
China is an authoritarian regime but not a neoliberal regime. In fact, it’s a distinctly and intentionally anti-neoliberal regime, at least in it’s internal economic policies.
“international organizations centered in the developed world preach the gospel of export-driven growth”
When you say “export-driven growth”, what you seem to mean is the mercantilist economic policy of post-WWII Japan, which was widely adopted in other Asian countries (Taiwan, South Korea, PRC, Singapore, primarily with Vietnam and others following in those footsteps). The international organizations hate (and hated) these policies consistently and have made significant efforts to oppose them for many decades.
“The answer: in order to promote domestic consumption, you need to make it so that the local population has more money and therefore more power.”
So far as I can tell, that’s literally the reverse of what the PRC’s economic thinking is.
Tuesday, January 4, 2011 at 12:39 pm
I’m not sure what your last sentence means in relation to what you quote.
Tuesday, January 4, 2011 at 1:01 pm
“The answer: in order to promote domestic consumption, you need to make it so that the local population has more money and therefore more power”
1. The PRC doesn’t seem to care much about domestic consumption. In fact, they’ve designed their currency system to depress domestic consumption and conversely increase exports.
2. The PRC doesn’t seem to operate with much interest if the local population has more money perse. That regime instead seems to pay a great deal of attention on building positions in key identified industries. There’s no indication they care whether Chinese factory workers in the toy industry have higher wages, for instance. What the regime does (seem to) care about is that factories located in the PRC have control over key points in the toy industry production chain.
3. Therefore, it’s not money perse that the PRC seems to be particularly interested in. They seem to have little interest in whether the owners of toy factories in the PRC are individually wealthier than the owners of Hasbro or Mattel. They certainly spend very little time trying to make Chinese toy factory employees as wealthy as the comparatively massively better paid employees of Mattel or Hasbro. They seem to focus on market power (retaining control of key points in the industry), not whether Chinese toy entrepreneurs or workers amass a lot of money (though they don’t oppose them doing so, it’s just not a policy priority).
Tuesday, January 4, 2011 at 1:04 pm
Okay, I get what you’re saying now: the Chinese government doesn’t really care if individual capitalists get money — presumably, I would extrapolate, because they have ways of making sure that even a very wealthy person doesn’t become an independent power center. (I was assuming your point #1.)
Tuesday, January 4, 2011 at 1:15 pm
You can think of the conservative assault on government-sector jobs and, of course, unions in much the same way. Conservatives that I know think that government sector jobs create a huge power base for the Democratic party. I usually respond by saying, you know, those people would be Democrats anyway; you seem like you just want them out of work. Perhaps that is true in some ways, because it would reduce their power. Also, it amazes me how much some middle class people have bought into the idea that laborers should literally be poor. I have heard on many occasions someone bellyaching about a union auto worker having a vacation home and a boat, or a nice car. I usually say something like, this guy actually builds expensive cars for a living, I think he should be able to afford a nice car! But nobody seems to mind that investment bankers selling pieces of hot dog shit to retirees can own half of Long Island?
Tuesday, January 4, 2011 at 1:36 pm
“Okay, I get what you’re saying now: the Chinese government doesn’t really care if individual capitalists get money — presumably, I would extrapolate, because they have ways of making sure that even a very wealthy person doesn’t become an independent power center.”
Adam,
This sentence of yours indicates that, in the current Chinese regime, it’s power that’s important, not money. But your original post asserted that it was money that was important rather than power.
So, either the PRC isn’t a neoliberal regime or neoliberal regimes don’t function the way you’re depicting or quite simply, it’s unclear what the interrelations of money and power are.
Tuesday, January 4, 2011 at 1:57 pm
My original post asserted, and I quote: “All things being equal, having more money makes you more powerful.” “Money is power” doesn’t mean “money is the sole form of power.”
I may be wrong in this post, but your way of demonstrating it produces a kind of mental block in me. My mind wanders back to that fateful day when you thought I was an idiot for drawing any analogy between CDS and insurance…
Tuesday, January 4, 2011 at 4:22 pm
Time to bring the facts.
Actually the combination of a highly authoritarian state and a free market is entirely and totally consistent with neoliberalism, from it’s inception in German ordoliberaliam in the late 1930s. Borrowing from Carl Schmitt (though cross polination is more likely) his critique of parliamentary democracy, the original recommendation was a combination of an authoritarian state that was ‘above politics’ (as sovereign is for schmitt) and that set the parameters for the free markets since ultimately the free market is more rational than the short term supposed messiness of democratic deliberation (just as Schmitt had said parliamentary democracy was braced by an inability to decide) that might resist what is necessary to create the Market. Schmitt even wrote a piece of business leaders called strong state, free market which multiple authors have noted is entirely consistent with Hayek, Ropke and the early neoliberals – indeed there are whole books on it – Authoritarian Liberalism is a good place to start. I don’t need to bring in the example of Chicago’s Chile here. And now, of course, China.
Tuesday, January 4, 2011 at 5:06 pm
Burritoboy,
I think the relationship of international development agencies to the Asian model of export-led growth is a bit more complicated than you suggest–the opposition was less towards exporting per se than the significant degree of state intervention in the economy. Development agencies had little issue with South Korea exporting cheap textiles in the 1950′s, for instance, but were sharply critical of a large-scale move into heavy industry, supported by subsidies, directed credit, massive government investment and all the rest. It’s not so much the exporting as the steady move up the value chain, supported (and often directed) by the state every step of the way, that causes controversy.
And to Adam,
I’d also argue that it’s not clear to me at all that the Chinese govt doesn’t care about domestic consumption–certainly their public pronouncements over the last 2-3 years would suggest that they are -very- concerned about it, and may even see higher wages as a means of driving further investment in more value-added production. -All- of the big East Asian economies have at one point or another tried to walk that tightrope of maintaining political control as well as social harmony–it’s not so much a matter of keeping wages low to keep workers powerless as it is one of supporting just enough wage and consumption growth, and enough employment growth to keep the whole thing from flying apart.
Tuesday, January 4, 2011 at 5:13 pm
Right, one thing I was thinking about adding in was that the dynamic needs to work in two directions — for the poor, giving them just enough that they don’t just rise up and start breaking shit, and for something like the middle class, giving them just enough that they feel like they have something to lose.
Tuesday, January 4, 2011 at 6:40 pm
I think there are actually a few obvious counter-examples, for example in the trade relationship between US-China and also the situation with borrowers and lender in the presently massively fucked up homeownership market. In both of these cases you would think that the creditor should have–strictly in economical terms–”power” over the debtor, but when the debtor is in so much debt and the debt is so widespread, the debtor becomes a kind of plummeting anchor which threatens to pull the one with the money down with it. This is why people basically misread the whole US-China economic issue, thinking that China’s export-oriented trade surplus is going to “crush us,” but they need our debt to deleverage their currency, so in reality it’s something like a stalemate between massive amounts of surplus and lack (of money in the abstract sense). To some degree the same is true of the foreclosure crisis and lenders, e.g. the “strategic default” strategy (though the banks could easily lobby to break this tactic).
I think this is a different dynamic than expropriating money to leverage power, then leaving whatever group with just enough to prevent rebellion/whatever, but something along the lines of economic mutually assured destruction.
Wednesday, January 5, 2011 at 12:29 pm
“Actually the combination of a highly authoritarian state and a free market is entirely and totally consistent with neoliberalism”
Except that, in your facts, you neglected to mention that China is a highly authoritarian state but also one that does not have a free market nor intends to have a free market. That’s why China is not a neoliberal state, while Chile (probably) was. There are other bad things besides neoliberalism, you know.
Wednesday, January 5, 2011 at 12:35 pm
“I think the relationship of international development agencies to the Asian model of export-led growth is a bit more complicated than you suggest–the opposition was less towards exporting per se than the significant degree of state intervention in the economy.”
And the exporting perse was an integral part of (and usually the point of) the significant degree of state intervention in the economy. So, yes, the international development agencies in general opposed models of economic development where the state promoted exports.
Wednesday, January 5, 2011 at 1:55 pm
“So, yes, the international development agencies in general opposed models of economic development where the state promoted exports.”
Yes, but that last part is something quite different than what Adam’s describing–any number of int’l agencies have been quite happy over the years with developing markets promoting the export of primary commodities (arguably leading to the servitude he describes), far less so with the kind of balls-out industrialisation program seen in, say, South Korea. Exporting’s fine if you’re crushing peasant farmers to keep the cash crops coming, but apparently not if you’re looking to become the world’s largest steel producer.
I’m not even really disagreeing with you re: the Asian economies, but I do think you’re oversimplifying somewhat otherwise.
And I’m in total agreement that if China is neoliberal then apparently any country where people sell things for money is, too.
Wednesday, January 5, 2011 at 2:06 pm
It was sloppy of me to imply that China was a neoliberal regime. I renounce and abhor any such notions.