29 January 2008

New Labour and Post-Thatcherism

"It is not the presence of markets we should object to. Markets are just an amoral mechanism to distribute goods and services, whose powers to create wealth are only matched by the resulting injustice, thriving as they do on innovation and destruction in equal measure. They work because they never take prisoners in the quest to create winners and losers. In the relentless pursuit of profit they know no boundaries, whether social, moral or environmental.

Our beef is with neoliberalism and its British incarnation of Thatcherism: the ideological belief that markets are always preferable to the state or other social institutions. For the notion of the social demands a limit on the role of the market. There are places where profits should not and must not be secured."

Neal Lawson

26 January 2008

The Chile Myth

"... contrary to the standard view, which has framed the “Chilean Miracle” as a triumph of the neoliberal economic policies and reforms first implemented under the military dictatorship of Augusto Pinochet (1973–90), Professor Castells offered an alternative explanation of Chile’s success: the 17 years of measured state intervention and social redistribution, comparable to Roosevelt’s New Deal, that elected governments have pursued since Chile’s return to democracy in 1990.

After the stagflation of the 1980s, Latin American nations came under increasing pressure — both internal and external — to adopt a model of economic development based on liberalization, privatization, deregulation, adoption of austerity measures and containment of social demands. This theory dominated much of the 1990s, in Castells’ words, “…a period marked by the so-called Washington Consensus, labeled ideologically as neoliberal policies.”

While for many this model seemed the only possible solution to the challenges of development in the context of globalization, its trajectory as a tenable approach turned out to be remarkably short-lived. By the first years of the new century, most Latin American nations had written off neoliberalism as socially regressive and politically unstable. In addition, many countries subsequently elected left-leaning administrations in a widespread rejection of the Washington Consensus.

Since the end of the Pinochet dictatorship, Chile has seen a substantial improvement in the living conditions of its population, an unprecedented reduction of poverty and dramatic progress in education, housing and health. “In many ways,” Castells explained, “ Chile is the only success story of Latin American development.”

In the United States and throughout the world this singular success has largely been attributed to the free market, laissez-faire economic model implemented by Pinochet and his economic czars, known as “the Chicago Boys.” However, the empirical data — which Castells supplied in great quantity, having carried out research on the subject for a book he published in 2006 — emphatically refutes this notion.

Castells identified two distinct models of development in Chile since 1973: the “authoritarian liberal exclusionary model,” implemented under the dictatorship; and the “democratic liberal inclusive model,” which has been in place since re-democratization in 1990. "

Manuel Castell: "Globalization, Development and Democracy: The Chilean Democratic Model"

23 January 2008

Western Dualism

Western philosophy have a tendency to spilt everything into "good vs evil" binary opposition as a result of the muslim/christian/judeo -tradition that has formed the base of our philosophy.

An eternal struggle between the two competing forces seems to be the standard delusion of our society and has been used as the justification for the demonization of the "other" in almost all conflicts in our history.

But reality is not constructed that way.

Our very existence is dependent on fusion and collaboration bridging the biggest duality that exists in humanity, between men and women. If men and women were locked into eternal conflict the way our western thought endorse, the human race would cease to reproduce and humanity would die out. Computer binary numbering system relies on both 1´s and 0´s and electricity is equally dependent on both negative and positive charges. Mathematics would be useless if addition "won" over subtraction or division "won" over multiplication.

In mystic traditions on the other hand, such as Zen, a key to "enlightenment" is transcending this sort of dualistic thinking, without merely creating a new dualism by substituting it with monism vs pluralism.

Individualism - Collectivism
The earth is a collective of individual living organisms. In terms of society, a collective is a group of individuals and an individual is a collective of individual cells.

If an individual cell suddenly considered itself more important than all other cells and started to grow uncontrollably at the expense of the collective of individual cells we call the "body" - then this would be diagnosed as "cancer" and could potentially end up killing the whole organism.

But hanging on to the big delusion, we are continuing the old political and philosophical struggle between collectivism and individualism that is in fact only a dated and futile attempt to artificially divide reality into two conflicting entities and fight over which of these is the "right" one.

If one of these extremes, individualism or collectivism, is allowed to dominate, the result is the same, a minority elite of individuals will have all the power. In an ultra-individualistic society the financial elite will rule and in an ultra-collectivist the political.

And after the Soviet empire collapsed it has been said that individualism won over collectivism and this is hailed as a big victory for the freedom of humanity. But this is just a continuation of this delusion. The term "collectivism" is incorrectly used as a description of a society where a minority political elite rule and "individualism" a society where a minority financial elite rule.

The only thing that happened was that power shifted from one minority elite to another. The "state power" criticized by the individualists is replaced by the "financial power" criticized by the collectivists.

As in George Orwell´s famous satirical allegory of Soviet totalitarianism, the Animal Farm; "All animals are equal but some animals are more equal than others" is just as true about a "individualistic society" as the US as it was about the "collective society" in the former USSR.

The worst concentration of power occurs when the combination of the political and financial elite form an alliance where the majority, is made completely powerless. The marriage between these two are obvious in both China and the US and the differences between these types of hierarchical structures are not as big as they are made out to be.

And this minority of the political and/or financial elite will do everything in their power to hold on to and increase their grip by means of control, surveillance, coercion, propaganda, 'perception management', war, jail, torture or any other type of oppression.

It's no coincidence that large transnational corporations provide funding for free-market think tanks who promotes individualism, because under the law, a corporation is legally treated as an individual, a corporate person. And that type of 'individual' would want as little restrictions as possible from the 'collectivism' of society.

The state comes in as a tool for the corporation when it comes to promoting corporate friendly policy and to punish less equal individuals who might threat the corporate profit, like farmers who are sued for storing patented seed or p2p sharing children being slapped with ridiculous fines by huge media cartels.

One of the biggest political delusion in western culture is the illusion of choice, the concept of right and left, of democrats and republicans, effectively nullifying any real threat to the elite by ridiculing and demonizing any other alternative towards real democratic influence by the population. Easily done when you own the media.

Power to the Elite
What is happening as a result of globalization is that the power concentration is accelerating and becoming more obvious as a result of both nation-state mergers in transnational agreements like the EU, NAFTA or ASEAN and corporate consolidations and cartels protected by these pacts, both working together effectively to move power further and further away from the national populations to a minority collective of individuals that is the global financial and political elites.

If an honest politician came along who actually tried to live up the the expectations of the voters, he can be easily outmaneuvered since he would no longer have any control over the national economy and will have to obey the rules of the globalized market and the laws of the transnational pacts.

On the positive side, the larger global collective of individuals interacting and collaborating over the internet, like in the open source movement, is a clear example that another, less hierarchic structure is quite possible, a more natural grass root globalization as opposed to the neoliberal version, but this is still a privilege for people who can afford a computer and a connection plus that this type of global technocratic society would demand a huge cost in terms of natural resources if everyone on earth would enjoy this privilege.

But I think it's high time we dropped the misleading "Individualism vs Collectivism" pseudo-debate. The answer is of course the same type of collective collaboration of individuals necessary for the reproduction of humanity or the type of collaboration of cells that makes up the human body. This is not about any delusional 'free will' or blind ideology - it's about the survival of humanity, the planet and the fact that we really have no other choice.

Psychological projection
G. Edward Griffin - On Individualism vs Collectivism

15 January 2008

The Death of Swedish Democracy

In 1902 Sweden was a feudal society where only the very wealthy were allowed to vote.

This eventually led to revolt and after massive protests and demonstrations by liberal democrats and socialists a compromise was reached with the ruling conservatives; men over the age of 24 would get voting rights, but only to the second chamber of parliament. Women were not allowed to vote but a wealthy male could personally get up to 40 votes and full rights to all chambers.

1918 further protests led to, despite strong objection from the right, a general suffrage. 1919 an eight hour workday reform was introduced and 1921 women were for the first time allowed to vote.

In 1931, the market failure and speculation bubble that led to the 'Great Depression' made the Swedish unemployment rampant and the few jobs available rendered slave wages.
In May 1931, as a response to an outdrawn industrial conflict over pay reductions at a pulp factory workers at other plants went on a sympathy strike. The owner of the company hired around 60 strike-breakers to curb the strike, resulting in a violent conflict. Since the police had not been able to intervene, the county administrative board asked for military troops to be deployed to protect the strike-breakers.

The following day the trade unions called a general strike, and the workers decided to stop all work in the timber and pulp industries in Ådalen. Several thousand participants, communists, syndicalists and radical social democrats, marched to the strike-breakers quarters, where the military troops had been ordered to defend them. Unable to stop the demonstration, the military opened fire and four unarmed protesters, all members of the communist party, and a 20 year old female bystander were killed by bullets fired by the military.

The events spawned a raging national debate and publishers of several left-wing newspapers were convicted for siding with the protesters. The investigation, with representatives from both employers and trade unions, later concluded that the military was highly unfit to uphold public order in similar situations. The following year, legislation was introduced preventing the military from using weapons against civilians.

1932 the social democrats won the elections and promised amnesty for the rebelling workers (although one of the Swedish communist party leaders, sentenced to two and a half year in jail wasn't released until after 3 years despite the social democratic victory and no damages were ever awarded to any of the families of the five dead) and 1936, the social democrats and Per Albin Hansson won with a 45,9 percent majority.

The Swedish Model

In 1938 after a socialdemocratic 50,4 percent victory, an agreement between the workers and employers confederations was signed as a compromise and truce between the more radical socialists and the feudal corporations. It resolved several issues on the market and it came to form a particular form of industrial relations in Sweden marked by willingness to co-operate and a mutual sense of responsibility for developments in the labor market - The 'Swedish Model'.

Sweden's social welfare continued to develop during the 1950s and 1960s, during which time Sweden was the second wealthiest country in the world for a period, with practically zero unemployment. The Welfare State then reached a peak in the 1970s oil crisis, when it up to then included everyone in socialized health care, child care and pension system.

Swedish Employers' Association
The right made a number of unsuccessful attempts over the years to win elections trying to dismantle the Keynesian welfare state and restore corporate power and in the early 70s, Sture Eskilsson, head of information at the Swedish Employers' Association, realized that the domination of the left in literature and the public debate would have to be more efficiently countered in order for that to succeed.

He discovered neoliberalism and Milton Friedman as an alternative to the lefts ideology and the Swedish Employers' Association consequently published hundreds of neoliberal, pro-capitalist books. In 1976 Milton Friedman won the Swedish National Bank Award (sometimes confused with the Nobel Price in economics).

The shock of the oil crises of 1970 created an golden opportunity for the right and a right-wing coalition government was elected for the first time since 1932. But despite the election victory the Keynesian view of economics continued to rule the politics of the elected right wing coalition.

Frustrated over the lack of change the the Swedish Employers' Association mobilized a massive propaganda campaign, publishing numerous pro-corporate economic reports, articles, ads and literature in the media and the schools through an elaborate network of subsidiaries.

Between 1976-1982 the right held power and one of the worst economic crises in Swedish history ensued, largely as an effect of the previous breakdown of the Bretton Woods system, but also a lack of consensus, competence and experience from not having been in power for decades, stagflation and the effects of a new oil crisis in 1979.

So the social democrats made a comeback in 1982 under Olof Palme, who was gunned down in very strange circumstances on the 28 of February 1986, along with a number of other strange deaths. Ingvar Carlsson took over as prime minister.

A 'New' Social Democrat

During the rule of the right wing coalition, bitterness over two election defeats and a generation shift introduced a new kind of social democrat in certain quarters of the party, already introduced to neo-liberal economical ideas and a more pragmatic, self serving, careerist, approach to politics than of the former idealist, egalitarian persuasion.

But despite all the hard work trying to bring back the corporate power of the glorious past, the majority of the population was indifferent or immune to the propaganda effort by Swedish Employers' Association, except a few members of the social democratic party who started a economic study group. At the same time Ronald Reagan and Margaret Thatcher conquered the US and Britain with a very self assured brand of neo-liberal economic fundamentalism and a massive corporate backing and Ingvar Carlsson, who took over after Olof Palme as prime minister, wrote favorably about this development in his memoirs.

The November Revolution
To understand the next development in the social democratic party and the Swedish central bank it´s important to understand that the Hayek/Friedman brand of economics rules out politicians as competent guardians of the economy in their view, since politicians will always seek to win elections and the maximum number of votes and therefor can´t be trusted with important things like the economy.

So in complete secrecy, out of the public and parliament´s eyes, the economists in the central bank started to deregulate the loan market leading to a huge speculation bubble and rampant inflation, the same thing seen in many countries in Latin America and Asia when they were forced into neoliberal market reform by the IMF.

And just as the IMF usually demanded even more neo-liberal reform to battle the effects of the same neo-liberal economic reform, the Swedish Employers' Association, with the same man who gave the "Nobel prize in economics" to Milton Friedman leading the charge, started to blame Keynesianism and the welfare state, for the effects of their neoliberalism and demanded even more neoliberal reform.

But in 1987, after an economical evaluation by the Brookings Institution ordered by SNS (Swedish Employers' Association Think Tank), Brookings , who were at that time favorable to the Swedish Model, told SNS that they couldn't see any indications that Sweden was in any need of any more reform and had handled the economy just as well as any other country could and suggested that Sweden kept their model.

This, however, was not what they wanted to hear and didn't discourage the Friedmanite reformists who played down this report and the propaganda campaign continued, now with a consensus between the social democrats and the right on economics, leaving voters with just as little choice as in American elections - corrupt politicians and a corporatocracy disguised as a democracy.

In October 26th 1990, the first officially neoliberal declaration was made by the Social Democratic party and Keynesianism in Sweden was dead.

The right came back between 1991-1994 after a record low election result and internal conflicts in the left. Time for even more neoliberal reforms, cuts and mass unemployment of course blamed on the now abandoned Keynesianism.

Next the national pension funds went under the hatchet and in June 1994 a reform package was introduced backed by both the right and the social democrats with only the communist party objecting, in effect making all swedes gamblers in stock market speculation and four years later, the implementation of the actual legislation started.

Between 200-400 billion was spent on promoting EU membership by the Swedish Employers' Association.

The period was again a disaster for the right and people believing they had any real choice voted back the by now quasi neoliberal social democrats.

Göran Persson
After Mona Sahlin was disqualified as candidate for the post as prime minister after minor corruption charges, Göran Persson took over 1996 and remained in power until 2006. During that period, Anna Lindh, the prime ministers next obvious successor was assassinated. Another murder of a high profile social democrat under strange circumstances.

The Swedish government was involved in aiding secret CIA torture flights and was charged by the UN and numerous human rights groups with violating the torture ban.

After pressure from the White house and corporate special interest groups, the police raided and confiscated computers in violation of Swedish law.

On a visit to China, Göran Persson praised the Chinese government for their 'order'.

Even more striking was that the legislation that prohibited the use of military force against the civilian population, kept for 75 years, was in May 10, 2006, abolished when a new law was appointed to again allow the use of military against civilian protesters.

People began to get fed up with the corrupt, secretive and increasingly totalitarian regime and the propaganda campaign by the Swedish Employers' Association that started back in the 70´s started to yield success.

A Pan-European network (and corporate lobby group) of neoliberal think tanks, based in the UK, began molding the European public opinion, "The Stockholm Network", was started in 1997 where the Swedish Employers' Association think tank "Timbro" was one of the six founding members and a young generation totally molded in the free market school of economics which have had monopoly over economic education the last decades took to the ballots.

The liberals who previously promoted 'liberal democracy' together with the social democrats in the beginning of the 20th century began instead promoting neoliberal free market fundamentalism. ("Free" is a very useful word)

And after the only leftist newspaper went bankrupt, the largest newspapers are now dominated by neoliberal pundits, Swedish Employers' Association propaganda and pro-corporate economic reports.

Pumping in 12 billion Swedish crowns to 'shape public opinion' the Swedish Employers' Association together with a number of secrets funds and foundations launched a new successful attack.

So after winning the 2006 election, the new neoliberal/neocon "Alliance for Sweden" is speeding up the dismantlement of the Swedish welfare state, attacking the unions resulting in a huge drop in union membership and selling out national companies at an ever increasing rate. The gap between rich and poor has dramatically increased, leaving one child in ten below the poverty line at the same time the number of ultra wealthy has increased.

A 'patriot act' is on it´s way demanding surveillance of all communications between Swedish citizens completely undermining civil rights.

The head of the Swedish Employers' Association is promoting Chinese in schools to make Sweden 'more competitive' and launch frequent PR campaigns promoting increased consumption.

Our foreign minister, Carl Bildt, a Trilateral Commission member and the first foreign RAND trustee, was involved in the AEI and Project for a New American Century linked "Committee for the Liberation of Iraq" as well as in unsavory oil deals in Sudan unanimously condemned by human rights organizations.

Market Feudalism
"When we call a capitalist society a consumers’ democracy we mean that the power to dispose of the means of production, which belongs to the entrepreneurs and capitalists, can only be acquired by means of the consumers’ ballot, held daily in the marketplace."

Ludwig von Mises

The amount of "democracy" available to you in a "consumer democracy" totally depends on how much capital you have at your disposal and how much you consume, in effect making this type of "democracy" something for the wealthy. The means of production is relocated or sold to foreign oligarchs, far beyond any real democratic control. All this transforms democratic elections into some sort of beauty contest where politicians in the end are left with very little power to influence.

So with a combination of "not really social-democratic"/neocon big state and globalized, neoliberal free market, the circle is now complete and we are back to 1902;

In 2009 Sweden is a feudal society where only the wealthy have influence over society and can afford health care and social security. And if you rebel, you can be shot by the police, as the fatal shooting at the 2001 G8 summit in Genoa or the shooting of protesters at the EU summit in Gothenburg proved, but this time with legal aid of the military, just as in 1931.

And as in Chile, China, Russia or Georgia, or a number of other countries that went through the same, neoliberal reform needs to be backed by military power and until the day the financial elite have their own private army and the legal framework to use it, they will need the "monopoly of violence" and the legitimacy and protection of the state, despite all rhetoric about 'small government'.

Luckily for the financial elite and their consumption propagandists, people are more worried about their weight, clothes and status and spend more time trying to accumulate enough money to enjoy the lifestyle of the rich and famous, to be bothered to protest.

Until the next Great Depression.

(Update June 2008;
"Lex Orwell" a Patriot Act law that permits surveillance of all digital communications in sweden is introduced.)

12 January 2008

Wonderful RFID

2007 China RFID Industry Annual Awards
China’s RFID market reached more than $500 million in 2007, growing over 50 percent in comparison of previous year; the trend is expected to continue for the next three years. According to IDTechEx, China has become the world's largest market for RFID by value, thanks to huge government spending on China’s national ID card program.

RFID in China
China has issued the world's largest order for RFID - a $6 billion order for a national ID card scheme. These are contactless cards, operating at HF. By the end of 2005, China had issued 110 million national ID cards.

Homeland Security to press ahead with Real ID
The U.S. Department of Homeland Security on Friday plans to take the next step in getting its controversial Real ID plan off the ground, despite opposition from numerous states and privacy groups.

US Gov Sets Controversial RFID Passport Card Specs
The US Department of State last week published a Federal Register notice that sets its RFID passport card requirements, effective February 1 of this year. The new PASS Cards are an alternative to traditional passports and will contain an EPCglobal Gen2 standard UHF RFID chip intended to expedite border crossings. The cards are controversial because many feel the RFID chips lack enough security to safeguard identities and prevent cloning and other hacking.

RFID Demonstration

The Mont Pelerin Society

In 1947, 39 scholars, mostly economists, with some historians and philosophers, were invited by Professor Friedrich Hayek to meet at Mont Pelerin, Switzerland, and discuss the state, and possible fate of classical liberalism and to combat the “state ascendancy and Marxist or Keynesian planning [that was] sweeping the globe”.

Invitees included Henry Simons (who would later train Milton Friedman, a future president of the society, at the University of Chicago); the American former-Fabian socialist Walter Lippmann; Viennese Aristotelian Society leader Karl Popper; fellow Austrian School economist Ludwig von Mises; Sir John Clapham, a senior official of the Bank of England who from 1940–6 was the president of the British Royal Society; Otto von Habsburg, the heir to the Austro-Hungarian throne; and Max von Thurn und Taxis, Bavaria-based head of the 400-year-old Venetian Thurn und Taxis family.

When the Mont Pelerin Society first met, in 1947, its political project did not have a name. But it knew where it was going. The society's founder, Friedrich von Hayek, remarked that the battle for ideas would take at least a generation to win, but he knew that his intellectual army would attract powerful backers. Its philosophy, which later came to be known as neoliberalism, accorded with the interests of the ultra-rich, so the ultra-rich would pay for it.

Neoliberalism claims that we are best served by maximum market freedom and minimum intervention by the state. The role of government should be confined to creating and defending markets, protecting private property and defending the realm. All other functions are better discharged by private enterprise, which will be prompted by the profit motive to supply essential services. By this means, enterprise is liberated, rational decisions are made and citizens are freed from the dehumanizing hand of the state.

This, at any rate, is the theory. But as David Harvey proposes in his book A Brief History of Neoliberalism, wherever the neoliberal program has been implemented, it has caused a massive shift of wealth not just to the top 1%, but to the top tenth of the top 1%. In the US, for instance, the upper 0.1% has already regained the position it held at the beginning of the 1920s. The conditions that neoliberalism demands in order to free human beings from the slavery of the state - minimal taxes, the dismantling of public services and social security, deregulation, the breaking of the unions - just happen to be the conditions required to make the elite even richer, while leaving everyone else to sink or swim. In practice the philosophy developed at Mont Pelerin is little but an elaborate disguise for a wealth grab.

Think Tank Watch
Alternet:Neoliberalism Dismantles Services to Make Elites Even Richer

Pareto's Law

Why it is hard to share the wealth
New Scientist - Jenny Hogan

The rich are getting richer while the poor remain poor. If you doubt it, ponder these numbers from the US, a country widely considered meritocratic, where talent and hard work are thought to be enough to propel anyone through the ranks of the rich. In 1979, the top 1% of the US population earned, on average, 33.1 times as much as the lowest 20%. In 2000, this multiplier had grown to 88.5. If inequality is growing in the US, what does this mean for other countries?

Almost certainly more of the same, if you believe physicists who are using new models based on simple physical laws to understand the distribution of wealth. Their studies indicate that inequality in market economies may be very hard to get rid of.

Pareto's law
In 1897, a Paris-born engineer named Vilfredo Pareto showed that the distribution of wealth in Europe followed a simple power-law pattern, which essentially meant that the extremely rich hogged most of a nation's wealth. Economists later realised that this law applied to just the very rich, and not necessarily to how wealth was distributed among the rest.

Now it seems that while the rich have Pareto's law to thank, the vast majority of people are governed by a completely different law. Physicist Victor Yakovenko of the University of Maryland in College Park, US, and his colleagues analysed income data from the US Internal Revenue Service from 1983 to 2001.

They found that while the income distribution among the super-wealthy - about 3% of the population - does follow Pareto's law, incomes for the remaining 97% fitted a different curve - one that also describes the spread of energies of atoms in a gas (see graphic).

Gas analogy
In the gas model, people exchange money in random interactions, much as atoms exchange energy when they collide. While economists' models traditionally regard humans as rational beings who always make intelligent decisions, econophysicists argue that in large systems the behaviour of each individual is influenced by so many factors that the net result is random, so it makes sense to treat people like atoms in a gas.

Class jumping
This, along with research data from other countries, suggests that there are two economic classes. In one, the rich grow richer while in the other the poor stay poor. Yakovenko explains this by going back to the analogy of atoms in a gas.

The atoms assume an exponential distribution of energy when they are in thermal equilibrium, and pushing the gas away from this state takes a lot of energy and it could prove similarly difficult to shift an economy to a different state. Randomness in the model does, however, mean that individuals can jump from one class to another.

"It suggests that any kind of policy will be very inefficient," says Yakovenko. It would be very difficult to impose a policy to redistribute wealth "short of getting Stalin", says Yakovenko.
Full Story

(It might be better to instate a "Pareto´s Tax" instead of a new Stalin*)

World's economies show similarities in economic inequality
PhysOrg - Lisa Zyga
Economists who yearn for the redistribution of wealth in an ideal society are up against history. According to a recent study, the uneven distribution of wealth in a society appears to be a universal law that holds true for economies in many different societies, from ancient Egypt to modern Japan and the U.S. This distribution may reflect a simple natural law analogous to a 100-year-old theory describing the distribution of energy in a gas.
Full Story

10 January 2008

Creative Destruction

Joseph Alois Schumpeter (February 8, 1883 – January 8, 1950) was a Moravian born classical liberal economist and political scientist of the Austrian school of economics. He was one of the most influential economists of the 20th century.
Undesirable Democracy
Schumpeter expounded a theory of democracy which sought to challenge what he called the 'classical doctrine'. He disputed the idea that democracy was a process by which the electorate identified the common good, and politicians carried this out for them. He argued this was unrealistic, and that people's ignorance and superficiality meant that in fact they were largely manipulated by politicians, who set the agenda. This made a 'rule by the people' concept both unlikely and undesirable.

Instead he advocated a minimalist model, much influenced by Max Weber, whereby democracy is the mechanism for competition between leaders, much like a market structure.

Although periodical votes from the general public legitimize governments and keep them accountable, the policy program is very much seen as their own and not that of the people, and the participatory role for individuals is severely limited.

Creative Destruction
The notion of creative destruction is found in the writings of Friedrich Nietzsche and in Werner Sombart's Krieg und Kapitalismus (War and Capitalism) (1913, p. 207) where he wrote: 'again out of destruction a new spirit of creativity arises'. The economist Joseph Schumpeter popularized in his work entitled "Capitalism, Socialism and Democracy" (1942) to denote a "process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one and used the term to describe the process of transformation that accompanies radical innovation.

Schumpeter goes so far as to say that the "process of creative destruction is the essential fact about capitalism."

Destroying Iraq
The step from economic destruction to military destruction is apparently small. Michael Ledeen, machiavellian fascist expert and neocon warmonger of the American Enterprise Institute writes;

"We therefore have a dual task: Kill the terrorists, and destroy the regimes that provide them with the critical infrastructure — training, safe havens, travel documents, technology, and all the rest — they need to operate.

The hunt for the terrorists is a technical matter, and we must hope that our military has enough virtue left from the Clinton ravages to do the job. But we should have no misgivings about our ability to destroy tyrannies. It is what we do best. It comes naturally to us, for we are the one truly revolutionary country in the world, as we have been for more than 200 years. Creative destruction is our middle name. We do it automatically, and that is precisely why the tyrants hate us, and are driven to attack us."

The fact that Saddam Hussein never attacked the US or had any connection to 9/11 seems to be irrelevant.

"The hidden agenda of the US government in Iraq has been three -- fold. Firstly, to take control of the world’s second largest oil reserves, thereby seizing one of the key oil spigots of competitors like Japan, China and the EU. Secondly, to prevent the dollar -- based world oil market from transacting in Euros, something Iran, Iraq and Venezuela were attempting since 2002, when the Euro was launched. Thirdly, the establishment of permanent US military bases in the strategic heart of the world. (The US has built the world’s largest embassy – employing 5000 people – in Baghdad).

In all three respects, the war has been a resounding success. US oil companies have taken charge of Iraqi oil. In the future it is through them that Japan, China, EU and any other competitors will have to buy oil from the region, something that gives the US formidable leverage. The oil market continues to transact in dollars, fragile as it is as a global reserve currency. Iranian experiments with the Euro Bourse have not taken off."

The European Union
The European Union's innovation program, and its main development plan, the Lisbon Strategy, are based on Schumpeter.

Austrian School of Economics

Classical liberalism
Creative Destruction
Joseph Schumpeter
The Economics of Creative Destruction - The Iraq War is a Huge Success
Joseph A. Schumpeter "Creative Destruction"From Capitalism, Socialism and Democracy
Michael Ledeen: Creative Destruction - How to wage a revolutionary war.
The new liberal imperialism

07 January 2008

Social Darwinism and Laissez-Faire Capitalism

British philosopher Herbert Spencer went a step beyond Darwin's theory of evolution and applied it to the development of human society. In the late 1800s, many Americans enthusiastically embraced Spencer's "Social Darwinism" to justify laissez-faire, or unrestricted, capitalism.

In 1859, Charles Darwin published Origin of Species, which explained his theory of animal and plant evolution based on "natural selection." Soon afterward, philosophers, sociologists, and others began to adopt the idea that human society had also evolved.

The British philosopher Herbert Spencer wrote about these ideas even before Darwin's book was published. He became the most influential philosopher in applying Darwin's ideas to social evolution. Born in 1820, Herbert Spencer taught himself about the natural sciences. For a brief time, he worked as a railroad surveyor and then as a magazine writer. Spencer never married, tended to worry a lot about his health, and preferred work to life's enjoyments.

In 1851, he published his first book. He argued for laissez-faire capitalism, an economic system that allows businesses to operate with little government interference. A year later, and seven years before Darwin published Origin of Species, Spencer coined the phrase "survival of the fittest."

Darwin's theory inspired Spencer to write more books, showing how society evolved. With the financial support of friends, Spencer wrote more than a dozen volumes in 36 years. His books convinced many that the destiny of civilization rested with those who were the "fittest."

The "Fittest" and the "Unfit"
Herbert Spencer based his concept of social evolution, popularly known as "Social Darwinism," on individual competition. Spencer believed that competition was "the law of life" and resulted in the "survival of the fittest."

"Society advances," Spencer wrote, "where its fittest members are allowed to assert their fitness with the least hindrance." He went on to argue that the unfit should "not be prevented from dying out.

Spencer believed his own England and other advanced nations were naturally evolving into peaceful "industrial" societies. To help this evolutionary process, he argued that government should get out of the way of the fittest individuals. They should have the freedom to do whatever they pleased in competing with others as long as they did not infringe on the equal rights of other competitors.

Spencer criticized the English Parliament for "over-legislation." He defined this as passing laws that helped the workers, the poor, and the weak. In his opinion, such laws needlessly delayed the extinction of the unfit.

Spencer's View of Government
Herbert Spencer believed that the government should have only two purposes. One was to defend the nation against foreign invasion. The other was to protect citizens and their property from criminals. Any other government action was "over-legislation."

Spencer opposed government aid to the poor. He said that it encouraged laziness and vice. He objected to a public school system since it forced taxpayers to pay for the education of other people's children. He opposed laws regulating housing, sanitation, and health conditions because they interfered with the rights of property owners.

Spencer said that diseases "are among the penalties Nature has attached to ignorance and imbecility, and should not, therefore, be tampered with." He even faulted private organizations like the National Society for the Prevention of Cruelty to Children because they encouraged legislation.

In the economic arena, Spencer advocated a laissez-faire system that tolerated no government regulation of private enterprise. He considered most taxation as confiscation of wealth and undermining the natural evolution of society.

Übermensch as Goal
Zarathustra first announces the Übermensch as a goal humanity can set for itself. All human life would be given meaning by how it advanced the generation of this higher, transhuman type. The aspiration of a woman would be to give birth to an Übermensch, for example; her relationships with men would be judged by this standard.

This aspect of the Übermensch has reminded some of Charles Darwin and Herbert Spencer. But whereas evolution via natural selection or survival of the fittest proceeds without being intended by any member of the species, the transition from humanity to Übermensch must be willed.

Nietzsche associates the Übermensch with a program of eugenics. This is most pronounced when considered in the aspect of a goal that humanity sets for itself. The reduction of all psychology to physiology and even physiognomy implies that human beings can be bred for cultural traits. This aspect of Nietzsche's doctrine focuses more on the future of humanity than on a single cataclysmic individual. There is no consensus regarding how this aspect of the Übermensch relates to the creation of new values.

Liberal Eugenics and Classism
Liberal eugenics is conceived as being mostly "positive", relying more on genetic manipulation than on selective breeding charts to achieve its aims. It seeks to both minimize congenital disorder and enhance ability, traditional eugenic goals. It is intended to be under the control of the parents exercizing their procreative liberty while guided by the principle of procreative beneficence, though the substantial governmental and corporate infrastructure required for human genetic engineering may limit or steer their actual choices. Currently, genetic testing such as preimplantation genetic diagnosis, have been developed to allow for embryos carrying congenital disorders to be discarded.

A key goal of liberal eugenics is to reduce the role of chance in reproduction.

Classism is the systematic oppression of subordinated classes of people by the dominant class. It includes individual attitudes and behaviors; systems of policies and practices that are set up to benefit the upper classes at the expense of the lower classes. Classism is grounded in a hierarchy belief system that ranks people according to socioeconomic status (SES), family lineage, and other class related divisions. This system leads to a drastic income and wealth inequality.

Ralph Harris, Baron Harris of High Cross (December 10, 1924 – October 19, 2006) was a British economist. He was head of the Institute of Economic Affairs from 1957 to 1987. The IEA's brand of free market liberal economics was deeply unpopular when it was founded, but, some 20 years later, Harris was considered to be an architect of Thatcherism.

Ralph Harris Eugenics Society Fellow 1937, 1957, 1977

Liberal Eugenics
British Eugenics Society Members List
A shameful history
Nazi Eugenics
Culture of corruption: the legacy of Ayn Rand
Social Darwinism and American Laissez-faire Capitalism

05 January 2008

Montesquieu and the Balance of Power

In his famous work On the Spirit of Laws (1748) Montesquieu observes "Every man whom some power is granted tries to get more and eventually misuses it".

It is this observation which led him to the notion that only a balance of power between different branches of government can ensure that none of them take precedence over the others.

Hayek wrote 'The Road to Serfdom' in a time when states had concentrated in their hands enormous power, rights and prerogatives. Quite naturally he was concerned that this process would continue.

However, instead of advocating a balance between states, corporations and employees he demanded almost unlimited power for business. Did he not realize that an atrophy of the state coupled with a collapse of unions would leave corporations a clear field?

Driving Forces in Physical, Biological and Socio-economic Phenomena By Bertrand M. Roehner

04 January 2008

The DCDC Global Strategic Trends Programme 2007-2036

The Development, Concepts and Doctrine Centre (DCDC) is a UK Ministry of Defence think-tank, collocated with the Defence Academy at Shrivenham.

The DCDC Global Strategic Trends Programme 3rd Edition is the latest iteration of work commenced by the DCDC, as the Joint Doctrine and Concepts Centre (JDCC), in 2001 and is published here(PDF)

Strategic Trends explores a range of potential outcomes over the next 30 years. As with previous editions, the document has been placed in the public domain in order to generate debate and discussion.

As well as establishing trend-based outcomes across the 5 dimensions (over 500 in total), Strategic Trends seeks to identify and interpret the likely pattern of change over the next 30 years. In doing so, it assesses that during this period human activity will be dominated and affected by 3 pervasive Ring Road Issues:

• Climate Change.
• Globalization.
• Global Inequality.

"There is compelling evidence to indicate that climate change is occurring and that the atmosphere will continue to warm at an unprecedented rate throughout the 21st Century. "

"..there will continue to be winners and losers in a global economy led by market forces, especially so in the field of labour, which will be subject to particularly ruthless laws of supply and demand."

"the gap between rich and poor will probably increase and absolute poverty will remain a global challenge. "

"The power and ubiquity of the media will increase the tendency towards populist and personality-based politics in democratic electorates, with confidence in politicians centered on administrative and executive competence rather than issues. "

"Absolute poverty and comparative disadvantage will fuel perceptions of injustice among those whose expectations are not met, increasing tension and instability, both within and between societies and resulting in expressions of violence such as disorder, criminality, terrorism and insurgency.

They may also lead to the resurgence of not only anti-capitalist ideologies, possibly linked to religious, anarchist or nihilist movements, but also to populism and the revival of Marxism. "

"Rapid mobilization – ‘Flashmobs’ - may be undertaken by states, terrorists and criminals, and may involve dispersed communities across international boundaries, challenging security forces to match this potential agility and ability to concentrate. "

" AI and the effective replication of human judgement processes, when combined with autonomous systems, particularly robotics, are likely to enable the application of lethal force without human intervention, raising consequential legal and ethical issues. "

"A more permissive R&D environment could accelerate the decline of ethical constraints and restraints. The speed of technological and cultural change could overwhelm society’s ability to absorb the ethical implications and to develop and apply national and international regulatory and legal controls. Such a regulatory vacuum would be reinforcing as states and commercial organizations race to develop and exploit economic, political and military advantage."

"By 2035, an implantable information chip could be developed and wired directly to the user’s brain."

Revolution, flashmobs, and brain chips. A grim vision of the future
Rear Admiral Chris Parry at the IISS Military Leaders’ Forum sponsored by KBR

02 January 2008

Bank of Credit and Commerce International

The Bank of Credit and Commerce International (BCCI) was a major international bank founded in London, United Kingdom by Agha Hasan Abedi, a leading Pakistani national, in 1972. The company was registered in Luxembourg. At its peak, it operated in 78 countries, had over 400 branches, and claimed assets of US$ 25 billion.

BCCI, at one point the seventh largest private bank in the world, collapsed in 1991 after an international effort had exposed it as a massive criminal enterprise.

Agha Hasan Abedi
In 1959 he founded United Bank in Pakistan and became its first general manager in addition to being a director. He was later designated as president and managing director. He was finally elected chairman of the board while at the same time holding office of the president.

He founded the BCCI with Bank of America NT&SA as one of the major share-holders and became BCCI's first president. In addition to being a member of the board of directors, he was a director of BCCI Holdings (Luxembourg) SA.

The corrupt organization used Bank of America as an important resource in a global Ponzi scheme to collect deposits, funneling most of its cash in the U.S. into Bank of America accounts. At the same time, the flow of deposits helped prop up the struggling California bank during its hard times in the mid-1980s. "The B.C.C.I. headquarters money always flowed through Bank of America," says a former B.C.C.I. executive.

The two organizations had a strong human link as well, grounded in the friendship between B.C.C.I. founder Agha Hasan Abedi and Bank of America's A.W. (Tom) Clausen, who was chairman during 1970-81 and 1986-90.

When regulators seized B.C.C.I. offices around the world in July 1991, three of the seven directors on its board were former high-ranking Bank of America executives. On that same day, the California bank disclosed that it still had $177.4 million of B.C.C.I.'s money in its accounts.

BCCI became the focus in 1991 of the world's worst financial scandal and what was called a "$20-billion-plus heist". It was found by regulators in the United States and the United Kingdom to be involved in money laundering, bribery, support of terrorism, arms trafficking, the sale of nuclear technologies, the commission and facilitation of tax evasion, smuggling, illegal immigration, and the illicit purchases of banks and real estate. The bank was found to have at least $13 billion unaccounted for.

Investigators in the U.S. and the UK revealed that BCCI had been "set up deliberately to avoid centralized regulatory review, and operated extensively in bank secrecy jurisdictions. Its affairs are extraordinarily complex. Its officers were sophisticated international bankers whose apparent objective was to keep their affairs secret, to commit fraud on a massive scale, and to avoid detection"; BCCI organized its own intelligence network, diplomatic corps, and shipping & trading companies.

The liquidators, Deloitte & Touche, filed a lawsuit against Price Waterhouse and Ernst & Young, the bank's auditors, which was settled for $175 million in 1998. A further lawsuit against the emir of Abu Dhabi, a major shareholder, was launched in 1999 for around $400 million. BCCI creditors also instituted a $1 billion suit against the Bank of England as a regulatory body. After a nine-year struggle due to the Bank's statutory immunity, the case went to trial in January 2004. However in November 2005 liquidators Deloitte dropped any action against the Bank of England as it was no longer considered in the best interests of the creditors after a High Court ruling.

BCCI's founder, Agha Hasan Abedi, started the bank in Pakistan in 1972. Abedi had previously set up the United Bank of Pakistan in 1959. Following the nationalization of United Bank in 1971 he sought to create a new supranational banking entity. BCCI was created with capital from Sheikh Zayed bin Sultan Al Nahayan, emir of Abu Dhabi in the United Arab Emirates, Bank of America (25%) and, allegedly, the CIA. It is claimed that the CIA were seeking a funding route for the Afghan Mujahideen, similar to the Investors Overseas Service and the Nugan Hand Bank in the 1970s[citation needed]. However, the vast majority of BCCI's assets were initially from Abu Dhabi.

BCCI expanded rapidly in the 1970s, pursuing asset growth over profits, seeking high net-worth individuals and regular large deposits. The company itself divided into BCCI Holdings with the bank under that split into BCCI S.A (Luxembourg) and BCCI Overseas (Grand Cayman). BCCI also acquired parallel banks through acquisitions: buying the Banque de Commerce et Placements (BCP) of Geneva in 1976, and creating KIFCO (Kuwait International Finance Company), Credit & Finance Corporation Ltd, and a series of Cayman-based companies held together as ICIC (International Credit and Investment Company Overseas, International Credit and Commerce [Overseas], etc.).

Overall, BCCI expanded from 19 branches in five countries in 1973 to 27 branches in 1974, to 108 branches in 1976, with assets growing from $200 million to $1.6 billion. This growth caused extensive underlying capital problems. By 1977, BCCI was in sufficiently dire financial straits that the Guardian later wrote that at this time "BCCI, founded in 1975, was almost certainly insolvent by 1977" - it was using cash from deposits to fund operating expenses, rather than making investments, taking on the attributes of a Ponzi scheme. Nevertheless BCCI continued to expand, moving into the African markets in 1979, and Asia in the early 1980s.

They were among the first foreign banks awarded a license to operate in the Chinese Special Economic Zone Shenzhen. Some of China's largest state banks were depositors in BCCI's Shenzhen branch.

In 1988, BCCI was implicated in a drug-money-laundering scheme based in Tampa, Florida: the C-Chase case. The BCCI was called the CIA’s money-laundering facility. BCCI pleaded guilty in 1990, but only on the grounds of respondeat superior.

In 1990, a Price Waterhouse audit of BCCI revealed an unaccountable loss of hundreds of millions of dollars. The bank approached Sheikh Zayed, who made good the loss in exchange for an increased shareholding of 78%. Much of BCCI's documentation was then also transferred to Abu Dhabi.

The black network
The BCCI Affair
Agha Hasan Abedi
Scandals: Gilt by Association

Neo-Cons for Giuliani

Jim Lobe
"Republican presidential candidate and current front-runner, Rudi Giuliani, has named seven more people, including four prominent neo-conservatives, to his already-neocon-dominated foreign policy team. The neo-conservatives include Ruth Wedgwood of the Johns Hopkins School of Advanced International Studies; “terrorism analyst” and free-lance writer often published in the Weekly Standard and the National Review Online, Thomas Joscelyn; and two “scholars” at the American Enterprise Institute (AEI) and protégés of Richard Perle – Michael Rubin and David Frum (with whom Perle wrote the ultra-hawkish “An End to Evil” in 2004). Combined with such incumbent team members as Norman Podhoretz, Martin Kramer, Daniel Pipes, and Robert Kasten, the team increasingly resembles the cheer-leading squad for the U.S. section of the international Bibi Netanyahu fan club."


01 January 2008

Privacy and the Market State

The argument that "economic freedom leads to greater democracy" seems to be contradicted by an overall worsening of privacy protection across the world. The US, home of the "Index of Economic Freedom" is itself blacklisted by Privacy International.

It borders on the ridiculous when one of the architects of South American death squads together with a newspaper owned by media monopolist and warpropagandist Rupert Murdoch rates "freedom" in the world from the worst ranking country in the democratic world when it comes to endemic surveillance.

Economic Freedom

Asia again topped a survey which ranks the world's freest economies in 2007, with Hong Kong in first place and Singapore in second position. Australia clinched the third spot in the latest Index of Economic Freedom survey for 2007 conducted by the Wall Street Journal and The Heritage Foundation.
Top 10 Countries
1. Hong Kong
2. Singapore
3. Australia
4. United States
5. New Zealand
6. United Kingdom

Privacy and Surveillance
Privacy International (PI) is a human rights group formed in 1990 as "a watchdog on surveillance and privacy invasions by governments and corporations." It has been doing its global survey on the rankings of privacy protection around the world since 1997.
The 2007 rankings indicate an overall worsening of privacy protection across the world, reflecting an increase in surveillance and a declining performance of privacy safeguard

The lowest ranking countries in the survey continue to be Malaysia, Russia and China.
In terms of statutory protections and privacy enforcement, the US is the worst ranking country in the democratic world. In terms of overall privacy protection the United States has performed very poorly, being out-ranked by both India and the Philippines and falling into the "black" category, denoting endemic surveillance.

The worst ranking EU country is the United Kingdom, which again fell into the "black" category along with Russia and Singapore.

Blacklisted Countries:
China 1.3
Malaysia 1.3
Russia 1.3
Singapore 1.4
United Kingdom 1.4
United States 1.5
Thailand 1.5
Taiwan 1.5

The Financial Paradoxes of Globalization

Look Ma, An Honest Neoliberal!

I found an article written by someone of the neoliberal persuasion that actually have an air of honesty to it;

"Globalization" and "Neoliberalism"
By J. Bradford DeLong for the Chronicle of Higher Education

I am a card-carrying neoliberal: a believer that a bet on increased international economic integration is our best hope for rapidly moving to a truly human world, an advocate of NAFTA and GATT, a former not-very-senior official in the Bentsen and Rubin Treasury Departments, and a believer that those fighting to hold back world economic integration are or are the dupes of foes of global prosperity and liberty.

But I also think that this bet on increased international economic integration is a bet. It is not a sure thing. And I think that it is less important to assure people that it is a good bet (although I think that it is) than to help people distinguish the light from the rhetorical heat. After all, there will be other bets and other policy choices to be made in the future. And to fail to understand what is going on now will diminish our chances of collectively choosing wisely tomorrow.

So I want to turn down the volume. I want to approach ideologies of every stripe (including my own) with skepticism. For despite the gallons of ink that have been spilled, our understanding of what "globalization" is and what it will do is still primitive. The people whom you can learn the most from aren't those who claim to have the answers, but those who are still working overtime to ask the useful questions.

The critics of free trade aren't necessarily wrong to be critical of the current state of the international economy. But they write tomes that seem to me at least to reveal confusion and fail to enlighten--instead they deepen the surrounding darkness.

There are, however, some excellent anti-globalization books.

The granddaddy of them all is Karl Polanyi's (1944) more than half a century-old The Great Transformation, published more than half a century ago.

Polanyi argued that the market economy erodes the web of relationships that holds human society together. The market for labor pressures people to move around the globe to where they can earn the most--creating strangers in strange lands. The market for consumer goods rewards people for being fortunate or for responding to the incentives--making status a product of market forces rather than the result of social norms or visions of distributive justice. Moreover, Polanyi argued, the market's undermining of social order threatens to destroy the very societal and institutional structures on which the market economy rests.

More recent works have provided intriguing updates to Polanyi's argument. The Work of Nations by Robert B. Reich, who went onto become Clinton's Secretary of Labor, focuses on the dangers posed by globalization to America's sense of community and to the political order established by Roosevelt's New Deal.

Saskia Sassen's (1998) Globalization and Its Discontents speculates on how the "new mobility of people and money" is about to lead to increases in relative inequality within the narrow spaces of modern post-industrial cities.

The second vein of reform-minded thinking about globalization is best exemplified by Dani Rodrik's Has Globalization Gone too Far?

He claims that globalization cannot be a replacement for (failed) social democracy in the developing periphery. Instead, he believes that globalization must be assisted by (successful) social democracy if it is to produce a world with a human face.

Barry J. Eichengreen, my Berkeley colleague, has written two recent books: Globalizing Capital and Toward a New International Financial Architecture.

A broader perspective, with more points of view but tending toward the same lessons, can be found in Capital Flows and Financial Crises, edited by Miles Kahler.

In response to such critiques, the neoliberal political establishment--the Brookings Institution, the Progressive Policy Institute, and the Century Foundation--assures us that critics of increasing international economic integration are suffering from an irrational fear: Globaphobia is what they call it.

In a sense the neoliberal position is a counsel of despair. Once upon a time development advisors, politicians, economists, and others argued that social democracy was the proper road for developing economies. A strong, active government to build infrastructure and redistribute wealth to ensure that growth would benefit all--or so the argument went. Couple that with high investment (perhaps behind a wall of substantial tariffs) and the private sector would flourish.

But over the past two decades cynicism has set in. A consensus has formed that outside already-developed nations (and indeed inside some of them) an activist developmental state has entailed too many coups, too much corruption, too many business leaders deciding that the road to profits is not capital investment but marrying the C.F.O. to the daughter of the vice-minister of finance.

Neoliberals hope that multinational corporations, financial analysts, bond-fund managers, and bond raters will in the end be able to apply some constructive pressure to improve the situation."

(In “The Squandering of America,” Robert Kuttner says financial elites have too much sway over the Democratic Party — and, as a result, over public policy. (Financial elites ARE the republicans so I don´t think there would be any real choice either way)

Today, we are seeing the squandering of America, on multiple fronts. The ultimate test of a democracy is whether it is possible for the people to throw out the governing party. In politics, we have come very close to losing our democracy, not just in rigged rules and stolen elections but in the domination of politics by big money, the decline in participation by ordinary people, and the assault on basic constitutional liberties."

Kuttner takes on four pillars of neoliberalism: the preference for balanced budgets and modest-size government; free trade; economic austerity as a condition for development aid; and financial-market deregulation. In each case, the evidence suggests neoliberal policies were either irrelevant or downright disruptive.*)

It’s the Politics, Stupid
Inflating the importance of trade liberalization

The Invisible Hand

‘Chicago’ Adam Smith was created in Milton Friedman’s department and replaced the authentic ‘Kirkcaldy’ Adam Smith who wrote the Wealth Of Nations.

One of the many atrocities committed by Chicago and its graduates who spread the word across US campuses, was the myth of the ‘invisible hand’, which some variants transmuted into ‘as if led by an invisible hand’, and most of examples of the myth in currency assert it was, first a ‘concept’, then a ‘theory’ and finally Smith’s most ‘important idea’.
Adam Smith's Lost Legacy

"Like the “free market” of Milton Friedman’s wettest dreams, the “marketplace of ideas” is heavily manipulated by well-paid professionals. These “markets” are virtually one and the same in the context of capitalism. Somebody’s always trying to sell you something—fear, beer, and all things in between.

In the case of “free market” capitalism there are a slew of manipulative forces at work: the WTO, NAFTA, the selective government subsidies predicted by Eisenhower’s parting “Military Industrial Complex” warning, the outsourcing of labor to countries with little regard for worker rights, pay or age, fraudulent Enron-type accounting, etc. The examples are numerous and I have left out many. Most understand that the “invisible hand” of the “free market” must by necessity be connected to an “invisible brain.” It would be dead meat otherwise.

Jefferson’s “marketplace of ideas” is similar, if not one and the same as the free market (they most often act in collusion). Our multi-billion dollar PR industry is the spokesperson of all other industries. It’s not akin to yelling “CONSPIRACY!” to acknowledge that specific people have control over what ideas are successful and multiply. We call them the media. The media is literally owned by giant corporations, which are under direction from its board members and CEOs to maximize profit in accordance with their charter. If they do not maximize profit they get sacked. They are also shielded from personal responsibility. So I say to you audaciously myopic Ayn b-Rand of libertarian free-marketeers clogging the well of civilized ideas (to say nothing of the fountainhead), “Where is your iconic, individual Superman now?” Out at the quarry raping self-victimized women, no doubt."
The Humanity of Political Deception and the Evolution of False Choice

American Civil War

By Ha-Joon Chang

"Almost all of today’s rich countries used tariff protection and subsidies to develop their industries. Interestingly, Britain and the USA, the two countries that are supposed to have reached the summit of the world economy through their free-market, free-trade policy, are actually the ones that had most aggressively used protection and subsidies.

Contrary to the popular myth, Britain had been an aggressive user, and in certain areas a pioneer, of activist policies intended to promote its industries. Such policies, although limited in scope, date back from the 14th century (Edward III) and the 15th century (Henry VII) in relation to woollen manufacturing, the leading industry of the time. England then was an exporter of raw wool to the Low Countries, and Henry VII for example tried to change this by taxing raw wool exports and poaching skilled workers from the Low Countries.

Particularly between the trade policy reform of its first Prime Minister Robert Walpole in 1721 and its adoption of free trade around 1860, Britain used very dirigiste trade and industrial policies, involving measures very similar to what countries like Japan and Korea later used in order to develop their industries. During this period, it protected its industries a lot more heavily than did France, the supposed dirigiste counterpoint to its free-trade, free-market system. Given this history, argued Friedrich List, the leading German economist of the mid-19th century, Britain preaching free trade to less advanced countries like Germany and the USA was like someone trying to “kick away the ladder” with which he had climbed to the top.
Between the Civil War and the Second World War, the USA was literally the most heavily protected economy in the world.

In this context, it is important to note that the American Civil War was fought on the issue of tariff as much as, if not more, on the issue of slavery. Of the two major issues that divided the North and the South, the South had actually more to fear on the tariff front than on the slavery front.

Abraham Lincoln was a well-known protectionist who cut his political teeth under the charismatic politician Henry Clay in the Whig Party, which advocated the “American System” based on infrastructural development and protectionism (thus named on recognition that free trade is for the British interest).

One of Lincoln’s top economic advisors was the famous protectionist economist, Henry Carey, who once was described as “the only American economist of importance” by Marx and Engels in the early 1850s but has now been almost completely air-brushed out of the history of American economic thought. On the other hand, Lincoln thought that African Americans were racially inferior and that slave emancipation was an idealistic proposal with no prospect of immediate implementation – he is said to have emancipated the slaves in 1862 as a strategic move to win the War rather than out of some moral conviction.

In protecting their industries, the Americans were going against the advice of such prominent economists as Adam Smith and Jean Baptiste Say, who saw the country’s future in agriculture. However, the Americans knew exactly what the game was. They knew that Britain reached the top through protection and subsidies and therefore that they needed to do the same if they were going to get anywhere. "

Post-Autistic Economics Network

The Newark [N.J.] Daily Advertiser, which was a Republican Party mouthpiece, warned on April 2, 1861, that the "free-trade doctrines of Adam Smith" were dangerously popular in the South as southerners had "taken to their bosoms the liberal and popular doctrine of free trade" and that they "might be willing to go . . . toward free trade with the European powers."

This "must operate to the serious disadvantage of the North," as "commerce will be largely diverted to the Southern cities." And, "We apprehend that the chief instigator of the present troubles – South Carolina – have all along for years been preparing the way for the adoption of free trade." This must be stopped, the New Jersey paper editorialized, by "the closing of the [Southern] ports" by military force (see Howard C. Perkins, Northern Editorials on Secession, p. 601).

This of course is exactly what Lincoln set out do to, two weeks after Fort Sumter, in announcing a naval blockade of the South. In doing so he offered the nation one reason and one reason only for the blockade: tariff collection.

Economy of the Confederate States of America
"The Confederate States of America had an agrarian-based economy that relied heavily on slave-worked plantations for the production of cotton for export to Europe and the northern US states. If ranked as an independent nation, it would have been the fourth richest country of the world in 1860.

The states that entered the Confederate States accounted for 70% of total US exports, and the Confederate leaders believed that this would give the new nation a firm financial basis. Cotton was the primary potential export, accounting for 75% of Southern goods either shipped to northern US states or exported in 1860. The Confederate States entered the war with the hope that its near monopoly of the world cotton trade would force the European importing countries, especially Great Britain and France, to intervene in the war on her behalf.

Disputes over the proper tariff rate had been a political issue between northern and southern US states. Southerners mostly opposed protectionist tariffs and in fact kept the tariffs at low levels from 1847 through 1860. The founders of the Confederate States adopted the doctrine of free trade and enshrined this in the Confederate States Constitution with a prohibition of protectionist tariffs. One of the first acts of the Confederate Congress was the lowering of import tariffs from the then current US average rate of 20% to 10%."

Henry Charles Carey
(December 15, 1793 - October 13, 1879), a leading 19th century economist of the American School of capitalism. He is now best known for the book Harmony of Interest, to compare and contrast what he called the "British System" of laissez faire free trade capitalism with the "American System" of developmental capitalism, through tariff protection and government intervention to encourage production.

He was born in Philadelphia, Pennsylvania in 1793 and was a chief economic advisor to Abraham Lincoln during his presidency.

Carey, who had set out as an earnest advocate of free trade, accordingly arrived at the doctrine of protection: the coordinating power in society must intervene to prevent private advantage from working public mischief. He attributed his conversion on this question to his observation of the effects of liberal and protective tariffs respectively on American prosperity.

This observation, he says, threw him back on theory, and led him to see that the intervention referred to might be necessary to remove (as he phrases it) the obstacles to the progress of younger communities created by the action of older and wealthier nations.


Income Inequality

Income inequality, by many measures, is now greater than it has been since the 1920's. The top 1 percent of earners in the United States made 19 percent of all income in 2005, up from 8 percent in 1975, according to an analysis by Emmanuel Saez and Thomas Piketty, two economists.

The causes of inequality are hotly debated and tend to fall into two broad categories. There are market forces - like increased trade and technological advances - which have made highly skilled and well-educated workers more productive, thus increasing their pay. And there are institutional forces, like deregulation, the decline of unions and the stagnation in the minimum wage.

In 1947, the median family - the one making more than half of all other families and less than half of all other families - made $23,400, according to the Economic Policy Institute. Over the next three decades, median-income more than doubled, to $47,400 in 1977. In 2005, the median family made $58,400. (All these numbers are adjusted for inflation.)

Meanwhile, the incomes of earners at the 99.99th percentile of the income distribution -- those making more than 9,999 out of every 10,000 other earners -- have soared over the last three decades, from less than $2 million in the late 1970's to about $10 million now.

So pay has risen for most families in the last 30 years, but as not as quickly as it did in the decades after World War II and not nearly as quickly as it has for the affluent.
-- David Leonhardt, Dec. 16, 2007

New York Times Topics - Income Inequality