Economic historian Paul Bairoch calls the USA "the mother country and bastion
of modern protectionism". One of the first acts of the United States' fledgling
Congress was the passage of a tariff to protect manufacturing. (This is not to say that the USA should still have protectionism. It does not need protection any more. However, if poor nations did now what the US did then, they should be able to develop just as quickly)
US free traders got a quick start on hypocrisy, using gunboats to force Japan
to sign a treaty limiting tariffs to 5% on most items. Around this time US
tarrifs were about 30%! By 1866 they were averaging 45% - and this continued
until 1883!
In the "wild west" settlers followed government-drawn maps, on
government-built roads guarded by government forts.
In 1798 Congress ordered 10,000 muskets from inventor Eli Whitney, who was
struggling in debt - and therefore deserved to be "weeded out" according to the
free market. This has been said to be the beginning of mass production and
standardized parts.
The Agriculture Extension Service helped farmers, who still hate government.
A heavy tariff on British rails made the American railroads expensive, until
the Americans simply built their own steel industry.
America created the first antitrust laws in the world. Afganistan and Sierra Leone did not.
As for trade and the depression, the Smoot-Hawley Tariff Act of 1930 affected
less than 1% of trade, and was passed after the depression had begun, making it
too little, too late to have made any difference. Duty-free imports into the US
dropped at about the same rate as taxed imports between 1930 and 1932.
60 years of growth and progress.
The Mixed economy in America began with Roosevelt and the New Deal.
Under the free-market Republican presidency of Herbert Hoover, the economy
shrank each year.
During World War II, with its massive taxing and spending the US economy
doubled.
The top income tax rate was between between 88% and 91% percent until 1963,
when Kennedy "lowered" it to 70% (still very high by today's standards).
Before World War II, the U.S. suffered eight depressions; in the nearly six
decades since, it has suffered none.
Republicans also supported the mixed economy: President Eisenhower funded
highways, President Nixon said, "We are all Keynesians now," and created the
Environmental Protection Agency, the Food and Drug Administration, and the
Occupational Safety and Health Administration.
In the so-called "Roaring 20s" about half of Americans were in poverty.
By the 1950s, the poverty rate had fallen to 20%. Johnson's Great Society
lowered it to 11.1% in 1973 - at the end of the mixed economy era. (8)
Between 1945 and 1973, the Gross Domestic Product grew at a 3.4% a year,
compared to only 2.5% since.
Individual worker productivity was a record high 2.8% before 1973; but it has
averaged only 1% since.
In America, the era of the mixed economy was finished in 1975, when the
SUN-PAC decision legalized corporate Political Action Committees, the lobbyist
organizations that bribe our Congress today.
In the ten years after the SUN-PAC decision, the number of corporate PACs
exploded from 89 to 1,682. (1) By 1992, corporations formed 67% of all PACs, and
they donated 79% of all contributions to political parties. (2) This meant a
huge shift of power from workers to corporations and owners.
The PACS killed Ralph Nader's campaign for a Consumer Protection Agency. They
deregulated on airlines, trucking, railroads, oil and interest rates.
They gave themselves a capital gains tax cut (helping the already rich), and
raised Social Security taxes (hitting the poor).They even persuaded Congress to
impose a tax on unemployment benefits! This was BEFORE Reagan!(3)
Reagan cut the top income tax rate was from 70% to 28%.
Corporate taxes as a percentage of all federal tax collections dropped to 8%.
During the 1950s 27% of federal taxes were paid by corporations.
Society was hurt by inequality. During the New Deal era, the incomes of all
grew together atabout the same speed, despite their original differences. But
under the corporate special interest system, the rich got richer and the poor
got poorer:
Another way to measure inequality, the Gini Index, rose from 0.352 to 0.395
between 1979 and 1994 (The scale is from 0 to 1; the higher the number, the
worse the income inequality.) (9)
Disposable personal savings fell from 7.9 to 4.1 percent between 1980 and
1994. (10)
Combined home mortgage and consumer debt rose from $1.3 trillion to $3.4
trillion between late 1980 and late 1990, about 50 percent faster than the
consumer's income grew (due to inflation). (11)
Though Reagan talked about family values, more and more women worked to make
up their husbands lower pay.
On average, the number of hours that wives worked was 32% higher in 1989 than
in 1979. Without the increased work of wives, incomes for 60 percent of families
would have been lower in 1989 than in 1979. (12)
During the 1980s, temporary work grew 10 times faster than overall
employment; as a result, Manpower, a temp agency, has replaced General Motors as
the largest private employer in the United States.
Workers rights were trampled to the point that even Business Week reported
that from the early 1980s, "U.S. industry has conducted one of the most
successful antiunion wars ever, illegally firing thousands of workers for
exercising their rights to organize." "Unlawful firings occurred in one-third of
all representation elections in the late '80s, vs. 8% in the late '60s."
Poverty has generally risen, from 11.1 percent in 1973 to 15.1 percent in
1993. (13)
The rich have greatly reduced their charitable giving, causing the poor to
increase theirs:
In 1990, the poorest income group -- under $10,000 -- actually gave the
highest share to charity: 5.5 percent. (15)
In short, neoism in American has been 25+ years of economic stagnation and
lessening democracy.
Canada
Canada tends to follow American trends, though slowly. The Canadian mixed
economy lasted until the 1980s.
From 1950 to 1980, the average unemployment rate was 5.4%, compared to 7%
during the neo 90s.
Free trade
When neo government minister Donald Johnston said "free trade agreements
are designed to force adjustments on our societies" he was right. Free trade
has had a huge impact on Canada: in 1989 exports were 25 of the GDP, now it is
40%. Here are the kinds of changes that the FTA, and NAFTA have forced:
Growth during the 1990s was the second worst in 100 years - the worst was the
1930, with the great depression.
Average per capita income fell, and only regained 1989 levels by 1999.
Average, of course, includes the rich - the only people who actually gained from
the 1990s were the wealthiest fifth of Canadians.
Employment is insecure and the social safety net is frayed. Wages have not
grown even though productivity has (though Canada does not have the same
productivity as America, as FTA and NAFTA salesmen promised).
By 2000 stable, high paying manufacturing employment was still 6% below its
1989 level.
Unemployment was, again, the worst other than the great depression.
Unstable self-employment was 43% of new job creation between 1989 and 1999.
Part-time employment accounted for another 37% of net employment growth during
1989-99.
Temporary work ("temps") grew from 5% to 12% of total employment during the
first half of the decade. Labor force participation rates dropped sharply, and
they are still far below 1989 rates.
Market incomes of the poorest 10% of families with children fell an
astounding 84% during 1990-96, and those of the next 10% fell 31% (Yalnizyan
1998).
Interestingly, lots of evidence comes from the same government that had been
selling free trade to Canadians. An Industry Canada study by Dungan and Murphy
(1999), found that between 1989 and 1997, 1,147,100 jobs were destroyed by
imports, with only 870,700 export jobs were created to replace them, equaling
the destruction of 276,000 jobs. The study did not make headlines.
Other changes
Not all of this disaster is due to free trade - neos have made other changes.
For example, from 1992 to 1999 10% of the GDP went from the public sector (all
levels of government) to private sector. Government is at the lowest level since
(drumroll please) the great depression.
To keep competetive, governments have no choice but to cut taxes on
corporations and raise them for the poor (through sales taxes, for example).
A 1996 report from the neo government's Privy Council Office noted: "the
basic affordability of the [social safety net] system and the benefits payment
regime has a direct consequence on competitiveness...By raising the cost of
labour as a productive input, such programs can either drive jobs south or
encourage further substitution of capital for labour" (Privy Council Office
1997).
Translation: the social safety net means people get paid more, and leads to
development as we build machines do our work for us. Therefore it is bad.
Because of NAFTA, jobs go where people are not rewarded for their hard work.
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New Zealand
New Zealand is considered an "economic miracle" and a model to be followed by
Neos.
In 1984 the same neo Blitzkieg that hit Britain and America arrived in New
Zealand - under the so-called "labor party". Even though most people voted
against the labor party, it still got power, the same way the Gore-Nader split
in the USA meant that Gore only got 500,000 more votes than Bush, a small enough
margin to let the Supreme Court choose the president.
Despite the lack of a mandate, the "Labor" Party did the standard neo policy.
The effects:
- the highest youth suicide rate in the developed world
- huge increases in violent and other crime
- the bankruptcy of half the farms in the country
- By the mid 90s the unemployment rate was about 50% higher, not including
those who had given up looking for work.
-During the neo years New Zealand had the worst economic growth rate of all
OECD countries - NEGATIVE 1 percent! Neo salesmen simply showed off the few
individual good years when growth consisted of the unemployed going back to work
again (and losing their jobs the next year).
-The productivity gains that neos bragged about were only only a 5% over 7
years - about half the long run average for the economy. At the same time
Australia saw a 21.9% increase.
- The rise of inequality inside rich nations was only higher in Britain under
Thatcher.
- The collapse of the New Zealand sharemarket in 1987 was the biggest fall in
percentage among the rich nations, as of 1996 it still had not recovered.
- The Public Health System was partly privatised, and waiting lists rose.
- Underfunding has left a crumbling infastructure - literally. 14 young
people were killed by a cheaply built platform at a scenic site collapsed. The
Judge of the enquiry concluded that they had been killed by "governmental
department reforms." It is up to tourists to decide if the scenery of New
Zealand is to die for.
- The GST (a sales tax) is charged on pretty well everything except financial
transactions - meaning that a homeless person buying a sleeping bag pays tax but
a rich kid who makes a living buying and selling papers does not. There is no
capital gains tax, a real relief for those sweating under the weight of their
stocks and bonds.
- The median equivalent disposable income has fell by 17.1% from 1983 to 1992
(Stephens et al 1995)
- It has been estimated the government spent $100 million to privatize
telecommunications - in short, people had to pay for the privilige of being
robbed.
-As the neos ran out of things to privatize, they looked towards schools,
hospitals, and the building of the parliament they bribe.
-Even promises of investment were lies: In 1993, the proportion of GDP in
investments was just 70% of what it was in 1984.
Even Sir Roger Douglas, the Minister of Finance during the disaster, admitted
in 1992 that the "debt crisis" was imaginary. After all, the neos doubled the
"crisis" from $22 billion, to $45 billion in 1994 -- despite selling $16 billion
in state enterprises. By the year 2000 debt levels were back to the origional
"crisis" level. Roger Douglas is currently a Chamber of Commerce speaker,
especially busy in the neo-dominated Canadian provinces of Alberta and Ontario,
selling the same product that he saw fail so badly.
In short, neos are frauds -literally in this case, two members of the neo
Business Roundtable (BRT) were jailed for fraud.
But surely they have learned from their mistakes...
The neos did not make any mistakes. They knew from the beginning what they
were doing.
The 1984 Treasury Report predicted that wages would fall, but "rapid
improvement in productivity could off-set this to some degree" (p 118). In
short, since the rich would get richer, this would make up for the poor getting
poorer.
_Management_ (July 1983:56) assured its readers that the "social crisis
that unemployment poses falls outside the scope of [this] article but the
business community can ensure that those who are [still] employed are involved
and united with management, thus providing a buffer to the groundswell of
unrest." Translation: they knew they would create unemployment, but with
enough propaganda the employed workers would care more about the situation of
their boss than their co-workers and neibours.
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Conclusions:
Free trade is the result of development, not the cause. Saying that free
trade causes development because wealthy nations have free trade is like saying
we will all become rich if we buy a mansion, because the rich have mansions.
Neos have responded to their failure by retreating from reality. In the
mid-1980s researchers asked 212 students at the most prestigious American
graduate schools of economics what made a good economist. 65% said "good at
problem-solving" while only 3% thought "knowledge of the economy" was good for
anything.
But neos are too educated and intelligent to destory economies!
If the massive failure of neoism is not due to ideologically stubborn people
in denial of reality, it might be deliberate. A good economy means workers have
an easy time finding jobs, meaning more bargaining power for them. This is an
"overheated economy", and brings calls from neos to put workers back in their
place. For example, during the Clinton economy:
October 13 1996 Business Week:
"...The latest round of applause was triggered by the Labor Dept.'s
surprising report that September non-farm payrolls dropped by 40,000
workers...For now, Wall Street seems content that the latest employment report
contains only good news: the economy is slowing and so is inflation. But if the
emerging trends in wages and labor costs continue, these cheers could quickly
turn into boos."
January 13 1997 Wall Street Journal (Page. A2):
"...The Labor Department said the economy added a remarkable 262,000 jobs
in December, up from an upwardly revised 127,000 jobs in November. Nearly every
aspect of Friday's Report came up roses for American workers...and average
hourly earnings shot up 0.5%, even after a 0.8% gain the month before...
But Mr. Dederick and other analysts stressed that it's a watch-and-wait
period, not time to call out the fire trucks. "Do you push the panic button?"
asked Mr. O'Neill of Harris. "No, we're not ready to do that yet.""
Luckily, worker's wages don't rise enough to cause panic.
Business Week gives regular warning of the dangers that employees might
actually get rewarded for their hard work:
"..The economy also seems poised to rebound after a sluggish third-quarter
showing, though not so strongly as to breed inflation worries, especially since
labor costs remain in check.
...The third-quarter surprise was the cooling off in wages and salaries,
which grew only 0.6%, the slowest quarterly pace in four years... Companies are
using an increasing number of temporary workers as a way of avoiding benefit
costs. And after having squeezed health-care costs to the bone, the emerging
area for cost control may be workers' compensation, as suggested by efforts this
year to overhaul workers' comp rules in Florida, California and New Jersey."
- Business Week, November 11, 1996, p. 331.
This is all in the worker's interests, of course. I spend most of my coffee
break begging my boss to take away my benifits - don't you?
The Dec 28 1993 WALL STREET JOURNAL (A1) Noticed that "What caused truck
drivers' work lives to deteriorate, trucking executives say, is cost-cutting
forced by intense competition. After deregulation opened truck routes to new
entrants in 1980, carriers turned to cheaper, nonunion drivers...." But this
is not the problem.
The problem is in the headline:
"Trucking Firms Find It Is a Struggle to Hire And Retain Drivers"
The January 24 1995 WALL STREET JOURNAL saw a clash of ideologies: should we
pay workers less, or just hire less of them:
"BUSINESS AND ACADEMIA CLASH OVER A CONCEPT: 'NATURAL' JOBLESS RATE
Are too many Americans at work these days for the economy's own good?
Absolutely says Martin Feldstein... "We are...into the danger zone." Nonsense,
retorts Dana Mead...Economists who talk that way...don't understand how American
companies have tied wage increases to productivity gains, shifted work overseas
and learned to produce more with fewer people. "
Neos know that unions are good for workers:
December 1996 Money magazine, special Forecast edition, Pages 50-1.
"...Today's chief threat to the economy is rising labor costs...after a
period during which American workers have been too worried about job security to
press for raises, unions under the aggressive leadership of AFL-CIO chief John
J. Sweeney seem certain to fight harder in 1997 for a bigger slice of corporate
profits."
Of course, they're really looking out for the interests of workers, who are
too stupid to figure out that lower wages are good for them.
If you read deep into BUSINESS WEEK, beyond all the pretty pictures, all the
way to page 56, you would have found this dire warning about the horrors of
unionization:
"Sweeney's Blitz
Today, though, workers may be receptive to labor's renewed message, coming as
it does after two decades of wage stagnation and heightened inequality.
In the 1980s, for example, the 10-year average earnings of the bottom fifth
of male wage-earners plunged by 34%. Now more than half of families say two
members must work to make ends meet. And constant downsizing has chewed away at
pay and job stability, even among professionals…"
Now why on earth is anything wrong with that? Read on:
"If unions do regain power, Corporate America is certain to feel the
squeeze. With just a tenth of private-sector employees in unions today, most
employers have had a free hand to hold down labor costs. Reunionization would
force up pay and benefits, which typically are 20% higher among union members…
"
You have been warned: if we don't act fast, corporations will have go through
such trials as paying benifits!
But the article has a happy ending:
"...Employers still have the upper hand in most unionization battles."
Neos even know that unions help non-union workers:
April 1991 FORTUNE magazine (hidden away on page 214):
"Even many who stayed in manufacturing lost ground when they were squeezed
out of lucrative union jobs, such as those in autos and steel. Columbia's Bloom
says that in 1980 only 47% of high school graduates over 25 and 40% of dropouts
held union jobs. By 1988 only 31% of graduates and 25% of dropouts were paying
dues.
As membership dwindles, union settlements no longer piled up wages at
non-union shops."
Nov 1995 THE ECONOMIST, Page 19:
"All countries have been buffeted by the forces of changing technology and
stronger global competition. So why should wage differentials in most of
continental Europe have changed by much less?
The answer is that deregulation in America and Britain has allowed market
forces to do their work, whereas in continental Europe powerful trade unions,
centralized wage bargaining and high minimum wages have propped up the wages of
the low-paid.
Indeed, pay differentials narrowed through the 1980s in western Germany,
where trade-union membership has held steady at around 40% of workers over the
past 20 years; in America, membership has fallen from 30% to 12% since 1970. A
study by Richard Freeman of Harvard University confirms that, in general, wage
inequalities are smallest in highly unionised countries.""
May 1994 Barron's:
"NOT TO WORRY...
The 'Nineties,' need we remind you, are a period of insecurity and cost
control, a time when workers feel lucky to have a job, let alone one that pays
well...If American labor sought inordinate increases, manufacturers could simply
move production abroad and employ foreign labor at a far cheaper rate."
Inflation a common excuse
Of course, inflation is only caused when workers make more money. For some
reason that neos never explain, CEO and executive pay does not cause inflation.
May 8 1995 Bussiness Week:
"WHY INFLATION ISN'T SPROUTING
Labor markets are their tightest in five years...labor costs are growing at
the slowest pace on record..."
Evil!
Well...Massive wealth with little work has a corrupting influence, as the
writers of the bible pointed out. One could say that neos are drugged with money
- and a junkie needs a fix, regardless oof education.
December 1996 FORTUNE, Page 72.
"Mr. Price is on the Line
One reason Price gets his way is that many investors simply agree with what
he's trying to accomplish. And what exactly is that? He doesn't bother hiding
the sanctimonious rhetoric of the 1980s raiders-- --that they were trying to
take over companies and show the world how they should be run.
He admits flat out that all he's trying to do is get the stock price up and
if his tactics are a little rougher-- --all right, a lot rougher----than those
of most other mutual fund managers, well, it works , doesn't it?"
(Note: by "rough" they don't mean forplay with spanking. They mean fireing
the employees who built the company in the first place and then profiting when
the stocks jump up.)
There is no "conspiracy", none is needed. The rich and powerful have always
had the same interests from the beginning of time. They have always managed to
find noble excuses for what they do, for slavery, conquest, genocide, and so on.
Power corrupts anyone that touches it. Greed is a disease, it is not hereditary
and it can be cured. This is no more good or evil than the laws of gravity.
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