Global Transformation: Strategy for Action
Dedication Epigraph Preface Acknowledgments One Two Three Four Five Six Seven Eight Epilogue Comments
| Chapter Three: Analysis |
Modernization
Romanticism
Authoritarianism
The System
Internal Methods of Control
External Methods of Control
The next question is: how can we build the kind of society described in previous chapters? As I see it, the first step is to face reality. By better understanding what we're up against, we can be more effective, partly because reality is less frightening if we name it for what it is. Since we can we can better understand what we’re up against if we understand where we come from, this chapter begins with a look at past patterns that shape current conditions.
| Modernization |
When I was young, like most children who encounter it, the Garden of Eden fascinated me. I was puzzled by why eating from the Tree of Knowledge shattered that paradise, but the idea of a past utopia certainly appealed to me.
Other cultures have embraced similar notions of a Golden Age. In Greece, Hesiod, who lived around 700 BC, wrote of a time when “they dwelt in ease and peace upon their lands with many good things, rich in flocks and loved by the blessed gods.” As he told it, human beings at that time were carefree and never aged. Farming was unnecessary. Death merely involved falling asleep.
These reports were repeated in subsequent generations by the Orphic religious movement and poets like Virgil and Ovid, who wrote:
No rule but uncorrupted reason knew:
And, with a native bent, did good pursue.
Unforc'd by punishment, un-aw'd by fear….
Most conceptions of Heaven have borne a close similarity to Eden. The return of Christ on Earth is conceived essentially as a return to Eden. And in the Old Testament, the prophet Isaiah envisioned a Jerusalem in which
In India, a Hindu epic, the Mahabharata, described the First and Perfect Age:
As an undergraduate, I encountered Emerson’s critique of the belief in progress in his essay, “Self-Reliance,” which argues:
This analysis led Emerson to conclude, “Society never advances. It recedes as fast on one side as it gains on the other.” His essay provoked a heated controversy in my class. As I recall, I was uncertain about my own convictions, but was greatly intrigued with the question.
By the time I read “Why Tribe” by Gary Snyder while sitting around the campfire on a backpacking trip in the High Sierra, I was more receptive to a profound rejection of modern civilization. Snyder speaks of a Great Subculture that
Years later, The Ohlone Way: Indian Life in the San Francisco-Monterey Bay Area by Malcom Margolin, which was selected by the San Francisco Chronicle as one of its “Top 100 Western Non-Fiction,” persuaded me that the Golden Age was not ancient history. As recently as the 16th century, from the Golden Gate to Monterey Bay about 10,000 Native Americans lived peacefully in an incredibly lush environment as hunter-gatherers in 40 different small, independent tribes of about 200 people each. When the Spaniards first arrived, fish were so plentiful they merely had to throw rocks into the water to kill them. When flocks of birds flew over, they blocked out the sun like an eclipse. As Margolin’s website states:
Years later, after reading this book, I discovered a recreation of a Native American village near the ranger station at Point Reyes National Seashore. I’ve sat there for hours imagining what it would have been like to live there 400 years ago and experienced a profound peace that seriously challenged the notion of social progress.
In late 2005, a visit to the National Museum of Anthropology in Mexico City confirmed that many of our contemporary problems began with the development of large-scale agriculture. Prior to only 6,000 years ago, modern humans had lived on plants and wild animals for 500,000 years. In northern Mexico, for example, according to the Museum,
In areas where large-scale agriculture, cities, and civilization developed, living conditions were much different. Whenever population density increased to a certain point, hunting and gathering was no longer sufficient. So people invented agriculture and modernization began. This process changed living conditions fundamentally
Intensive agriculture emerged in the following areas at the following times: Mesopotamia 3500 BC: Ancient Egypt 3200 BC; Peru 3000 BC; India 2700 BC; Greece 2000 BC, and; China 1750 BC. The fact that farming was invented in these disconnected areas at roughly the same time suggests that massive climate change was a major reason.
Only several thousand years prior to the advent of agriculture, enormous sheets of ice melted across the northern parts of the planet, including North America, Europe, and Asia. This melting caused long dry seasons in most areas of the Earth, which led to the growth of annual plants that die off and leave behind seed or tubers that procreate new plants.
This development enabled hunter-gatherers to begin storing wild grains and seeds for planting, which led to the formation of small, settled villages that attracted more settlers. As villages became more populated, they grew into cities, agriculture became more intensive, and complex societies, or “civilizations,” emerged. Using a “division of labor,” these societies stored enormous surpluses – for use during dry seasons and for sale and barter throughout the year.
The ability to control and protect these surpluses became crucial. This necessity (as well as greed and the lust for power) contributed to organized military forces, stratification of social status, concentration of wealth, military conquests of other cities, and the growth of empires. Certain segments of society, such as standing armies, could now rely on farmers to feed them. And writing was developed to help legitimize centralized power by recording history in a light favorable to the rulers.
These developments caused insecurity. People could no longer rely on the abundance of nature and they faced threats from those who monopolized military power – their own rulers as well as foreign forces. This dependency led to submission to and worship of the powerful. As has been well documented, human beings have a strong tendency to “identify with the aggressor” when they are dominated.
The National Museum concludes that the fear of strangers from other societies led to a generalized fear of the “other.” This fear of “the ‘otherhood’ that threatens us” contributed to the development of a life “constructed upon dualities – nature/culture; biology/society; body/mind; good/evil; subject/object.” From this perspective, “those who are different – the elderly, the indigenous peoples, colored people, women, children, dwarfs, pagans, insane or sick – [are objectified and isolated].” One no longer “sees himself as part of a plural, diversified whole.”
Nevertheless, many of the egalitarian, communal values of earlier hunter-gatherer societies persisted, even under brutal regimes, as did the memory of a Golden Age. In Mexico, for example, under Spanish rule in the 18th century, “the sharing of communal property of the land, the provision of mutual support among families, and fulfillment of collective obligations” remained vital.
My extended stays in Mexico have impressed me with how most Mexicans demonstrate more spontaneous “warmth” than do people like myself, who tend to be relatively “cool, calm, and collected.” Seeing the movie “Bee Season” with Richard Gere while in Mexico brought home this difference when the teenage son confronted his father by telling him, “You talk and talk and talk, but you never talk from the heart.” These reflections prompted me to explore further how people have lost so much of their humanity (and also led me to try to become less reserved myself).
So, not long after my visit to the National Museum, I searched “alienation” on the wikipedia, followed the trail of links encountered there, and discovered a remarkable essay, “The Metropolis and Mental Life,” by one of the founders of sociology, George Simmel.
Writing in Germany at the outset of the 20th century, Simmel was in the midst of the initial transition from traditional towns to modern cities. This freshness may have provided him with more insight into the nature of modern life than is the case with those of us who have been immersed in it our entire life. Regardless, the eloquence, insightfulness, and relevance of his comments made more than 100 years ago amazed me.
A major concern of Simmel’s was the psychological impact of the “the intensification of nervous stimulation which results from the swift and uninterrupted change of outer and inner stimuli” that he saw in urban life at that time.
Some years later, in the United States, John Dewey made a similar observation, when he wrote, “No one experience has a chance to complete itself because something else is entered upon so speedily. What is called experience is so dispersed and miscellaneous as hardly to deserve the name.”
Simmel considered the growth of “intellectualism” as both a cause and an effect of this modernization.
The interaction between the economy and personal psychology greatly concerned Simmel:
This process promoted conformity and homogeneity.
The intellectually sophisticated person is indifferent to all genuine individuality…. Money is concerned only with what is common to all: it asks for the exchange value, it reduces all quality and individuality to the question: How much? All intimate emotional relations between persons are founded in their individuality, whereas in rational relations man is reckoned with like a number…. Metropolitan man reckons with his merchants and customers, his domestic servants and often even with persons with whom he is obliged to have social intercourse [in this way].
In rural life
Another consequence of urbanization was that the
Another feature of the urban life that Simmel observed was what he called the “blasé attitude,” which
Simmel argued that the money economy also contributes to the spread of a blasé frame of mind in that
This devaluation of objects in the real world was then transferred to the subjective world.
This strategy also demanded “negative behavior” toward others, including a “reserve” without which the “the touch-and-go elements of metropolitan life” would have caused Germany city dwellers at the turn of the 20th century to “come to an unimaginable psychic state.” These conditions established “the right to distrust.”
Beneath the reserve, Simmel saw an undercurrent of hostility.
In addition to protecting people from both the indifference of others, this hostility also protected people from being sucked into dangerous or unhealthy relationships by “indiscriminate mutual suggestion.” Succumbing to these temptations “would be unbearable.”
In these ways, urban attitudes helped people cope, as “the quantitative aspect of life is transformed directly into qualitative traits of character.”
Simmel argued that traditional, rural life had been rooted in feudal societies that carried over characteristics from older civilizations in which
The division of labor in the urban societies that Simmel studied both required and enabled greater individuality.
Modern man paid a price, however. He became free to be alone.
Another key characteristic of cities at that time was the automatic, self-perpetuating tendency to expand and extend their influence.
Urbanization also compelled “the individual to specialize in a function from which he cannot be readily displaced by another.” The struggle with nature was transformed “into an inter-human struggle for gain.” This specialization also flowed from
So, in their transition from traditional cultures, large cities necessarily promoted individualism as well as homogeneity. Asserting one’s own personality and attracting attention by being different became necessary. “For many character types, ultimately the only means of saving for themselves some modicum of self-esteem and the sense of filling a position is indirect, through the awareness of others.” Likewise, having strong opinions and appearing "to the point" became more typical “in brief metropolitan contacts than in an atmosphere in which frequent and prolonged association assures the personality an unambiguous image of himself in the eyes of the other.”
Another reason cities fostered individualism was that
As people become more one-sided in their work and their politics, they become more one-sided in their thinking, unable to appreciate the richness of split-screen awareness.
| Romanticism |
Eighteenth century liberalism, according to Simmel, led to the emergence of a new attitude in the nineteenth century that affirmed that “the carrier of man's values is no longer the ‘general human being’ in every individual [as affirmed by liberalism], but rather man's qualitative uniqueness and irreplaceability.” This new form of Romantic individualism called for “the elaboration of individuality itself,” or self-actualization. Compared to the intellectualism of the city, this Romantic spirit was more in keeping with rural life, which was
The wikipedia describes Romanticism as
As discussed in the previous chapter under “Whole Persons,” this Romantic tradition emphasized pre-verbal, primordial experience, including the spiritual sense of dependence on forces beyond understanding or control. Many Romantics affirmed the child’s-eye point of view and tried to recover and maintain that perspective as adults.
Many Romantics didn’t reject rationalism, but rather tried to integrate the head and the heart. “Throughout the nineteenth century, from Blake to Rainer Maria Rilke, European songs of experience had recognized the need to supplement spontaneous impulse with sustained reflection (Lears).”
Simmel envisioned a reconciliation between these two forms of individualism, the liberal and the romantic. Toward the end of “The Metropolis and Mental Life,” he concluded
This review of human history reveals that modernization has brought a mixed bag. As Emerson argued, we pay a price for every gain. But it seems to me that Emerson overstated his case when he declared, “Society never advances.” Sometimes the gain is greater than the loss.
Population growth made the hunter-gatherer lifestyle impractical. Four thousand Native Americans could manage well in the lush San Francisco-Monterey Bay Area. But increased numbers, even without the European invasion, would have eventually made survival difficult, as it did in Europe. Less hospitable environments with larger populations, like the mountains of central Mexico with its long dry seasons, pressured people to learn how to farm, which led to centralization, civilization, and social stratification.
Even today with birth control methods, families in societies that face economic hardship tend to have lots of children so their offspring can help the family survive and care for parents in their old age. So the increase in the number of humans living on the planet was inevitable, which means that modernization was inevitable once botanical evolution made agriculture possible.
After Simmel wrote his essay, the pace of modernization steadily accelerated, resulting in the “future shock” that Alvin Toffler warned about decades ago. Following my first extended visit to Mexico 30 years ago, the strongest impression the States made upon my return was the incredible amount of stimulation in this country, as described vividly by Simmel more than 100 years ago. This enormous stimulation struck me at the time (and still does) as a diversion from more important matters. It is questionable whether our spirits have been able to adjust adequately to these rapid changes in our social environment.
Reversing modernization, however, is impossible. I recall a family with whom I lived in rural Dominican Republic in 1987. Their family and the other poor families who lived nearby within earshot seemed remarkably tranquil. I spoke with the mother, who’d spent time in the States, about whether they really wanted to “Americanize” their country. She appreciated my concerns and then said, “But I would like to have running water in my bathroom.” I didn’t argue with her then, and I still don’t.
But we can learn from the Golden Age, and we can use what we learn to inject some Romanticism into our modernized world.
| Authoritarianism |
As modern societies developed new ways to make money, the new capitalists challenged the kings and queens whose children inherited power automatically. They also challenged the privileges given to state-sponsored businesses and demanded the freedom to initiate their own enterprises. This struggle eventually led to opening the corridors of powers to these new forces, who then competed among themselves to increase their relative advantage while protecting their common interests.
By enabling competition between different factions within the elite, this approach provided society with more flexibility. When the dominant faction made serious mistakes, as happened in the United States prior to the Great Depression, it could be replaced with a new faction that implemented more effective policies, as President Franklin Roosevelt did following the Great Depression.
This new flexibility, however, also brought instability and insecurity. And in the face of prolonged economic hardship, despair and fear has led to widespread support for a Strong Leader to impose order forcibly. As the Grand Inquisitor declared in The Brothers Karamasov, “Feed men, and then ask of them virtue!”
These dynamics drew upon “romantic violence.” British Prime Minister Harold Macmillan admitted, “I enjoy wars. Any adventure’s better than sitting in an office.” Mussolini advocated “the revenge of madness against good sense.” Tocqueville praised wars of conquest because “the greatest malady that threatens a people organized as we are is the gradual softening of mores, the abasement of mind, the mediocrity of tastes.” As William Pfaff says in The Bullet’s Song: Romantic Violence and Utopia,
In the 19th and 20th centuries, Corey Robin observes,
Arguing for a full consideration of the social factors that contribute to violence, Robin rejects the common emphasis on psychological explanations: “Violence we favor is deemed strategic and realistic: a response to genuine political exigencies. Violence we reject is dismissed as fanatic and lunatic, the outward manifestation of some inner drama.”
As is the case with any exercise of political power, the resort to political violence has required justification. Most often, these rationales have relied on appeal to a higher power, whether God, Revolution, Nation, or some other noble cause. Wanting to spread capitalism to China with the Opium Wars, for example, Tocqueville wrote, “I can only rejoice in the thought of the invasion of the Celestial Empire by a European army. So at the last the mobility of Europe has come to grips with Chinese immobility.”
The classic example of authoritarianism borne of chaos, of course, is Nazi Germany. Following the defeat of Germany in World War One, the Allies imposed peace terms that would have required Germany to pay enormous sums of money for decades to their opponents in that war (to compensate for the damage the Germans inflicted in the war). These payments worsened economic conditions in Germany and created strong resentments. Then the global Great Depression hit Germany in 1929 and by 1932, one-third of the workforce was unemployed.
These conditions left Germans vulnerable to the irrational appeal of neo-pagan, polytheistic, cataclysmic Nazi ideology, which Lears calls one of many “cults of authentic experience.” As Paz wrote, “Despair, anxiety, and a sense of being adrift leave people vulnerable to appeals that claim that utopia will magically emerge from apocalyptic, violent conflict.”
In 1933, in Mass Psychology of Fascism, Wilhelm Reich discussed another factor that can contribute to the rise of totalitarianism: sexual repression. He argued that authoritarian families, typically headed by men, impose strict, arbitrary discipline on their children, teach them that sex is sinful, and train them to obey authority without question. This conditioning is reinforced with a theology that conceives God as authoritarian and punitive, an economy in which workers are expected to submit to their bosses, and a racist culture that proclaims white supremacy.
His analysis led the Nazis to force him to leave Germany, but his early work has inspired many people. Many others, like Snyder, have agreed that authoritarian parents with negative attitudes about sex tend to have authoritarian attitudes about politics. Sexual repression is not necessary for authoritarianism, but it encourages it.
The novelist Umberto Eco reflected on his youth as a Fascist in Italy in a widely discussed 1995 piece in The New York Review of Books titled “Ur-Fascism,” a word that he coined to describe “Eternal Fascism.” He defines “totalitarianism” as “a regime that subordinates every act of the individual to the state and to its ideology” and lists the following essential characteristics of historical fascism:
2. A rejection of modernism, [especially] a rebuttal of the capitalistic way of life….
3. Action for action's sake. Thinking is a form of emasculation….
4. Disagreement is treason….
5. Exploiting and exacerbating the natural fear of difference, [including] an appeal against the intruders….
6. An appeal to a frustrated middle class, a class suffering from an economic crisis or feelings of political humiliation, and frightened by the pressure of lower social groups….
7. The obsession with a plot….
8. [Feeling] humiliated by the ostentatious wealth and force of their enemies….
9. [Assuming] life is permanent warfare [until] a "final solution" [achieves] a further era of peace, a Golden Age….
10. Contempt for the weak [rooted in] a popular elitism, [though] every subordinate leader despises his own underlings, and each of them despises his inferiors….
11. Everybody is educated to become a hero. …Heroism is the norm….
12. [Transferring the] will to power to sexual matters. This is the origin of machismo….
13. A selective populism [with which] the People is conceived as a quality, a monolithic entity expressing the Common Will [and] the Leader pretends to be their interpreter….
14. [The Leader] speaks Newspeak,…an impoverished vocabulary, and an elementary syntax, in order to limit the instruments for complex and critical reasoning….
The arrival of mass communications facilitated the emergence of totalitarianism, whether from the “left” or the “right.” And the refinement of mass advertising techniques that manipulate and often fabricate appearances led to a whole new method of brainwashing.
In the United States, the growing power of the “imperial Presidency” has presented a particular threat, especially during time of war. “The Constitution has never greatly bothered any wartime president,” wrote Francis Biddle, F.D.R.’s attorney general during World War II. John Adams supported the Alien and Sedition Acts, which criminalized political dissent and empowered the President to deport any non-citizen he considered “dangerous to the peace and safety of the United States.” Thomas Jefferson tried to charge treason against people who traded with Great Britain. Andrew Jackson disregarded treaties with the Cherokee Nation and attempted to halt the distribution of abolitionist literature in the South. Abraham Lincoln denied habeas corpus. Woodrow Wilson suppressed political liberties. Franklin Roosevelt incarcerated Japanese-Americans. And President Harry Truman seized steel mills.
In 1966, prior to the election of Richard Nixon, as Lyndon Johnson escalated the war in Vietnam, Senator J. William Fulbright published a prescient book, The Arrogance of Power, which accurately predicted a worsening of the Imperial Presidency. The Senator lamented that "the Senate's constitutional powers of advice and consent have atrophied into what is widely regarded as, though never asserted to be, a duty to give prompt consent with a minimum of advice.” And he feared that
In a recent commentary on Fulbright’s book, Jackson Lears’ reflected:
Then, in response to the turbulence of the 60s, facing defeat in Vietnam, the emergence of violence-prone Black nationalism, urban riots, and increasing crime, Richard Nixon proved Fulbright’s prophecy correct. He appealed for “law and order,” created his “enemies list” against whom he used illegal counter-methods, sought to prevent the publication of the Pentagon Papers, and tried to set up a new domestic spy agency under his direct control (at that time the FBI was independent due to J. Edgar Hoover’s power and the CIA generally offered relatively objective information and analysis).
As Jonathan Schell wrote:
| The System |
Most people intuitively understand comments about "the system." Popular culture and mass advertising often include references to it. Even banks exploit resentment by using ads that affirm “beating the system.” Given its widespread use, the American Heritage Dictionary recently added the phrase “the system” and defines that term as “the prevailing social order; the establishment.” We need to clarify this common-sense knowledge by considering the nature of systems and how today’s dominant social system emerged.
As individuals, we participate in interlocking networks. We depend on one another and belong to various social systems. So a systemic worldview is crucial to understanding our place in society and the environment.
Broadly, a system, like the solar system or the digestive system, is a group of elements that work together as an integrated whole to perform a particular function. The components of a system interact to create a reality that is greater than the sum of its parts.
Systems adjust to maintain stability. A worker, for example, can cope with a bad job by getting sick, which enables the worker to escape temporarily. But after she is cured and returns to the workplace, the job leads to another illness. The cycle repeats itself, the worker keeps the job, and the boss is happy.
A nation is a unified social system, a coherent whole composed of many social systems that fit together. Without this harmony and sense of common identity, nation-based societies would disintegrate.
Modern societies developed as social systems consisting of formal public institutions (such as education, government, economy, media, religion, entertainment, sports, and science), informal social institutions (such as families), a common culture whose ideas and values were embedded within individuals, and individuals who acted to help perpetuate those societies. All of these elements were interwoven into self-perpetuating social systems that reproduced themselves in the hearts, minds, and bodies of their members.
In recent decades, the world’s various societies became increasingly integrated into a global social system. As the planet was globalized, we witnessed the consolidation of a global social system that shaped and managed the entire world. Throughout the world, wherever you would go, societies came to function in much the same way, and they cooperated to protect each other’s interests.
Since human beings are purposeful creatures, social systems are devoted to a common purpose. To endure over time, a social system, whether an organization or society-at-large, must have a primary purpose. Secondary goals serve the primary purpose.
As one can determine the purpose of a tree by its fruit, one can determine a social system’s purpose by observing its nature. Being the world’s most powerful country, the United States has exemplified the nature of our global social system.
Two central facts stand out concerning this country: 1) One percent of the population has owned 50 percent of the nation's wealth, and 2) We have had the best government that money can buy. Similar patterns prevailed in the world as a whole.
These conditions were not God-given. Our society intentionally manufactured these realities to protect and increase the wealth and power of those people who were already wealthiest and most powerful. More than any other force, this dynamic explains how and why our society worked. The global society’s primary purpose was to protect the wealth and power of the wealthy and powerful.
Wealth bred power and power bred wealth. Most people who were addicted to the pursuit of one, desired both. Greed was critical, but so was the urge to dominate. Money was a way to keep score, to know who has the most power. The lust for power and the desire to make money were so interwoven, they became one. Life became a never-ending competition, as people strove for more money and power.
In 1912 former President Theodore Roosevelt stated, "Behind the ostensible government sits enthroned an invisible government owing no allegiance and acknowledging no responsibility to the people...[an] unholy alliance between corrupt business and corrupt politics." That same condition largely continued to prevail throughout the 20th century.
The government, global corporations, the major media, the military, and police forces worked together to concentrate wealth and power in the hands of a self-serving elite. The few who were richest and most powerful got richer and more powerful, except when the majority of people intervened and reversed or halted this trend.
This world was never a land of equal opportunity. From childhood on, the super-rich used their enormous advantages for their own benefit and passed on those advantages to their children and grandchildren. With a heavy bias in favor of the sons and daughters of the elite, the top-level managers of our institutions carefully screened applicants to the corridors of power to assure that they would operate within the limits of what was expected of them. The "old boys’ network" excluded applicants who didn’t play the game properly and if managers deviated too greatly from those expectations, they were quickly replaced.
Any adolescent could resolve to enter the upper ranks, but only a few succeeded. The number of seats in the theatre of wealth and power always remained far less in number than the number of people who wanted inside. The overwhelming majority of Americans never rose far above the status of their parents. Social inheritance replaced the biological inheritance of wealth and power.
A few positions of power were left open for people who weren’t born into privilege. And less powerful individuals gained benefits by doing what the elite few wanted them to do. This limited openness enabled the elite to argue that the system was fair. It also served as a safety valve to let off pressure, for the more ambitious could concentrate on trying to gain what was denied to the great majority.
Given these conditions, individual executives were not primarily responsible. They deserved neither primary credit nor blame. They were disposable and they knew it. As is known in folk wisdom, “the players change but the game remains the same.” The system was self-perpetuating.
The governing elite moved easily back-and-forth through the revolving door of big business, media, the military, and government, enriching themselves and their friends along the way. This elite consisted of an identifiable group of people who shared common values and characteristics. They circulated in the highest circles and collaborated closely to wield controlling influence over all of our major institutions.
Protecting the interests of the elite few required sophisticated methods of social control. Some of these methods were internal, or subjective, and others were external, or objective. Since these methods are still utilized today, I’ll switch to the present tense to describe them.
| Internal Methods of Control |
Our greedy, power-hungry society perpetuates itself in large part by glorifying objects. Physical appearance, clothes, income, luxuries, cars, houses, and other consumer goods are the gods of modern society. The material world has supplanted the non-material world. The mind is reduced to the brain. Lovers become commodities. Human beings become cogs in the moneymaking Machine. We disrespect emotions and other inner experience that can’t be measured. Quantity rules. Quality is neglected.
Inclined to copy those who hold power over them, people learn to treat others as objects to be used until they are used up and disposed – as they themselves are treated. External injustice becomes internalized oppression. Human beings become objects that worship objects, striving to move up the social ladder in order to accumulate more objects.
Society uses three internal, or psychological, tools to get most people to buy this dream of upward mobility: the stick, the carrot, and conditioning.
| The Stick |
The primary stick is the threat of poverty. Most Americans either live in poverty or face a serious threat of being thrown into poverty, and they know that the under-employed stand ready to take their job if they are fired.
This situation is not necessary for economic prosperity. Most people don’t need to be threatened in order to be motivated to work hard. They naturally want to demonstrate their abilities and advance their position. Many European countries with capitalist economies have had productive workers as well as full employment, long paid vacations, and social support programs to guard against poverty. But most countries aren’t so lucky.
Using fear, however, makes it easier to boost profits (in the short run) by keeping wages down. So in the United States, the managers of our economy manufacture poverty by limiting the number of living-wage jobs. They achieve this goal by raising interest rates to suppress economic growth whenever the economy approaches full employment and by refusing to create public-service jobs to meet pressing social needs.
Creating poverty protects investments in the enormous bond market by reducing the risk of unexpected inflation. The return on these investments depends on the interest rate that is accepted when they are purchased, and the interest rate is based on expectations concerning inflation. If prices rise more than expected, when bonds are exchanged for cash, that cash is worth less than expected. So members of this wealthy “creditor class” want to keep inflation as close to zero as possible.
Modest, steady inflation, however, stimulates economic growth. By increasing prices a bit, businesses are able to increase both profits and wages, which boost the economy. And Social Security and other income-assistance benefits are adjusted according to inflation to protect low-income people. So some inflation is beneficial to most people. But the creditor class prefers to keep inflation near zero, and they have the power to get their way, even though the general public pays the price of unnecessary poverty.
Given the threat of being cast into the ranks of the poor, most workers accept their situation. They do what they're told and hope to find a way to get ahead. They buy into the prevailing social order and do little for the one in four who live in poverty (according to any common-sense definition of poverty rather than the official definition that is most often reported).
| The Carrot |
Another tool that the dominant social system uses to perpetuate itself is to seduce people with the carrot of upward mobility. By bombarding people with images of the rich and famous and the objects they possess, people are led into being copycats, obsessed with making enough money to buy the latest symbols of success.
A similar pattern is observed with regard to power. Although they have mixed feelings about it, when push comes to shove, most Americans tend to support the elite because they admire the wealthy and powerful and want wealth and power for themselves. They tell themselves that those who have it deserve it. Might makes right, or so it is assumed, if only because rationalizing the situation is less disturbing than accepting the truth. So they blame the poor for poverty, overlooking the fact that the number of people who want to work far exceeds the number of living-wage jobs.
Productivity is idolized and people become workaholics, aiming to have their egos stroked with praise and respect. We get hung up in our future-oriented, analytical mind as we try to “make it” by improving our station, even when we sacrifice our principles and neglect our loved ones. We become increasingly one-sided, reduced to an instrument.
Progressive activists also fall into this pattern by getting seduced with delusions of grandeur. Desperate to satisfy their ego, they exaggerate the importance of their efforts and become addicted to their squirrel cages, chasing one prize after another. In so doing, they fail to take the time to really pay attention to each other and slowly build the kind of community that is an essential foundation for lasting, meaningful change.
| Conditioning |
To perpetuate itself, the system must get inside our head. By accepting and internalizing the values of the dominant culture, we help to reproduce the dominant social order.
Our entire society is designed to get people to ignore the voice of conscience, accept unspeakable brutality as natural and legitimate, and pursue an ego-centered life of comfort for themselves and their immediate family. The elite rip off wealth and guard power for themselves, and most people don’t lift a finger. This blindness and indifference is not natural. It does not happen automatically (or by accident). It is manufactured, though just below the surface most people want to liberate their higher self.
The conditioning begins at home, where children learn to stop asking why and do what they’re told. In school, students learn that only a few will "win." Everyone else "loses" and is expected to accept their place in the social pecking order. Children fail to develop healthy self-esteem based on trusting their natural instincts and respecting others. For every Napoleon in the official corridors of power, countless little Napoleons try to dominate others in their own kingdoms.
People assume that some one person must always be in charge, whether on the dance floor, at work, or in bed. The notion that "all men are created equal" is reserved for the ballot box. Relating as equals becomes an experience that is rare if not forgotten. Instead, we dominate or obey, depending on the situation. We either presume to be superior, or we defer. We learn to submit to our “superiors” and seek more power for ourselves so we can dominate our “inferiors.” We forget how to respond to others openly, fully, from the heart, honestly, mutually, as children do naturally.
Biological psychiatry, with its mechanistic perspective on human emotions, reinforces this lack of trust and teaches people to be dependent on authority figures. Worse yet, in league with the profit-hungry pharmaceutical industry, doctors are labeling more or more people, including children, with questionable diagnoses and prescribing drugs that suppress emotion and undermine self-affirmation.
Lacking self-esteem and self-confidence, people are less likely to challenge abusive power than would be the case if they were raised with unconditional love and support. Just as elites worry about “too much democracy,” so too are they concerned about people having too much power in their personal lives – for once people are empowered privately, they are a political threat as well. In particular, many people who are discriminated against based on race, gender, or any other arbitrary characteristic learn to blame themselves for their condition.
The mass media, concentrated in the hands of a few mega-corporations, reinforces these messages with an unrelenting, repetitive onslaught of propaganda and myth making. The worship of celebrities. The glorification of luxury goods. Incessant advertising spreading into every corner of society. Entertainment that ridicules ordinary people and idolizes the wealthy and powerful. A sports industry that commercializes athletics. Increasingly, society is being turned into a meat market.
And underlying all of this is constant fear-inducing news reports. Seldom does television report encouraging news or positive developments. “If it bleeds, it leads.” The culture of fear, fed by economic insecurity, is pervasive.
Powerful countries also use foreign threats, often manufactured, to spread fear as a way to consolidate the power of authoritarian rulers. As Aldous Huxley wrote in 1946,
In the modern United States, when the mainstream media reports reality accurately, it usually does so in a very narrow and superficial way. News organizations routinely allow the Administration and Congress to set the agenda and the terms of debate. To gain access to valuable leaks, reporters refrain from irritating their sources and merely report what the elites have to say rather than digging for actual facts. They report rumors uncritically and seldom analyze underlying social forces or hidden agendas. And the corporate media seldom reports on issues that challenge the profit-making interests of its owners.
As a result, many if not most Americans sacrifice fundamental ideals on the altar of comfort and security, cope as best they can, and do next to nothing to challenge the established order.
| External Methods of Control |
Society complements these internal methods of social control with various external methods. Principal among these methods are legalized bribery, "divide and conquer," police power, and imperialism.
| Legalized Bribery |
Controlling the government is essential. As Robert F. Kennedy Jr. said, "We have a system that is designed to corrupt politicians and to deny any politician who refuses to be corrupted a place in power." Some exceptions occur, especially on the local and state level, but getting a progressive voice in the Senate is rare indeed and the White House is even more remote.
Once elected, highly paid lobbyists, most of whom serve the interests of wealthy power brokers, swarm upon our elected officials and shower benefits on them, including donations for campaign expenses.
Moreover, while they're in office, legislators and administrators know well-paid positions in the private sector are waiting for them if they benefit powerful special interests while in office. Legislators have to wait one year before they can move to high-powered lobbying positions, but they can and do take lucrative jobs from other corporations immediately upon leaving office and use those positions to influence Congress and the Administration. Not surprisingly, many officials take advantage of those opportunities.
And there are no restrictions on lobbyists taking well-paid staff positions in Congress where they can assist their previous employer, and later return to a higher paying private-sector job.
The enormous cost associated with campaigning for federal office leaves candidates beholden to wealthy donors. Money and other rewards are seldom handed over immediately prior to a specific vote. The people involved claim that they were only buying "access." But fat cats spend all that money for one reason: it works.
| Divide and Conquer |
Historically, empires separated different ethnic groups in a particular region, selected one group as surrogate ruler, and manipulated resentments between groups to provoke internal conflict as a way to undermine opposition to the imperial power. Our founders who wrote the U.S. Constitution knew this history and adapted it. In a 1787 letter to Thomas Jefferson, James Madison wrote, "It may be asked how private rights will be more secure.... Divide et impera (divide and conquer), the reprobated axiom of tyranny, is, under certain qualifications, the only policy by which a republic can be administered on just principles."
The founders’ concern about "private rights" was prompted by keen awareness of serious threats from "levelers" who wanted to equalize wealth and power. So they allowed individual states to limit voting rights to white male landowners and they carefully crafted a "separation of powers" with "checks and balances" that made it difficult to change the status quo.
Congress is divided into two houses, with each holding the power to block legislation. Senators are elected only every six years, which makes them less responsive to popular pressure. A Senate minority can block bills with the filibuster. When the President vetoes legislation, a two-thirds majority is required to pass the law. The judiciary can declare legislation unconstitutional based on questionable interpretations. Powers not explicitly granted to the federal government by the Constitution are reserved to the states, which makes united action nationwide more difficult. This dispersal of responsibility protects elites by making it more difficult for majoritarian popular movements to achieve significant change.
In addition to these structures, political leaders have often inflamed divisions and conflicts among the people. In particular, they've used racism to divide whites and people of color. As President Lyndon Johnson told Bill Moyers, "If you can convince the lowest white man he's better than the best colored man, he won't notice you're picking his pocket. Hell, give him somebody to look down on, and he'll empty his pockets for you."
John Erlichman, chief domestic-affairs advisor to President Richard Nixon, acknowledged that the Nixon campaign used racism in its successful electoral strategy. "It was subtler than code words. It was, 'I'm on your side,'" Erlichman said. "I know he saw Johnson's embrace of blacks as an opportunity. He exploited it." As Dylan sang in 1963, the “poor white” is only “a pawn in their game.”
In 2005, Sylvia Hale, a member of the Australian parliament, criticized her Prime Minister with a critique that clearly explains this political tactic.
The enslavement of Africans was central to this country’s early economic growth. Following the abolition of slavery, legalized segregation continued the oppression of African Americans in the South and de facto racist segregation in the rest of the country seriously limited opportunities for African Americans and other people of color. The social divisions that have consequently resulted have made popular unity more difficult.
Discrimination based on gender, sexual orientation, age, disability, appearance, and other such factors also serve to undermine social solidarity.
| Police Power |
Only the government can legally imprison people. This monopoly on violence is essential to governmental power. Always lurking in the background is the threat of police action. Police power helps to keep the general population in line and provide the stability that all societies need. Effective policing can help protect people against criminals. Community involvement in crime prevention, nonviolent conflict resolution, social justice, community policing with officers walking beats and getting to know the residents and businesses, and restricting the use of force to the minimal necessary as a last resort can lead to valuable police services.
Unfortunately, however, police forces often violate individual rights and deter social and political reform. Throughout the history of the United States, agents of the government have frequently used violence against political agitators and labor unions to weaken legitimate rebellion.
It is not unusual, for example, for police forces to attack nonviolent demonstrators with excessive force, which provokes violent reactions that escalate into a spiral of increasing violence. Sympathy for protestors decreases, as the general public becomes anxious about the loss of law and order in general and focuses its outrage on the violence of protestors. On many occasions, paid "agent provocateurs" directed by the government have escalated confrontations as a way to justify arrests and discredit rebels. In these ways, police violence radicalizes protest movements and isolates protestors from the mainstream, which renders them less effective.
These incidents also discourage participation in political demonstrations by people who prefer to avoid dangerous situations. These conditions send a clear message: toe the line or else you could end up in trouble. An undercurrent of fear promotes conformity. It is no accident that these patterns benefit wealthy elites who do little or noting to stop it, even though they oversee the officials who supervise police departments.
The use of police power to maintain the status quo is also reflected in our criminal justice and psychiatric institutions, where poor people are locked up, brutalized, and neglected. Percentage wise, the United States has several times more people incarcerated than is the case with most other industrialized countries. Once released, inmates are largely left on their own without adequate support services, as are homeless people, foster children, and impoverished senior citizens.
It is probably no coincidence that the two most highly militarized countries in the world, the United States and Russia, also incarcerate the most people. Faith in violence spreads throughout society and, in the short run, it appears to work and progressive change is suppressed.
| Imperialism |
From its founding, American prosperity has been enhanced by imperialism. The Indian Removal Act cleared the way for Westward expansion by legalizing the forcible removal of Native Americans from their homes. And a series of wars and military actions have enabled the United States to directly seize or indirectly dominate foreign lands for the benefit of American business interests.
This exploitation has consistently been justified with racist rhetoric. Land grabs, for example, were vindicated in the name of "Manifest Destiny" – the belief that naturally superior white Americans had a divinely inspired mission to spread their form of civilization to lands populated by people of color. In 1823, the Monroe Doctrine made that notion official by proclaiming that the United States, rather than Europe, would dominate South and Central America.
After President James K. Polk, a slaveholder, started the Mexican War (1846) in the province of Texas, the United States seized half of Mexico's territory all the way to California, which gave the South two key pro-slavery votes in the Senate.
The Spanish-American War (1898), also initiated by the United States, grew into a conquest of Spanish territories throughout the Caribbean and the Pacific, including the Philippines. As Senator John M. Thurston of Nebraska stated, "War with Spain would increase the business and earnings of every American railroad, it would increase the output of every American factory, it would stimulate every branch of industry and domestic commerce."
After the U.S. defeated Spain, they purchased the Philippines and colonized it – after fighting for fourteen years against Filipino groups that had previously been struggling for independence. This Philippine-American War resulted in the death of several hundred thousand people. President McKinley justified the war by saying that the Lord told him “to educate the Filipinos, and uplift and civilize and Christianize them, and by God’s grace do the very best we could by them, as our fellowmen for whom Christ also died.”
From 1890 to 1932, the United States military intervened 47 times in countries south of its border or on the Pacific Rim. The Great Depression and President Franklin Roosevelt’s Good Neighbor foreign policy led to a lull in U.S. military adventures. But after World War Two, with weakened European empires unable to maintain their colonies, the United States expanded its reach into Africa and the Middle East. As of 2004, the United States had engaged in more than 125 military interventions in foreign countries.
Most often, these interventions established “client states” friendly to the economic interests of American business interests. In many cases, these military actions involved overthrowing democratically elected governments that challenged American efforts to exploit their countries.
In addition, the United States has assisted, encouraged, and supported numerous brutal military dictatorships friendly to American corporations. Since the Vietnam War, training and assistance in torture has been a central element in American foreign policy. The techniques exposed recently in Iraq, to the horror of the world, had previously been utilized for decades by the American military and its allies throughout the world, many of whom the United States trained in methods of torture.
Enormous military spending has directly benefited the powerful “military-industrial complex” that President Dwight Eisenhower warned about as he left office. More than $100 billion a year, about ten percent of the entire federal budget, goes to seven well-connected defense contractors, most of whom receive most of their income from the federal government.
While the projection of American military power, or "hard imperialism," has been central, "soft imperialism" has also been essential. In particular, through its control of the International Monetary Fund and the World Bank, the United States has imposed Structural Adjustment Programs and the "Washington Consensus" on developing countries. These programs have pressured countries to adopt economic policies favorable to the United States in exchange for loans and financial aid.
In addition, economic embargoes and sanctions initiated by the United States have been used to punish countries that resist American policies. These embargoes and sanctions have imposed severe hardships on the people of those countries and have generally failed to achieve their announced political goals. But they have served to discourage other countries from following suit with more resistance to American desires.
Now, with the World Trade Organization, global elites have established an un-elected supra-governmental body that can overthrow the laws of states, provinces, and nations that run counter to their desire for quick profits.
Under both Republican and Democratic Administrations, the United States has employed “divide and conquer” in its foreign policy by encouraging the fragmentation of countries. As Ellen Ray and Bill Schaap wrote, “It is easier to dominate a region when the governmental units are small." A prime example is when, shortly after Boris Yeltsin ascended to power, the U.S. supported the precipitous, illegal breakup of the Soviet Union.
When the Soviet Union collapsed, many progressive-minded people, myself included, pushed for a “peace dividend.” But we were skeptical and speculated about who the next “enemy” would be. We knew that the global system needs an antagonist outside the inner circle of highly developed nations. The dominant political party in the United States needs a foreign enemy to help consolidate its dominance. And keeping the military-industrial complex happy with enormous guaranteed profits serves to help preserve that power base.
In no time at all, the first President Bush tried to manufacture an enemy with Manuel Noriega and the “war on drugs.” But the invasion of Panama was short-lived and the drug war proved not to provide enough real enemies.
So the first Bush Administration failed to clearly warn Iraq against invading Kuwait, gave Hussein a “green light” indicating that an invasion would be acceptable, and encouraged Kuwait to provoke Iraq in a number of ways, including taking disputed oil reserves. All of these manipulations led to Iraq's invasion of Kuwait, which enabled the United States to finally overcome the so-called “Vietnam syndrome,” its alleged reluctance to assert itself militarily.
Militarism continued to thrive under Bill Clinton, who tried to take the "military card" away from the Republicans by bombing more countries that any other President. With a foreign policy that steadily evolved toward greater unilateralism, Clinton tried to counter the Republican argument that Democrats were weak because they were afraid to take military action. Secretary of State Albright described the Clinton Administration's unilateral August 1998 missile assaults against Sudan and Afghanistan as "the war of the future."
The Clinton Administration also continued the strategy of divide-and-conquer. It actively supported the splintering of Yugoslavia in Eastern Europe, as well as the Congo, Angola, and Sudan in Africa. As The New York Times reported in July 1998:
Some neoconservatives close to the second Bush Administration have spoken openly about their desire to foment division. Michael Ledeen, an influential neocon thinker at the American Enterprise Institute, wrote,
This quote prompted Bernard Weiner to write:
As Robert Dreyfuss documents in Devil's Game: How the United States Helped Unleash Fundamentalist Islam, from the 1950s on the U.S. funded and supported Islamic extremists in order to counter secular Arab nationalism, which was seen as a threat to the U.S. aim to privatize economies that have a strong public sector. This support for Islamic radicals fostered divisions in the region.
After the dramatic rise of Islamic fundamentalism in Iran in 1979, the U.S. encouraged Iraq to go to war against Iran only one year later (after having encouraged Iran to go to war against Iraq four years earlier). According to the wikipedia, “In July 1980, Zbigniew Brzezinski of the United States [President Carter’s National Security Advisor] met Jordan's King Hussein in Amman to discuss detailed plans for Saddam Hussein to sponsor a coup in Iran against Khomeini.” Later that year, Iraq invaded Iran and the U.S. gave strong backing to Iraq. Commentators at the time concluded that the U.S. wanted neither country to win a decisive victory. The war eventually cost Iran one million casualties and ended in a stalemate with both countries severely damaged economically.
In all of these geopolitical maneuvers, the United States has tried to be a global puppet master – manufacturing enemies, setting up subservient client regimes only to overthrow them later, playing one country off against another, choosing one side against another rather than mediating resolutions from a neutral stance, aggressively interfering in the internal affairs of democratic countries, and switching sides at the drop of a hat (but usually taking one side or the other).
By focusing attention on foreign enemies, the Administration in power has consolidated its own domestic political position, which has enabled it to better serve the interests of the elites to whom it is beholden. These methods enabled the United States to establish an informal "American Empire" – a network of legally independent countries that have been largely obedient to the United States. As a result, United States corporations gained access to cheap labor and natural resources, American consumers have benefited from greater prosperity, and, of particular importance, American financial institutions have gained access to capital markets, where they can use money to make money in the “paper economy” without producing any goods or providing any services.
| The Paper Economy |
From the end of World War Two until 1973, the American economy lifted all boats. The share of the nation's income taken by the wealthiest families remained the same. Income inequality did not increase, as is the inherent tendency under capitalism. This pattern held true because the governing elite had agreed to a "Social Contract." Henry Ford summed up this contract when he said, "How can I sell my cars if my workers can't afford to buy them?" This "enlightened self-interest" persuaded the wealthy that sharing wealth in the short run can help multiply wealth in the long run. In the early 1930s, President Roosevelt established this point of view, and Presidents Truman, Eisenhower, Kennedy, Johnson, and Nixon reaffirmed it.
Since 1973, however, income inequality has steadily worsened. Other measures also indicate that a significant shift in national economic policy occurred at that time. Beginning in the early 1970s, the governing elite in the United States began to reject the Social Contract.
A review of the events of the early 1970s suggests why this tendency crystallized into a solid consensus by early 1974, when a number of shocks to the system had apparently undermined the elite’s confidence in the future and prompted them to adopt new economic policies.
The first evidence of a major shift is an August 1971 confidential memorandum titled “Attack of American Free Enterprise System” to the Chairman of the Education Committee of the U.S. Chamber of Commerce from Lewis F. Powell, Jr., a former President of the American Bar Association. He wrote this memo two months before President Nixon appointed him to the U.S. Supreme Court, which was one year after Congress had established the Environmental Protection Agency to monitor and control corporate pollution of the environment.
Powell opened his memo by declaring “the American economic system is under broad attack.” After some references to communists and the New Left, he identified Ralph Nader as “perhaps the single most effective antagonist of American business.” He also singled out Charles Reich, the author of the popular book, The Greening of America. Powell argued
The first major shock to the elite was the humiliating military loss in Vietnam. On January 23, 1973, peace accords ending the war were signed. This defeat symbolized a weakened ability to dominate and exploit other countries.
At this time, the United States economy was suffering from excessive military spending. Although public spending on the military can prop up an economy in the short run, investment in non-military areas more effectively strengthens economies in the long run. Too much military spending therefore undermines an economy when other countries invest in areas that are more productive in the long run. This pattern had taken hold in the United States by the early 70s.
Less than two months after signing the peace plan, President Nixon unilaterally declared that the value of major currencies would permanently "float" freely on global currency markets (where currencies are bought and sold), which means the value of the dollar would be determined by what people were willing to pay.
The previous year Nixon had taken the nation off the gold standard. Since World War II, global economies had been based on the U.S. dollar. The United States had promised to give gold at a fixed rate – $35 for an ounce – on demand to anyone who wanted to exchange dollars for gold. At the same time, the currencies of other countries were tied to the dollar at a fixed rate. This arrangement meant that owners of other currencies could at any time demand that their government give them a fixed amount of gold for each unit of currency they owned.
By 1971, gold reserves at Fort Knox had dangerously fallen to only eighteen billion dollars, with outstanding claims held by foreigners totaling twice that. As other economies were getting stronger, owners of financial assets started holding their assets in currencies other than U.S. dollars and were cashing in their dollars for gold.
Afraid of being subjected to a run on dollars that the United States would be unable to meet, in 1972 President Nixon had unilaterally declared that the United States temporarily would no longer pay gold for dollars. Later that year and in early 1973, Nixon tried to negotiate with other countries agreements on the number of dollars to be exchanged for a given unit of another currency. But in March 1973, he gave up and floated the dollar.
With floating exchange rates, the value of the dollar continued to decline. As a result of Nixon’s decision, exports were cheaper abroad and imports were more expensive at home, which boosted the sale of products made in the United States.
In the face of the defeat in Vietnam and the threat to the dollar, the U.S. government launched another new tactic in 1973 in its attempt to protect the wealth of the governing elite: the privatization of the public sector. As the first major experiment in this campaign, the United States on September 11, 1973 encouraged and supported a military coup against the democratically elected government of Chile. Shortly following this coup, the new military dictatorship with vigorous assistance from American economists from the University of Chicago began lowering income taxes, deregulating business, and privatizing its pension system, state-owned industries, and banks.
Nixon’s decision to float the dollar had helped the U.S. economy, but it hurt other economies. Consequently, on October 17, 1973, during the Israeli-Egyptian War, the Organization of Petroleum Exporting Countries (OPEC) stopped shipping oil to nations that supported Israel. Weakened by its military loss in Vietnam, the U.S. took no action in retaliation. As described by William Greider in Secrets of the Temple:
The OPEC price increase, in turn, triggered a global increase in prices throughout the world, resulting in long lines at gas stations. But unemployment and inflation-adjusted personal income for the general public held steady in 1974. Wealthy elites, however, suffered a traumatic loss in wealth. Stock prices fell sharply and for the first time since the Depression, the nation's total net wealth declined for two years in a row – from $6,200 billion at the end of 1972 to $5,000 billion at the end of 1974, more than one trillion dollars. Thus, the wealthy saw 20 percent of their assets disappear in less than two years.
At the same time, the President of the United States was "twisting in the wind" while facing a trial before the Senate for high crimes and misdemeanors. In 1974, Nixon became the first President forced to resign while still in office. This controversy added to the nation's troubles and a sense of foreboding among the super rich.
The social turbulence of the time didn't help, as far as wealthy elites were concerned. The youth rebellion that overlapped with the antiwar movement and the militant Black Power movement were bothersome enough. But perhaps most ominous was the growth in the number of labor strikes. Work stoppages grew from 250 in 1972 to a record-high 424 in 1974.
In combination, these events in 1973-74 shook the confidence of the nation's wealthiest individuals. American military power was waning. The leadership of the United States was being called into question. Wealth was vanishing into thin air. From the point of view of the wealthy, something had to be done to correct this alarming decline. “During the 1970s, business refined its ability to act as a class, submerging competitive instincts in favor of joint, cooperative action in the legislative area (Thomas Edsall).”
Faced with these ominous conditions, a new consensus apparently formed in the corridors of power: get rich quick and to hell with the future. The wealthy increasingly de-emphasized long-term investments, started reducing wages and salaries, and shifted toward short-term profits, especially guaranteed profits on the financial markets where they play with loaded dice. The house always wins in Vegas, but in High Finance, the game is fixed to favor the high rollers because it enables high rollers to engage in what economics writer Thom Calandra described as "no-lose propositions."
One example is classic arbitrage, which involves buying a financial instrument, like dollars, at one price in one country and selling it instantaneously at a higher price in another country. The price differential is tiny, so only extremely wealthy traders can make enough money to justify engaging in these transactions, but they generate enormous profits in this way. Another example is that only wealthy firms can afford to constantly upgrade the extremely expensive software that enables them to have a significant advantage in financial markets. So long as the Fed controls inflation, their money keeps growing.
Another way top-level executives make money in this “paper economy” is through corporate mergers that boost assets (often without increasing productivity). In 2006 alone such mergers were worth $3.79 trillion. Handy write-offs and cash reserves from these mergers help managers improve their standing on Wall Street and enrich themselves with bonuses, increased pay, and stock options.
This paper economy enables the super rich to make money in financial markets, buying and selling "financial instruments," without having to manufacture anything or provide any services of value. Writing in The New York Times, economics writer Peter Passel offered the following analysis of these economic developments:
President Jimmy Carter and Senator Ted Kennedy, both Democrats, began applying Chilean-style neoliberalism to the United States in the late 1970s with the deregulation of the trucking industry. Presidents Reagan, Bush, and Clinton, with the cooperation of Congress, accelerated this deregulation and privatization.
And now the process of privatization is being applied to core governmental institutions, such as the prison system and the military. Private, for-profit corporations like Halliburton and Blackwater receive sweetheart contracts to provide essential services with little accountability. United States taxpayers are financing the slow destruction of their own government.
This weakening of the Federal government leaves High Finance free to operate with impunity. As Thomas Friedman said, “Managers of huge money funds...shift capital around the globe like an electronic herd moving at the speed of light.... These high rollers have King Midas's money and Attila the Hun's morals.” Even former Federal Reserve Chairman Alan Greenspan described the financial markets as a "global floating crap game...in which enormous sums of speculative money [races] around the world seeking hour-by-hour, even minute-by-minute profits."
After remaining steady historically, in 1974 the percentage of the nation’s personal income generated from “receipts on assets” made a record increase, from 11.3% to 11.9%. For the next 25 years, these paper gains continued to grow, to a record high of 17.3 % in 1998.
According to Frances Moore Lappe¢, less than one percent of the dollars traded on Wall Street “fuels corporate operations. More than 99% simply moves from one speculator to another as half of all stocks change hands with a year, often within hours.”
The bulk of this unearned income from the paper economy goes to the richest 1% of the nation’s households, which is why Wall Street wants "free trade." They want the freedom to move capital in and out of as many financial markets as possible. The wealthy elites have clearly discovered how to get rich quick, without revealing the inside tricks and advantages they hold.
| *** |
Now that we’ve taken a close look at historic social patterns that shape our current situation, the next question is: what can we do about it?