Friday, November 17, 2006
by Stephen Gowans
Milton Friedman, who was instrumental in providing the intellectual justification capitalist classes needed to claw-back the reforms they had conceded to labor in the post-WWII period, has died.
Friedman’s neoliberalism – the idea that enterprises and markets must be free, and if they’re not, governments must intervene to make them so -- has two bookends.
The first is Chile, following the other 9/11 – September 11, 1973. That was the date Augusto Pinochet, backed by US companies, the CIA and Henry Kissinger, overthrew the leftist government of Salvador Allende.
Friedman’s intellectual janissaries, the Chicago Boys, a group of class warrior economists from the University of Chicago where Friedman taught, rushed to Chile to advise the new military government on the harsh-to-the-poor-indulgent-to-the-rich economic ideas of Friedman and his intellectual cronies Ludwig von Mises and Friedrich Hayek.
Nationalizations were reversed, public assets were sold off, natural resources were opened to untrammeled exploitation, and social security was privatized. Foreign firms were courted, indulged and guaranteed the right to repatriate profits.
Thirty years later neo-liberalism was brought to Iraq, also by the gun. On September 19, 2003, Paul Bremer, the US proconsul in Iraq, imposed Friedman’s ideas on a country that had been brought under US suzerainty by force.
Bremer defined a bill of rights for foreign capital, including the right: to buy Iraq’s public enterprises; to own Iraqi businesses; to repatriate profits; to own Iraqi banks; to be free from barriers to trade and investment; and to pay little tax. To ensure foreign capital would also have the right to cheap labor, Bremer banned strikes in key sectors and severely restricted unionization.
Neoliberalism promised to stimulate economic growth, but failed miserably. Ever since neoliberal ideas became ideologically hegemonic in the late 70s, economic growth has slowed globally, not increased.
But what neoliberalism has succeeded in doing quite spectacularly is to reduce inflation (by increasing unemployment) and to distribute wealth upward. In other words, neoliberalism hasn’t made the world wealthier, but it has made those at the top richer.
Was Friedman an enemy to nine-tenths of humanity? In a way. But it’s not as if his ideas changed the world.
On the contrary, Friedman’s neoliberal ideas were plucked from obscurity (the ideas were developed in the 30s and remained on the fringes for decades) because they were congenial at a particular moment in time to the interests of the hereditary capitalist families, corporate directors and bankers whose political and economic interests were being eroded by the growing social welfare Keynesianism of the 70s.
Rampant inflation was reducing the value of their assets, muscular unions and progressive tax-supported social welfare programs, were cutting into their bottom lines, and colonial liberation was undermining overseas profits.
In boardrooms and private clubs, it was clear something had to be done.
Social welfare Keynesianism, which had been made possible by the high growth rates of the post war era (the growth had been stimulated by the pent-up demand from the war years, the development of the automobile industry and its multiplier effect in stimulating allied industries, and the heavy military spending of the cold war and space program) had run its course.
Neoliberalism offered an attractive veneer to policies capitalist class-dominated governments would pursue anyway. If Friedman didn’t exist, he would have been invented, which is to say, someone else, with similar views, would have been plucked from obscurity and thrust into the limelight, celebrated as an intellectual giant, just as he was.
To elevate his views to respectability, Friedman, and Hayek too, were awarded the Nobel Prize for economics. The award wasn’t part of the other (the real) Nobel Prizes, but was handed out by the Swedish banking elite, a group, which, for obvious reasons, smiles fondly on anyone who says they, and those who share the same class interests, should be indulged.
That neoliberalism was only a veneer, a stalking horse behind which plunder and trickle up policies were pursued, is clear in the abandonment of neoliberal policy wherever it conflicted with capitalist class interests.
Ronald Reagan, who styled himself a champion of neoliberalism, didn’t follow neoliberal tenets of reducing the public sector or bringing down taxes.
(Nor does George Bush, who rhapsodizes about free trade while maintaining a program of subsidies and tariff barriers to protect the US steel industry, as well as the agricultural, aerospace, biomedical and military sectors.)
To be sure, Reagan supported Paul Volker’s neoliberal policies at the Fed, crushed unions, and took a wrecking ball to labor relations policy.
But while he slashed taxes for the top 20 percent of income earners, he increased taxes for the remaining 80 percent – the greatest tax increase for the greatest number of people in peacetime ever.
He did this to fund a massive increase in the public sector through a military buildup -- also debt-financed, fueling a colossal growth in public sector debt.
Investment bankers who held government bonds and war contractors like Boeing, Lockheed-Martin and General Electric reaped the bonanza of growing government orders for bombers, cruise missiles and other expensive gadgetry of war. Everyone else picked up the tab.
Rather than being neoliberal, Reagan’s policies were pragmatically pro-capitalist – a mix of Keynesian militarism and monetarism put together to meet the challenges the capitalist class faced at the time. Neoliberalism, in its pure form, was to be a doctrine applied in practice to the Third World alone, where its emphasis on free markets, free trade and free enterprise would benefit investors and transnational corporations based in the West.
John Williamson, one of Friedman’s intellectual children, acknowledged that the neoliberalism “the US government promotes abroad, the US government does not practice at home.”
The day after he died, my morning newspaper ran a photograph of Friedman on the front page, under the headline “A staunch champion of freedom.”
While he may have been a staunch champion of freedoms that reached beyond free enterprise and free markets alone, Friedman’s ideas became a convenient justification for the pursuit by rich families, corporations and investment banks of capitalist freedom: the freedom to plunder and exploit.
For more on neoliberalism I recommend Vincente Navarro’s “The Worldwide Class Struggle(http://www.monthlyreview.org/0906navarro.htm)” and David Harvey’s “A Brief History of Neoliberalism,” Oxford University Press, 2005.
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