DOCUMENTS ON ECONOMICS

DOCUMENTS ON ECONOMICS.

29.10.2011

These documents are mostly critical of conventional economic theory and practice. Most of the items were collected some tima ago but they illustrate and support the claims made in the Issue Summaries.

Contents.

1. GENERAL NOTES.

2. THE MARKET SYSTEM.

3. PRIVATE VS PUBLIC FIRMS; Which are more "efficient"?

4. MARKET RELATIONS DESTROY SOCIAL COHESION.

5. AFFLUENCE AND GROWTH: The supreme commitments..

6. THE TRICKLE DOWN ASSUMPTION.

7. CUTTING STATE SPENDING

8. THE QUALITY OF LIFE; Unrelated to GDP...falling

9. THE DAMAGE OCCURRING TO SOCIAL COHESION

10. INEQUALITY

11. THE PROBLEM OF SURPLUS

12. DEBT and INTEREST.

13. BANKS AND MONEY CREATION

1. GENERAL NOTES.

There is "…massive documentary evidence that shows that (conventional economic theories) do not work." 68 

M. Rowbotham, Goodbye America, 2000, p. 21.

"There is no evidence that trade or economic development are of any great value to humanity. World trade has increased by twelve times since 1950 and economic growth has increased fivefold, yet during this period there has been an unprecedented increase in poverty, unemployment, social disintegration and environmental destruction."

R. Nader and L. Wallach, "GATT NAFTA and the subversion of the democratic process, in J. Mander and E Goldsmith, The Case Against the Global Economy, 1996.

They no longer pretend that the system will serve all people or lead to the solution of major problems. Now "…capitalism has abandoned its claims to serve a larger historical cause. Even in the wealthiest capitalist economies, unemployment has become structural and condition of life have become more onerous for most of the population. The failure of capitalism’s historical mission is most evident in the end of the project of "Third World modernization…

I. Meszaros, Socialism or Barbarism,

Within a decade, the world has been made to serve the only legitimate value-set now permissible in public discourse: "private investor value", a condition overtly celebrated as "the brutal global competition to survive".16

 Prof. John McMurtry." The New Totalitarian Movement", Mid 2002.

The IMF has urged Australia to abolish all tariff protection of industry, reduce the award system to a simple safety net, slash the top tax rate and substantially increase work tests on the unemployed.

From the World Bank's recommendations for the Australian economy, 2000.

 The most controversial element "…is its proposal that the government end the indexation of pensions and welfare benefits to average weekly earnings and let pensions fall relative to workers’ incomes."

 Another is to "…delink pensions and disability payments from wage growth, while substantially increasing participation requirements for welfare recipients."  It "….urged that tax cute focus on reducing the top 47% marginal tax rate, and raising the %60,000 threshold at which it cuts in, saying high tax rateds could increase the brain drain from Australia…"

 T. Colebatch, IMF Report, Economics Editor, The Age, Canberra, Fri23, March, 2001.

McMurtry refers to the things that sustain "life" in society, and the way the rampage of the market is destroying these. "…the social infrastructure of life’s preservation and enablement has been rapidly dismantled." 93

"…ever more invasive assaults on life’s support systems…eg., environmental despoilation, the redistribution of wealth from poor and middle-income classes…" Social cohesion is being damaged. Society’s have a protective response system, similar to the immune system in an organism…sewers, public health, police, education, working conditions…these make up social health and welfare. They are crumbling as capitalism loots them of what is profitable."

J. McMurtry, The Cancer Stage of Capitalism, London, Pluto, 1999.

Nasser refers to"…the global war of neoliberalism against working people." 49 and to "…the contemporary neoliberal project to privatise and deregulate everything." 50.

Nasser stresses that not long ago access to education, health care and security in retirement etc were regarded as rights that people had and that the state would guarantee and seek to strengthen, but now these are commodities one can only get if one pays enough for them, and it is accepted that some will not be able to pay for what they need.

G. Nassser, "Saving social security…", Monthly Review, Dec., 2000.

"The current economic model places growth and profits above all other considerations, and is based on unsustainable rates of resource use." 232.

C. Hines, Localisation; A Global Manifesto, London, Earthscan, 2000

Switzerland has the most tightly regulated capitalism in the world, yet it has the biggest positive trade surplus in manufactures. 140

P. Self, Rolling Back the Market, New York, St. Martins, 2000.

"…despite all our gadgets, despite all our wealth…we are no more happy than our grandpa was when he was young." 4. He refers to "government for and by the rich".

Mass production and mass consumption is " leading us down the deadest of dead ends." We are forced to work far more than is necessary. 10

F. Mate, A Reasonable Life; Toward a Simpler, Secure, More Humane Existence, Albatross, 1993.

Schutt stresses that there is no conceivable way that the capitalist system can avoid collapse. Sustained growth of 5% pa would have to be continued for 10-15 years.

H.Schutt, The Trouble With Capitalism, Zed, 1988.p. 198.

"What the industrial economy calls growth is really a form of theft from nature and people." 1.

"Companies that do not aggressively maximise shareholder value have been taken over by those willing to throw out the old managers and downsize the workforce."

W. K. Tabb, "Labor and the imperialism of finance", Monthly Review, 51,5, Oct. 1999, p.

Evidence that growth makes people poorer, because it adds more to costs than to benefits.

H. Daly and J. Cobb, Economics for the Common Good.

…the evidence to suggest that actual competition has generated market efficiency, or greater benefits for consumers, is very weak.

T. Anderson, "The meaning of deregulation", Journal of Australian Political Economy, 44, Dec., 1999, p. 12.

98% of the cost of toothpaste is for packaging, advertising and profit.

D. Dowd, "Neither a borrower nor a lender be", Znet, 9^th July, 2000.

"…the great majority of the benefits of global economic growth have gone not to the poor but to those who already have far more than they need…" 79

World advertising expenditure , 1998, estimated at $437 billion. 33.

"…capitalism…legitimate(s) an ideology in the service of a narrow class interest." 40.

The 200 biggest transnational corporations only employ 18 million., c 40-42.

D. Korten, The Post-Corporate World, Kumarian, 1999.

"While the main justification for privatisation tend to be the increase in efficiency, productivity or competition, the elimination of sources of state deficit, or less government intervention in the economy, it has not been shown that privatisation has effectively contributed to any of these factors On the contrary, in many cases it has done just the opposite. 91

"In the industrial nations…the standard of living of the working classes has been in slow decline for many years." 121.

World Bank President L. Summers said "I think the economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable and we should face up to that."…and "The argument that moral obligation to future generations demands special treatment of environmental investments is fatuous." 82

"In the industrial nations…the standard of living for the working class has been in slow decline for many years (since the late 1970s in North America.)"

G. Teeple, Globalisation and the Decline of Social Reform, Humanities, 1995.

Stretton compares the actual effects of deregulation with the effects predicted by its advocates.

Deregulators predicted that floating the dollar would allow market forces to correct automatically any tendency towards balance of payments disequilibrium. In fact the imbalance of payments is worse now than it was.

Deregulators predicted that any speculative dealing in foreign exchange would tend to reduce fluctuations and stabilise values in orthodox textbooks…pure spec markets have notorious tendencies to positive feedback and boom and slump… Speculative activity has made the market for Australian dollars more volatile than it ever was in the regulated decades…

Deregulators predicted that integration with the world financial system would increase and diversify the capital resources on which productive Australian enterprise…might draw. In fact deregulation has seen a large shift away from direct foreign investment in Australian industry…towards indirect lending and portfolio investment…

Deregulators predicted that hotter competition between financial intermediaries would cut their profit margins and interest rates. In fact the profit rates of many of them have risen. Real interest rates on safe loans have multiplied sevenfold.

H. Stretton, "Deregulating Australia’s financial system", Economics as a Social Science,F. Stilwell and G. Argyrous, Eds,. p. 242.

A study of trade liberalisation in many countries that was conducted atthe World Bank by two economists, Lars Lundberg and Lynn Squire, was

cited then in support of the troubling observation that 'The costs of adjusting to trade reform are ... borne exclusively by the poor' (para 8.9, draft).

C. Reddy, "Hamlet with the prince", Third World Resurgence, 122, 2000, p. 8

Governments of rich countries use their taxpayers money to lend to heavily indebted Third World countries, via the IMF, so these countries can pay their debts…to the banks who speculated wildly to lend to the Third World in the first place! They all claim to believe in freedom for market forces, but the market solution which would allow banks that have made very bad lending decisions to go broke is never embraced by them.

In the US 200,000 people are killed each year by mistakes made in medical and hospital treatment.

R. Levins, "Is capitalism a disease?", Monthly Review, 52, 4, 2000, p. 17.

THE JUNE 2000 Conference Board Report concluded that the claim "a rising tide lifts all boats" is wrong. Increased wealth in the US has not led to any reduction in the proportion of people living under the poverty line since 1973. In the period 1986-1978 it has actually increased 7.3%;, while GDP rose 25%

"…capitalism produces poverty along with wealth, hunger for many along with opulence for a few."

Notes from The Editors, Monthly Review, 52, 4, 2000,

The average real wage for US blue collar workers in 1997 was 13% lower than in 1973, despite a 34% increase in productivity per worker in the same period.

A. Merrifield, "Class formation, capital accumulation, and the downsizing of America", Monthly Review, 51. 5. 1999, p. 36.

"Companies that do not aggressively maximise shareholder value have been taken over by those willing to throw out the old managers and downsize the workforce."

W. K. Tabb, "Labor and the imperialism of finance", Monthly Review, 51,5, Oct. 1999.

I Increasingly, we are faced with a world economy governed by financial speculation and the attempt to create global monopoly (or oligopoly) power—

J. Belamy Foster, "The turn of the millennium", Monthly Review, April 20900, 10-12.

Expenditures on marketing are now running at more than one trillion dollars a year…We are experiencing the greatest merger wave in capitalist history.

Globally, more than two trillion dollars worth of mergers were announced in the first three quarters of 1999.

J. Belamy Foster, "The turn of the millennium", Monthly Review, April 2000, p. 9

…a new class structure has emerged in advanced market economies. The social groups constituting the new privileged minority are, basically, hostile to any expansion of statism and the welfare state and are increasingly attracted by the ideology of the private provision of services like health, education and pensions—although a significant par of this 'attraction" is forced by the neoliberal undermining of the state provision of these services Their attitude towards statism and the welfare state is determined by the fact that public services and their financing by taxation have a disparate effect on the privileged minority and the underclass. In other words, it is the privileged minority, that has to finance, through taxation, public services in which they are not interested any more (because of the deterioration in their quality as a result of neoliberal policies). As the privileged minority is also the electoral majority (because they take an active part in the electoral process, whereas the underclass mostly do not bother to vote. …

So, in the last 15 years or so, all major social-democratic parties, (Britain, Germany, France, Sweden, Spain, Greece) have abandoned traditional social-democratic policies like the commitment to full employment and the wellfare state, and adopted, with minor variations, the essence of the neoliberal programme (privatisations, liberation of markets and so on…

A neoliberal consensus has swept over the advanced capitalist world and has replaced the social-democratic consensus of the early post-war period.

… The main economic policies proposed by neoliberals and subsequently implemented first by the Thatcher/Reagan administrations and later .by governments all over the world have been the liberalisation of markets (particularly the labour market), the privatisation of state enterprises, the redistribution of taxes in favour of high income groups and, last but not least, the reduction of the welfare state into a safety net and the parallel encouragement of the private sector 's expansion into social services (health, education, pension schemes and so on). The effect of the latter has been not only the marketisation of sectors of the economy that used to be under state control, but also a further reduction of the social wage—a fact, which makes labour even more 'flexible' to market conditions. No wonder that as a result of these policies, Profitability, which had slumped at the end of the statist period. has been almost restored to the levels achieved at the peak of the post-war boom…

T. Foutopoulos, "Welfare state or economic democracy", Democracy and Nature, 5. 3. 1999, 433-468.

…with corporate welfare now amounting to about $6 billion a year - more than is spent on sickness and unemployment benefits - taxpayers will be looking more closely at what benefits come back to the nation. (Cases are given from the Sydney Morning Herald, 7.12.99, include a $48 million subsidy to pay television operator Australis Media, to set up production centre in Sydney.)

S. Turnbull, in ERA Newsletter, Nov-Dec, 2000.

In the New South Wales Compulsory Third Party scheme, after ten years of deregulation (or 'market privatisation') purchasers of policies pay higher real prices than before, despite the conversion of a public monopoly into a 14-player regulated oligopoly and despite a succession of restrictions on allowable claims (Anderson 1999). With deregulation the price became higher but the service poorer. P. 17

The Australian experience of 'deregulation' has shown that complicated process is unlikely to involve less government 'intervention', that the benefits to consumers will be limited at best and totally illusory at worst, and that it is quite likely that the legal rights of citizens will be seriously diminished. Deregulation really means a market re-regulation to guarantee new and profitable markets to large corporations,…

T. Anderson, "The meaning of deregulation", Journal of Australian Political Economy, 44, Dec., 1999, p. 17-18

In our view, most of this research shows that neo-liberalism does not enjoy widespread support in Australia despite its promotion by both major political parties and most of the mainstream media over the last twenty years…What is striking is that opposition to the ale of government business enterprises has remained it is not only privatisation that has failed to capture the people's hearts and minds. The published polls have shown throughout the last 15 years strong majority opposition to tariff cuts and free trade. P 44.

The evidence we have presented provides a striking reminder of how little neoliberal values have penetrated the political consciousness of most Australians. It shows why neoliberal administrations have chosen the path of electoral deceit as a means of securing political office…

As John Quiggin has pointed out, the latest and perhaps most significant neoliberal reform –competition policy -- "…has never been democratically endorsed. In fact the whole process was designed to subvert democratic control over public policy. The reformers accepted the conventional wisdom that reform was best implemented by stealth."

D. Hayward, "The democratic paradox and socialist strategies", Journal of Australian Poilitical Economy, 44, Dec., 1999, pp 46-57.

The hours of work on average are higher in the US than in any other developed nation.

For 1997 the figure was 1966, 4% higher than in 1980.

Peoples’ Global Action Network protests against WTO, Third World Resurgence, 95. p. 31.

"It is a world where the rich get richer and the poor get poorer because the trickle down theory of the 1950s and 1960s has been replaced by the trickle up theory… Since 1974 there massive trickling up of wealth from low income to groups… 96

"Let the market decide is the answer we hear from big business and mainline economists. 'Let the invisible hand guide our destiny for the benefit of all.' It just happens to be the system which is most beneficial to the richest people and least advantageous to the poor and powerless. 99.

P. Hellyer, The Evil Empire, Toronto,1997.

"Greider sees the global economy as a huge incredibly powerful agricultural-like machine running amok and ploughing across fields with frightening effect. As it throws off enormous mows of wealth while leaving behind great furrows of wreckage. There is no one at the wheel to control the speed and direction and it is accelerating…Exploitation of the weak by the strong flourishes…"

 Excerpts from a review of W. Greider, One World Ready or Not (The Manic Logic of Global Capitalism.)

Under the present market system there can be no measures taken to prevent short term environmental and human exploitation, because the shares of a corporation engaged in any kind of benevolent behaviour towards the environment or society would take a beating against others who do not. As far as countries are concerned, any government who'd engage in any kind of protection measures would be scorned, charged at the WTO, or in our case NAFTA panels under Chapter 11, for "expropriation of properties". The money markets would then make the currency of the country worthless. We have this going on in British Columbia right now, where a 1-year-old government is dismantling environmental protection and labour rights laws to make the proviusiness friendly and more globally competitive" (The usual fashionable jargon).

 Ed Deak, On economic Efficiency, ,ERA Information Network, 18th May, 2002.

AUSTRALIAN ECONOMY

In 1999 86% of the Australian financial sector was foreign owned.

E. Fayner, Globalisation and the Australian economy", ERA Newsletter, 12, 17, March-April, 2001, p. 4.

John Pym, president of Ausbuy, said that 85% of the goods in our shopping trolleys are from foreign-owned companies. 80% of foreign investment is to buy existing Australian owned business. . . The level of foreign ownership has doubled in the last decade to 21% of gross domestic product, and the money leaving Australia for foreign owners also doubled, reaching $12 billion.

Frank Walker, The Sun-Herald [17.9.00]

Foreign investment is always assumed to be a good thing, which helps the economy, but

In the 1986-94 period more than 1/3 of foreign investment in Australia was to purchase Australian real estate,

companies.

E. L. Wheelwright, G. Argyrous and F. Stilwell, Economics as a Social Science, Pluto, 1996, p., 6.

 The average US male works a full month a year longer than 25 years ago…

 Anti-capitalism theory and practice, 2000, p. 5. Socialist Worker Pamphlet,

The famous quote by the President of the World Bank, expressing the logic of conventional economics… "Health-impairing pollution should be done in the country with the lowest cost, which will be the country with the lowest wages . . . I think the economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable and we should face up to that. (in Dore 1992 8s.)

‘Interest has been shown to make up about half the cost of everything we buy.”

Ellen Brown, “Austerity fails in Euroland...” Dec. 22, 2010 nwww2.webfodebt.com.

US 2005 expenditure on marketing; $1 trillion, or 9% of GDP. This will be a significant underestimate.

Metrics; 2.0. Business and Market Intelligence. “US Marketing spending exceeds $1 trillion in 2005.”, June 26, 2006. http://metrics2.com

Increasing concentration...Mergers were at a record level 2007; totalling $4.38 trillion. Also, vast increase in foreign direct investment.

Monthly Review, June, 2011. P. 3.

2. THE MARKET SYSTEM.

The market system ensures that those with high incomes get scarce and valuable things, because they can pay more for them, while people on low incomes don’t get them. This is responsible for most of the suffering occurring in the world. In a good society there might be a role for markets, but the main factors determining what is to be produced and how it is to be distributed would be considerations of justice, morality, tradition and what is best for people, the environment and social cohesion.

______________________________________

"Markets are utterly indifferent to political and social values such as equity, justice, accountability, responsibility and solidarity…" 55

Kaplins, M, Considine, Crosier, Australian Politics in the Global Era, Longman, Melbourne, 1998.

"When the market rules, the rich get most of whatever is valuable!"

E. Elliott and M. Barlow, GATS, Privatising all Services!, wwwcommunitycauldron.com

"THE ‘FREEDOM OF THE CONSUMER’ IN A FREE MARKET…IS…ONLY THE FREEDOM OF THOSE WHO HAVE ENOUGH MONEY TO DEMAND WHAT THEY WANT. FOR ALL THOSE WHO DO NOT POSSESS ENOUGH MONEY TO CONSUME WHAT THEY REQUIRE TO BE HEALTHY OR A LIFE, THERE IS NO FREEDOM OF THE CONSUMER, EVEN TO EAT." 48

"IN NO NATIONAL SOCIETY IN THE WORLD HAVE MARKET REFORMS AND RESTRUCTURINGS REDUCED RATES OF POVERTY OF CHILD MALNUTRITION AND STARVATION." 147

J.McMurtry, The Cancer Stage of Capitalism, London, Pluto, 1999.

"The corporations apply their knowledge to comparatively luxury goods and services." 9

"TNCs produce goods and services for those who have purchasing power; they cannot meet the basic needs of people who do not have the money to express their needs in the market place." p. 9.

J. Madeley, Big Business, Poor People, Zed Books, 1999.

"…the market…respects only those with money and purchasing power." P. 29.

R. Kothari, Poverty; Human consciousness and the Amnesia of Development,, 1995.

"Markets are not about justice; they are about profits."

J. Nelson, Post-Industrial Capitalism; Exploring Economic Inequality In America, Sage, 1995.

Winner take all markets have increased the disparity between rich and poor and more and more Americans compete for fewer and bigger prizes, encouraging economic waste, income inequality and an impoverished cultural life.

"…reliance on market forces has led to explosive growth in the salaries of top performers, while most people struggle to hold their own."

R. H. Frank, The Winner Take All Society, Free Press, 1995.

The victims of free market dogma can be found all over the developing world. An estimated 43 per cent of the rural population of Thailand now live below the poverty line, even though agricultural exports grew an astounding 65 per cent between 1985 and 1995. In Bolivia, following half a decade of the most spectacular agricultural export growth in its history, by 1990, 95 per cent of the rural population earned less than a dollar a day. In the Philippines, as acreage under rice and corn declines and the area under cut flowers increases, 350,000 rural livelihoods are set to be destroyed.

. Mitllet," Land loss, poverty and hunger", The Ecologist Report, Globalising Poverty, Sept., 2000, p. 44.

Between 1975 and 1996, 1,223 new drugs were marketed worldwide, but only 13 were for tropical diseases. Only 4 were produced by the drug companies’ research.

 UN Development Programme,Human Development Report 2001.

When free trade doesn't suit you, you switch!

The story of the East India silks and calicoes that were imported into England and caused difficulty for the English textile industry is so well known that it does not need to be told here. It was fortunate for England that no Indian Ricardo arose to convince the English people that, according to the law of comparative costs, it would be advantageous for them to turn into shepherds and to import from India all the textiles that were needed. Instead, England passed a series of acts designed to prevent importation of Indian textiles and some "good results" were achieved.

A. Cippola, quoted in H. Magdoff, Imperialism, p. 159.

 The destruction of Indian manufactures is analysed in detail. Indian silk and other textiles had been exported in large quantities before 1815 and easily underpriced British, the name of free trade, British levied prohibitive duties as high as 1,000 percent on these articles. Meanwhile, duties of British textiles into India were set at three and one half percent on most items. An urban-rural migration ensued in India and the British imposed the exploitative British landlord system on the colony, which would be the source of countless peasant revolts in years to come. Plantations, some using slave labour, spread in cotton, sugar, wheat, and other cash crops. Rising exports of food and cash crops would coincide with mass famine for the next century. Clairmont writes "As Ireland had been laid waste by mercantilist economic policies in the seventeenth and eighteenth centuries, so was India to be ravaged by liberal economic policies often indistinguishable in their rapacity from their mercantilist predecessors." 

J. Cavanagh, "The costs of economic liberalism", Monthly Review, May, 1997, 50-51.

____________________________________________________________

3. PRIVATE VS PUBLIC FIRMS; Which are more "efficient"?

It is commonly assumed that it is much more efficient if firms are privately owned. This is a central element in the neo-liberal ideology and has fuelled the orgy of "privatisation" governments have plunged into in recent years. However there is much evidence against the assumption. It seems that some types of enterprise run better if they are privately owned but many others function better if they are run by the state, or collectively. Cooperatives are in general very efficient, because all participants or workers have a direct incentive to make them work well. In general the evidence seems to say clearly and emphatically that privaisation is great for the rich who can buy shares and who can refocus privatised firms to the most profitable ventures, but it is not socially desirable.

--------------------------------------------------------------------------

Notes on, Privatisation, G. Hodge, Westview, 2000.

This book is extremely important in reviewing evidence on the actual consequences of privatisation. In general it finds that privatization is great for those who own capital but undesirable for everyone else.

The book is rather dry and difficult to wade through but its key conclusions are given in a few pages.

Regarding "contracting out", i.e., subcontracting some functions to private firms, Hodge found much diversity among the studies, but says in general that there has been a modest (c 6-12%) reduction in costs, although none in many cases. (155). There was no discernible effect on the quality of services provided. Employment ass reduced. There were undesirable social effects; e.g., women and minorities are disadvantaged. More areas become closed to public evaluation because they are regarded as "commercial in confidence."

Re the privatization of whole firms, Reported "financial performance" improved, but in fact was no better than for firms that were nationalized, and no better than in a control group of firms that were not privatised (!) (226, 243. There was a reduction in employment.

Returns to shareholders were significantly improved. (226, 242, 243..) No clear link was observed between privatization and national economic growth.

Price reduction for goods produced by the privatized firms, and competition between firms, did not result. (226, 243.) There was no clear evidence of improved quality of service. In the one relevant study, performance improvements were influenced much more by strengthening regulation and public accountability than with privatization. (!) 226, 243.

The evidence is that privatization increases inequality. Unemployment increases, as does executive pay. "Major winners and losers have typically been evident with privatization." (227) The spread of individual incomes appears to have widened.

It is more attractive to governments to sell public enterprises than to cut spending or increase tax." (227.)

 Almost all commentators on UK privatisation say there was too little regulation after the event.  Claimed and predicted benefits were exaggerated. There was pressure on governments to make the transfer seem successful.

Paradoxically, far from freeing firms from government regulation, privatisation was found to increase it. (p. 244.)__________________________

"A very large number of studies…have concluded that large welfare states are no less efficient than smaller leaner ones…"

S. Wilson, Politics and the economy in Australia today,, Australian Options, Feb., 2001, p. 5.

It is notable that researchers have revealed that the supposed inferior efficiency and greater bureaucracy of public enterprises is a myth without empirical foundation (Prof. Stephen King and Dr Rohan Pitchford in their report to the Productivity Commission).

Eric Aarons, "The need for new social movements", Australian Options, Nov., 1999, p. 22.

The fiscal illusion of budgetary devices has obscured the public loss from privatisations, but one analyst concludes that 'in many cases the sale price is around 50 per cent of the present value of the stream of earnings foregone' and that the UK's large budget deficit in 1993 'may be traced, in large measure, to the effects of privatisation' (Quiggin, 1994, pp.30-1)... The death of the theory of public incompetence should have occurred when in Britain'a public owner turned Western Europe's least profitable steel producer into its most profitable' enterprise.

Source not known.

________________________________________________________

"The belief that privately owned firms will by definition operate more efficiently and productively owes more to ideology than to economic logic.." (84) "There is actually little evidence to suggest that public firms are given to poor performance..." (86) "In general reducing the public sector to expand the private sector appears to exercise little impact on development." (86; for references see notes 27-30.)

J. Rapley, Understanding Development Theory and Practice in the Third World, London, Riener, 1996.

Hodge argues that the best way to improve the efficiency of a public service is to improve its regulation, not privatise it.

The gains to efficiency that are associated with privatising public industries come before the privatisation; i.e., through the steps taken to make the enterprise more attractive to buyers.

C. Hodge, Privatisation. Westview.

Central to the privatisation dogma is the claim that it is more efficient to contract services from private firms, rather than for the government to provide them. "Contrary to the rhetoric, moreover, private provision has often proven to be more expensive than public provision of the same services and benefits…" 104

G. Teeple, Globalisation and the Decline of Social Reform, Humanities, 1995.

P. Self, Rolling Back the Market, 2000, 113.

It is not true that private firms are necessarily more efficient in a technical or micro-economic sense. The evidence is mixed and by no means one-way (for evidence, see Stretton and Orchard,1994, pp. 80-122). … The death of the theory of public incompetence should have occurred when in Britain'a public owner turned Western Europe's least profitable steel producer into its most profitable' (Stretton and Orchard, p. 96) 

P. Self, Rolling Back the Market, 2000, 113.

The privatisation of the Commonwealth Bank was a financial disaster for the Australian public, although investors in the float did very well indeed.

The total proceeds from the three stages of the sale amounted to about $7.8 billion in 1995-96 dollars. Average real annual profits over the period 1988-93 (which covers a complete business cycle) were around $560 million. Computing the present value of this stream of profits at a discount rate of 5 per cent yields a value of $ 11.2 billion for the Bank as a whole. Therefore, even if profits had not increased after 1993, the public would have incurred a loss of around $3.5 billion from the privatisation. In fact, primarily because of the removal of restrictions on the monopoly power of the banks, profits have soared. Profits for the three years from 1998 to 2000 totalled $5.4 billion, or more than half the total sale proceeds received by the Australian public.  Financial deregulation has been similarly disastrous. Since the advent of financial deregulation, banks have raised fees and charges, cut services and exploited their collective monopoly power whenever possible. ~ The Australian delegation to Seattle had eight business representatives but no other community representatives.  Three decades ago, corporations paid about a quarter of all U.S. Federal taxes. Now the corporate share is down to approximately 10 percent. The nominal tax rate on corporations is 35 percent, but the effective tax rate on big corporations is approximately 21 percent, according to the Washington, D.C.-based Citizens for Tax Justice (CTJ). A 2000 CTJ study of the 1998 income tax payments of 250 of the largest corporations determined that two dozen had negative federal income tax payments - meaning the~received rebate checks from the U.S. Treasury.  Led by General Electric, which finagled just under $7 billion in tax breaks in 1998, at least 25 corporations, including Ford, First Union, AT&T, Bell Atlantic, Merck, Microsoft, Bristol Myers-Squibb and Exxon - exploited tax loopholes to gain at least $1 billion in tax breaks, according to CTJ.   The worst case of privatisation for fire-sale prices was the sale of the State Bank of NSW for $214m in 19..

Source not recorded.

____________________________________________________________________________________

4. MARKET RELATIONS DESTROY SOCIAL COHESION.

Market relations only involve individuals in maximising their self interest. There is no incentive to consider what is good for others, the public good, morality, what is good for the environment or society. A satisfactory society is not possible unless considerable value is put on these factors and the more we increase the emphasis on market relations the more we drive out desirable social relations and considerations. Polanyi pointed out that our society is the only one which has given the market such prominence, and that this is leading to the destruction of social cohesion and of the environment. (For discussion see .)

Polanyi stresses that the market system is not natural or inevitable; it was created or constructed, by the state. It is not the natural way humans organise an economy.

Nudler and Lutz say, "The market economy was the result of al political action, a violence brought against the social body to adjust it to the needs of a form of production which was organised around complex machines and processes" The factory system required markets, and "…it was the state that saw to it that these conditions should prevail…(the state) …forcibly created a labour market by turning impoverished mobs into new industrial troops or a reserve army. It was the state that subjected land to the rule of merchandise. Finally it was the state that made even money a commodity. " These things were "…artificially injected in order to further the factory system."

Polanyi believed that there were always two forces; one pushing for the market to prevail and one defending society against it.

O. Nudler and M. Lutz, Economy, Culture and Society: Alternative Approaches, United Nations University Press, New York, 1996. Pp. 31-32

Polanyi points out that the market was developed under regulation; i.e., it was not free but was organised, directed, protected by the state. The idea of a self-regulating market is quite new.

"Never before our own time were markets more than accessories of economic life. As a rule the economic system was absorbed in the social system…" Markets did not tend to expand and take over more of society. "Where markets were most highly developed, as under the mercantile system, they throve under the control of a centralised administration…"

"The self-regulating market was unknown…" It is very important to understand this historical background when thinking about the market system today, because it is something human society has not had before.

In feudal times land was crucial. "…its status and function were determined by legal and customary rules. Whether its possession was transferable or not, and if so, to whom and under what restrictions, what the rights of property entailed, to what uses some types of land might be put – all the use questions were removed from the organisation of buying and selling, and subjected to an entirely different set of institutional regulations."

"The same was true of the organisation of labour. Under the guild system

as under every other economic system in previous history, the motives and circumstances of productive activities sere embedded in the general organisation of society. The relations of master, journeyman, and apprentice, the terms of the craft, the number of apprentices, the wages of the workers were all regulated by the custom and rule of the guild and the town. What the mercantile system did was merely to unify these conditions. Mercantilism, with all its tendency towards commercialisation, never attacked the safeguards which protected these two basic elements of production –labour and land – from becoming the objects of commerce.."

"Not before the last decade of the eighteenth century was the establishment of a free labour market even discussed, and the idea of the self-regulation of economic life was utterly beyond the horizon of the age."

"A self-regulating market demands nothing less than the institutional separation of society into an economic and political sphere…Neither under tribal, nor feudal, nor mercantile conditions was there,…a separate economic system in society. "

"…labour, land and money are obviously not commodities…Labour is only another name for human activity which goes with life itself…land is only another name for nature, which is not produced by man; actual money, finally, is merely a token of purchasing power … None of them is produced for sale."

"To allow the market mechanism to be sole director of the fate of human beings and their natural environment, indeed, even of the amount and use of purchasing power, would result in the demolition of society."

K. Polanyi, The self-regulating market, F. Stilwell and G. Argyrous, Economics as a Social Science, Sydney, Pluto, 1996.

In a traditional Mexican village…the private accumulation of wealth results in social ostracism; prestige is gained precisely by spending even small profits on good deeds for the community. Here is a way of life maintained by a culture that recognises and cultivates a state of sufficiency…

W. Sachs, Planet Dialectics, Zed, 1999.

With hindsight, it is therefore obvious that Polanyi was wrong in thinking that the rise of statism in the 1930s was evidence of the utopian character of the ''self-regulating" market and of the existence of an 'underlying social process' which leads societies to take control of their market economies. In fact, statism proved to be a relatively brief interlude in the marketisation process. P. 449

T. Foutopoulos, "Welfare state or economic democracy", Democracy and Nature, 5. 3. 1999, 433-468.

Kothari points out that with the decline of public services fewer educated people will be working for government and thus identified with public goods; more will work for corporations and identify with the business world. This will surely contribute to the reduction in concern for the public goos among the middle class.

R. Kothari, Poverty; Human consciousness and the Amnesia of Development,, 1995.

Many things are not and cannot be commodities. They can't be bought and sold. Consider friendship, affection, trust, concern, conscientiousness, morale, reverence, respect, intrinsic value, love, sharing, sense of community, peace of mind, volunteering, giving, helping, admiration, commitment, loyalty, appreciation, enjoying company...

J. Moller, The Growing Challenge to Internationalism", The Futurist, 33.3. March, 1999, 22-27.

Over 50 years ago Polanyi said, 'To allow the market mechanism to be sole director of the fate of human beings and their natural environment...would result in the demolition of society.'" Polanyi thought societies take steps to protect themselves from domination by the market...he would be staggered to find today that just the reverse is happening. "...the whole point of neo-liberalism is that the market mechanism should be allowed to direct the fate of human beings."

S. George, "A short history of neo-liberalism", The Global Policy Forum, reported in, ERA Email Network, 17th July, 1999.

"The marketisation of society has undermined the community values of reciprocity, solidarity and cooperation in favour of the market value of competition and individualism."

T. Fotopoulos, "Mass media, culture and democracy", Democracy and Nature, Previously to our time no economy has ever existed that even in principle was controlled by markets . . . [A]lthough the institution of the market was fairly common since the later Stone Age, its role was no more than incidental to economic If e . . . [W]hile history and ethnography know of various kinds of economies, most of them comprising the institution of markets, they know of no economy prior to our own, even approximately controlled and regulated by markets ~ .... All economic systems known to us up to the end of feudalism in Westem Europe were organised either on the principles of reciprocity or redistribution or householding (i.e., production for one's own use) or some combination of the three.

The motives, therefore, that ensured the functioning of the economic system derived from custom, law, magic, religion - but not gain. Markets, up to the end of the Middle Ages, played no significant role in the economic system. Even when, from the sixteenth century on, markets became both numerous and important, they were strictly controlled by society, under conditions that, as described ably by Peter Kropotkin, made a self-regulating market unthinkable:

The internal commerce was dealt with entirely by the guilds not by the

individual artisans - prices being established by mutual agreement . . . [A]t the beginning external commerce was dealt with exclusively by the city and it was only later that it became the monopoly of the merchants' guild and later still of individual merchants . . . [T]he provisioning of the principal consumer goods was always handled by the city, and this custom was preserved in some Swiss towns for corn until the middle of the 19th century.

As a rule, both ancient and feudal economic systems were rooted in social relations, and non-economic motives regulated the distribution of material goods. The goods of everyday life, even in the early Middle Ages.

T. Fotopoulos, Towards an Inclusive Democracy, 1996, p. 7.

Comments from Polanyi's perspective; source not recorded:

Previously to our time no economy has ever existed that even in principle wascontrolled by markets . . . Although the institution of the market was fairly common since the later Stone Age, its role was no more than incidental to economic If e . . . While history and ethnography know of various kinds of economies, most of them comprising the institution of markets, they know of no economy prior to our own, even approximately controlled and regulated by markets ... All economic systems known to us up to the end of feudalism in Western Europe were organised either on the principles of reciprocity or redistribution or house holding (i.e., production for one's own use) or some combination of the three.4

The internal commerce was dealt with entirely by the guilds not by the individual artisans - prices being established by mutual agreement . . . [A]t the beginning external commerce was dealt with exclusively by the city and it was only later that it became the monopoly of the merchants' guild and later still of individual merchants . . . The provisioning of the principal consumer goods was always handled by the city, and this custom was preserved in some Swiss towns for corn until the middle of the 19th century.

_________________________________________________________________________

5. AFFLUENCE AND GROWTH: The supreme commitments.

Robert Frank, professor of economics at Cornell University, believes all levels of American society are in the grip of "luxury fever". Consumption has become a kind of arms race, a desperate struggle to display more and more of the trappings of success which his driving record numbers of people into debt and bankruptcy…

Tom Morton, "Filthy rich and feverish", Sydney Morning Herald, 24.6.2000, p. 7.

That craving for possessions is a cause of suffering was recognised by the great religions. 21

"He who knows he has enough is rich."

North American Indians said, "We consider ourselves much happier than you, in this that we are content with the little that we have." 21

"I buy, therefore I am."

P. Self, Rolling Back the Market, New York, St. Martins, 2000.

___________________________________________

6. THE TRICKLE DOWN ASSUMPTION.

Conventional development is based on the assumption that even though capitalism development focuses on things that will enrich the rich, some of the "wealth" created will trickle down and start to raise the living standards of low income people.  There is usually some trickle down, but very little. In 1996 the Unconcluded that the poorest one-third of the world’s people are getting poorer, not richer. Even if there is trickle down the glaring fault in conventional development is that most of the Third World’s productive capacity and resources are mostly benefiting others, not Third World people. (For discussion of conventional development see.)

"…capitalism produces poverty along with wealth, hunger for many along with opulence for a few.

Notes from The Editors, Monthly Review, 52, 4, 2000,

___________________________________________

7. CUTTING STATE SPENDING

On the reason for the cuts in welfare spending;"...in the framework of an international market economy, the higher a country's 'social wage' the lower its competitiveness."

T. Fotopolous, Towards an Inclusive Democracy, London, Cassells, 1996. p. 91.

… in Britain,it was recently revealed that many hospitals have reduced the age limit for treatment of several diseases to 65!

T. Foutopoulos, "Welfare state or economic democracy", Democracy and Nature, 5. 3. 1999, 433-468.

Australian governments now spend less on universities than they did in 1975.

Journal, Oct-Nov, 2000, p. 49.

__________________________________________

8. THE QUALITY OF LIFE; Unrelated to GDP...and falling.

Fordham Institute for Innovation in Social Policy concludes that social well being in the US has fallen since the mid seventies." 83

M. Renner, Fighting For Survival, 1997. P. 83.

In recent years measurement of the quality of life people experience has begun to be explored. This shows that the quality of life is now falling in the richest countries, and that the quality of life has little to do with income or GNP. This contradicts the conventional economic assumption that it is supremely important to go on striving to raise the GDP.

H.McKay says the 1990s are the age of anxiety; uncertainty and insecurity. C p. 13.

Kaplins, M, Considine, Crosier, Australian Politics in the Global Era, Longman, Melbourne, 1998.

"There is no clear evidence of any ink between economic growth and perceived well being, once a reasonably comfortable economic level has been attained."

F. Stillwel, Changing Track, Australian Options, Feb., 2001, p. 5.

"Most psychological investigations do not reveal consumption to be among the main determinants of happiness in life…" 22

P. Self, Rolling Back the Market, New York, St. Martins, 2000.

"It is clear that the vast majority of Australians feel unhappy about what has happened to this country since 1983. Ninety percent believe life is more stressful than it was 10 years ago.; When offered a choice between maximising growth or achieving a world of greater equality, 70 percent chose greater equality. Only 30 percent think that life is getting better overall.

Tom Morton, "Filthy rich and feverish", Sydney Morning Herald, 24.6.2000, p. 7s.

A 16 indicator measure by Fordham Institute of Innovation in Social Policy shows that in the US "…social well-being has declined since the mid-seventies." 83.

M. Renner, Fighting for .Survival, Norton, London, 1996.

"...careful research over a period of decades in many developed countries has shown that even substantial economic growth and increases in average incomes lead to no increase in average happiness for society as a whole."

N. R. Goodwin, F Ackerman, and D. Kiron, The Consumer Society, Island Press, 1997, p. 6.

"Numerous studies from the United States, Europe and Japan confirm that increasing per capita incomes do not result in increasing happiness. In the United States real incomes rose substantially between the 1940s and the 1970s; new detailed studies of that period have confirmed Easterlin's 1974 finding that happiness peaked in the late 1950s and then declined. From 1972 through 1991, a period when per capita income after tax rose by one third, annual survey data from the national Opinion Research Centre likewise show no upward trend in happiness.

Surveys of life satisfaction in nine European countries from 1973 through 1989 show a slight upward tend in two countries, a slight downward trend in two, and no trend in the remaining five, during those years real per capita gross domestic product rose from 25 to 50% in the nine countries. A study of Japan found no increase in subjective well being from 1964 to 1987, despite the fact that real per capita GDP more than doubled."

N. R. Goodwin, F Ackerman, and D. Kiron, The Consumer Society, Island Press, 1997, p. 26.

"...increases in average income over time do not lead to increases in average happiness, and...people in rich countries are no happier, on average, than those in poor countries."

Summary of Easterlin's findings, in N. R. Goodwin, F Ackerman, and D. Kiron, The Consumer Society, Island Press, 1997, p. 6.

"The world economy gallops ahead and gives us more to buy but our lives are impoverished and retrenched." (Schwarz and Schwarz, 1998, p. 152.)

The US Genuine Progress Indicator fell 40% between the 1970s and 1992. (Schwarz and Schwarz, 1998, p. 152.) In Britain an Index of Sustainable Economic Welfare has fallen more than 20% since 1980. (Ibid., p. 153.)

"Globalisation enriches the few and impoverishes the many."

(Schwarz and Schwarz, 1998, p. 155.)

One of the most surprising findings of research into what psychologists call subjective well-being (which includes life satisfaction and happiness) is the often small correlation with objective resources and conditions. One recent estimate is that external circumstances account for only about 15% of the differences in well-being between people [8].

Another striking finding is that the proportion of people in developed

nations who are happy or satisfied with their lives has remained stable over the past several decades that happiness and satisfaction have been

measured (about 50 years in the US), even though we have become,

on average, much richer. Only in the poorest countries is income a good indicator of well-being. In most nations the correlation is small, with even the very rich being only slightly happier than the average person.

Diener, E., Suh, F., Lucas, R. & Smlth, H (lY99). Subjective well-being. Three decades of progress Psychological Bulletin, 125

__________________________________________

9. THE DAMAGE OCCURRING TO SOCIAL COHESION

The worst thing neo-liberalism has done is drive out collectivism; it has installed a selfish,, competitive individualist, sink or swim, winner-take-all culture. Only a generation ago there was a major strand of concern for the welfare of others and for the public good, a culture of caring and mutuality to some extent. The state was expected to concern itself with the welfare of all and especially those least fortunate. Now the state tells individuals they must look after their own fate, and focuses on facilitating business. Everyone has to be an entrepreneur, including schoolchildren who have to develop their portfolio towards securing a job. This is killing off he life force of society, the factors that make a society possible, let alone civilised. Social cohesion and the quality of life depend on the readiness to value the interests and welfare of others, and of society in general. It is not possible to have a society in which people only attend to their own self interest, let alone to maximising their wealth.

_________________

All, social life at its core is based upon mutuality, even if this has no significant expression in the world of markets. It is inseparable from the development of a responsibility to the other and an ethical approach to the social world.

The decline of a sense of mutual obligation is widespread today. In our economic relations this is easily observed. How else is one to interpret the tax revolution where a sustained revolt against paying taxes has unfolded for twenty years…

The crisis in welfare, where increasing numbers of people experience 'social damage', is a fact. But it is more than this. For behind the fact are he very processes which we regard as development. The new economy not only destroys jobs. It also destroys those social contexts that nurture mutual obligation. For the old community increasingly is made over by forms of association which work through distance, which cannot significantly allow us to know others through their presence.

J. Hinkson, "Suffer those who are surplus", Arena Journal, Oct-Nov., 2000.

More Australians are withdrawing from communal activity. More of us live alone than ever before. One in four Australian households is now one person living alone, up from one in five just a decade ago.

We are spending more time in front of television sets or computer screens, more time in cars, and less time sharing public transport. (The number of motor vehicles per head grew by 12 percent in the past decade alone).

We do not have as much religious faith as we used to. And we are less likely to sign up with community organisations. (Reference to the rise of individualism at the expense of community.)…

Families don't spend as much time at the meal table together as they used to. People don't make their own music as much as they used to…

The enjoyment of work has declined…

Your people are far less trusting than older generations… Across all age groups the social trust trend has been slowly down during the past decade…this mirrors a loss of safety. Employment of police and security personel has surged in both societies.

The number of lawyers in the US had doubled, per capita, since 1960 and has also surged in Australia…

Civic engagement and social connectedness have diminished…

Paul Sheehan, "Feeling like going it alone? Join the club," Sydney Morning Herald, 15^th july, 2000.

C. Lasch, The Minimal Self, 1984, Norton, argues that affluence reduces social responsibility and faith in the civic realm.

"The traditional sense of belonging to a civil society (still less a community) sustained by collective concerns and responsibilities has receded." "Superindustrialism has well night completed the destruction of community." 23.

P. Self, Rolling Back the Market, New York, St. Martins, 2000.

J. McMurtry, The Cancer Stage of Capitalism, London, Pluto, 1999.

________________________________________________________________________

10. INEQUALITY

Between 1979 and 1997, the after-tax incomes of the top 1% of US families rose 157%, compared with only a 10% gain for families near the middle of the income distribution…60% of the gains of the top 1% went to the top .1%, those with incomes of more than $790,000. "This transformation happened very quickly, and it is still going on."

"Over the past 30 years the average annual salary in America (in 1988 dollars) rose from $32,522 in 1970 to $35,864 in 1999 ---about a 10% increase. Over the same period, according to Fortune, "…the average real annual compensation of the top 100 CEOs went from $1,3 million -- 39 times the pay of an average worker --to $37.5 million, more than 1000 times the pay of ordinary workers."…

The major tax cuts of the past 25 years, the Reagan cuts in the 1980s and the recent Bush cuts, were both heavily tilted toward the very well off; "…more than half the Bush tax cut will eventually go to the top 1% of families." The major tax increase over the same period, the increase in payroll taxes in the 1980s, fell most heavily on working class families.

Future Survey, Nov., 2002, reporting on P. Krugman, "The End of Middle Class America (and the Triumph of the Plutocrats", New York Times Magazine, 20, Oct., 2002, 62-77.

"…the 30 largest US family and individual fortunes in 1999 were roughly 10 times as big as the 30 largest had been in 1982."

From the Nov 2002 Future Survey review of K. Phillips, "The New Face of Anther Gilded Age", The Washington Post, 26, May, 29

US average weekly earnings have fallen since 1973.

Blumfeld, Ed., Scanning the Future, 1999, p. 250.

The extreme inequality now evident can be expected to accelerate under globalisation. When all are "free" to compete the rich and powerful are free to take more and to push many into exclusion. Note how tax arrangements, and the share of profits vs wages have moved in favour of the rich recently.

Stable societies, especially tribal societies, have strong mechanisms to regulate against the development of significant inequality. As inequality becomes more extreme social cohesion is threatened.

In the US 1% of households have half the wealth.

J. H. Eintz and N. Folbre, The Ultimate Field Guide to the US Economy, 2000.

In 1998 … Bill Gates, with a net worth of $90 billion, Warren Buffet, with $36 billion, and Microsoft co-founder Paul Allen, with $30 billion, achieve a combined income that was greater than the total combined income of the 600 million that live in the worlds 48 least developed countries...

W. Bello, From Melbourne to Prague, in ERA Email Newsletter, 2, 15,

1% of Americans hold 47% of shares. The poorest 80% hold only 2%.

P. Hellyer, Evil Empire, 1997, p. 10.

1% of Americans have more wealth than the bottom 90%. 60

J.McMurtry, The Cancer Stage of Capitalism, London, Pluto, 1999.

A study by the University of Melbourne, March 1998, found that 30% of the Australian population were living below the poverty line.

E. Fayner, Globalisation and the Australian economy", ERA Newsletter, 12, 17, March-April, 2001, p. 4

"In the United States 1 percent of the population now has more wealth than the bottom 90 percent."

The Editors, :"The Nader campaign…", Monthly Review, Feb., 2001, p. 19.

"…it is perfectly evident that under turbo-capitalist conditions growth yields more inequality…" 232.

E. Luttwak, Turbo-Capitalism, Harper Collins, 1999

Ralf Dahrendorf argues that the process of neo-liberal economics and globalisation has resulted in greater social exclusion. He agrees with Will Hutton that even in developed countries, 40% are fairly secure middle class, 30% in a precarious and shifting position, and 30% are excluded in some way. Dahrendorf argues that the problem is 'in the most serious sense of the word, moral. A society which claims to be civil but tolerates the exclusion of significant numbers from its opportunities, has betrayed the values on which it is based'.

Dahrendorf, Ralf 'Prosperity, Civiiity and Liberty Can We Square the Circ!e?' The British Academy, 1996 <www.vIadrina.euv-frankfurt-o.de/~julis/ideen/dahrendorf.html>

A mere 4% of American workers are getting 51% of income; the few what in high-tech, information etc. positions most valuable to the corporations.

ABC Life Matters, 11/6/1999.

Among the rich industrialised countries, the United States, at 22.7%, has the highest child poverty rate defined as the percentage of children in households with disposable cash income of less than 50% of the median disposable income for all, adjusted for size of the household. The United Kingdom has a 17.9% rate, Canada 13.9% and Australia 14.3%. The Russian Federation, with 19.9%, comes second after the US in terms of child poverty.

"Globalisation has unleashed extraordinary inequality and insecurity", Third World Resurgence, 118/119, 2000, p. 36.

20.2 million households, earning under ten thousand dollars, lost an average of four hundred dollars each in benefit cuts, while 1.4 million wealthy families, earning an average of more than eighty thousand dollars, received an average of $8400 dollars in tax cuts.

During Reagan's first term in office, low-income families lost twenty-three billion dollars in revenue and Federal benefits, while high-income families gained over thirty-five billion dollars.

W. Tabb, "The world trade organisation; Stop world takeover", Monthly Review, 51.8 Jan, 2000.

"…less than 1% of the world’s people would have a consequential participation in corporate ownership" 62

77% of US shares are owned by 5% of US households.

"…more than half the world’s hundred largest economies are centrally planned for the primary benefit of the wealthiest 1% of the world’s poor." 62

D. Korten, The Post-Corporate World, Kumarian, 1999.

Wiseman claims that one third of Australians are under the poverty line.

J. Wiseman, Global Nation?,Cambridge Univ. Press, 1998. P. 66.

10 people have more wealth than the annual income of 48 countries.

225 people have more wealth than the annual income of half the world's people.

The Big Picture, Magazine from GATT Watch, NZ, May, 1999, p. 3.

Australia is a deeply divided rich-get-richer nation, in which both winners and losers of almost two decades of economic and social upheaval are baffled and angry at the destruction of the fair-go-society.

Child poverty is now at 14 per cent, youth unemployment is still four times that of the adult rate, public education is under-funded and under siege, and our public hospitals are woefully under-resourced.

The individualism of the 1980s has driven us to the point that we now live in a society where life-opportunity is increasingly based on the capacity to pay.

The top 20 per cent of wealthiest Australians receive 48 per cent of the gross weekly income while the lowest 20 per cent receive only 3.8 per cent. Over the past eight years, executive salaries have increased by more than 30 per cent while safety net adjustments increased by less than 13 per cent.

S. Burrows, "A new set of global rules", Arena Magazine, Oct-Nov., 2000, p. 38.

There is decreasing concern with equality; R. Dworkin says "Equality is the endangered species of political ideals." Two decades ago an egalitarian society was a major goal, but not now.

R. Dworkin, Sovereign Virtue; The Theory and Practice of Equality, Harvard Univ. Press, 2000.

In 1995 there were 3 Australian billionaires. In 2001 there were 11.

F . Stilwell, Privatisation, ERA Newsletter, Sep[t-Oct., 2001, p 5.

1% of Australians own 60 % of shares.

"…the richest are becoming richer very rapidly." 19 Between 1983 and 1999 the richest 200 in Australia multiplied their wealth by 6, in deflated terms. 19 The number of Australian millionaires multiplied by 2.5 in 5 years. 35

Median Australian annual income was 2% less in 1996-7 than in 1982-3. The living standards of the bottom half of Australians was 7% less. For the top half it was 25% higher.  Tax on a $2million income in 1987-8 was 54%. In 19960-7 it had fallen to 21%…lower than the tax on low income earners. 61.

L. Aarons, Casino Oz, Goanna Booka, 2000.

10% of Americans have 70% of the wealth. P 9. The top .5% have 27.5% of all wealth. 46 (…an increase from 21.4% in 5 years.)

"The central problem…is the increasing weakness of…the nation state…" xiv

"…governments are faced with a kind of blackmail; if capital…does not get its way…if wages…are too high…then capital will move to more accommodating areas." 32

Corporate profits rose 75% between 1990 and 1995. 38.  We are returning to feudalism via inheritance. A caste system of wealthy and poor is emerging, because the rich are able to pass on their wealth to their children. A new feudal aristocracy is developing. This is facilitated by low taxes, low inheritance taxes etc.

In the US in 1973 56% of the wealth of people between 35 and 39 had been given to them by their parents. By 1986 the percentage was 86%. 72

Note how inheritance contradicts the enterprise ideology they espouse. The rich oppose the payment of income as welfare to poorer people, on the grounds that they haven’t worked for it…but provide to their children opulent lifestyles for which they don’t have to work.

Inequality is increasing rapidly. Between 1989 and 1995 the top ..5% of Americans (the super rich in Haesler’s terms) increased their proportion of all income from 23% to 27.5%. The lowest 90% fell from 32.5% to 31.5%. 10

The estimated assets of the super rich doubled between 1986 and !995. By 2000 this will be 50%. "The super rich are becoming m ore demanding." 11 They are also abandoning the concern for social obligation, religion , philanthropy that the old rich had. They are decreasingly involved in society. "Robber barons with a social conscience …have become a historical curiosity." 122

Most people have little wealth apart from their house. The lowest 90% of people in terms of wealth have 78% of their wealth in their house. However their average debt is 43% of their wealth…meaning their net wealth is low. 13. In UK 99% of shares are owned by 1% of people. 13

There are 30,000 walled and gated housing estates in the US. One third of all new houses built are behind walls.

The massive scale of state assistance to failed banks…when the Mexican economy collapsed President Clinton organised a $50 billion bail out of the US banks that had lent to Mexico, to save them from collapse. This was the biggest aid package since the Marshall Plan. The same sort of thing occurred when the Asian meltdown happened in 1987.

There is clear evidence now of falling living standards for many in UK and US. The 1997 US minimum wage was 25% lower than in 1970. 52. Between 1979 and 1989 the US inflation adjusted wage for the bottom 10% fell 16% 53 UK average real incomes are falling.

The official rationale is that to have more "flexible" labour hiring arrangements increases economic efficiency. "There is no evidence whatsoever that the hire and fire economies have done any better than those with more regulated labour markets. " 56

The middle class is being eliminated"…the new global economy is leading to the destruction of the traditional middle-class way of life." 62

Polarisation occurring; "…a two class world of super-rich investors and their professional advisers on the one hand and the rest on the other." 66

"…any medium-sized nation state that attempts to interfere with free trade – either in capital or goods or services – will be punished by capital flight, under investment and political unpopularity following lower living standards caused by public sector cuts or rampant inflation or both." 154.

The state serves capital; it delivers subsidies, infrastructures, education, bail outs, and disciplines labour, and targets inflation which the rich do not like but isn’t so concerned about unemployment.

The corruption of the political system by campaign contributions.

The more a candidate spends the more the chance of election. 95% of winning candidates are those who have spent most. 162. "…even before the votes are counted, business has already bought the state." 162

Haesler believes global capitalism can’t be stopped now. "Any aim or campaign to overthrow or even reverse this new capitalism would be utterly unrealistic." 165.

"Modern capitalism will simply run rings around any serious attempt to constrict them." 167

S. Haseler, The Super Rich, St. Martins, New York, 2000

INEQUALITY IS INCREASING.

"Throughout the 1980s and 1990s incomes declined or were stagnant for the poorest 60% of Americans,…judged by stock market capitalisation alone, the rich became fabulously richer."

F. Clairmont, USA; The making of the crash, Third World Resurgence 125-126, 2001, P. 45.Nov.Dec 2000.

In 1972 17% of unemployed people lived under the poverty line. Now the figure is 75%.

ABC News, 22^nd March, 2001.

The share of profits in GDP in the late 1970s was 14%…and by 1990s, 17%. The share taken by wages fell from 60% in the 1960s to 56% in the 1990s.

D. Bryan and M. Rafferty, The Global Economy in Australia, Allen and Unwin, 1999.

Between 1977 and 1989 average real US incomes of the top 1% of people rose 78%. For the bottom 20% there was a fall of 10.4%. 148

P. Self, Rolling Back the Market, New York, St. Martins, 2000.

In the 1970s 10% of people in Britain were dependent on welfare. Now it is 25%. p. 2.

H.Schutt, The Trouble With Capitalism, Zed, 1988.

In pre-Thatcher Britain, about one person in ten was classed as living below the poverty line, not a brilliant result but honourable as nations go and a lot better than in the pre-war period. Now one person in four, and one child in three is officially poor. This is the meaning of survival of the fittest.

S. George, A short History of Neo-liberalism, ERA Email Netowork, 17.7.1999.

"The gap between America's fortunate fifth and everyone else is widening."

R. B. Reich, The Work of Nations, New York, Knopf

Australia is developing an underclass of the dispossessed and hopeless. This is especially evident amongst the young, who are increasingly turning to drugs, crime and violence, making our cities unsafe and our homes like prisons to keep them out. This is the model provided by countries like Mexico, Brazil and the Philippines, which are saddled with a small class of super-rich and a large class of ever growing poor. This is something that Australia nas largely been able to avoid, but which is becoming agreater possibility every day.

A. David and E. L. Wheelwright, The Third Wave,

In industrial countries the gap between rich and poor has widened over the past decade or two. It is no coincidence that the biggest increases in income inequalities have occurred in economies such as those of America, Britain and New Zealand, where free market economic polices have been pursued most zealously.

On both measures, inequality in America narrowed from 1929 to 1969, but then started to widen. In 1992 the top 20 per cent of American households received eleven times as much income as the bottom 20 per cent, up from a multiple of 7.5 in 1969. The effect was to give the richest 20 per cent of households a 45 per cent share of the country's total net income in 1992, a postwar high, and the poorest 20 per cent of households a mere 4 per cent share. The Gini coefficient rose from 0.35 to 0.40 over the same period. In Britain too, the gap between rich and poor has been widening since 1977. In both America and Britain, income inequalities are now larger than at any time since the 1930s.

The poorest 10 per cent of Arnerican families suffered an 11 per cent drop in real income between 1973 and 1992; the richest 10 per cent enjoyed an 18 per cent increase in real income.

Extracted from E. L. Wheelwright, G. Argyrous and F. Stilwell, Eds., Economics as a Social Science, Pluto, 1996, p., 6.

In Britain between 1979 and 1993. poverty increased from 8 per cent to 24 per cent among couples with young children and from 19 to 58 per cent among lone-parent families.

Foutopolous, T., (1997), Towards an Inclusive Democracy, London, Cassell., p. 131

In America "The incomes of the top fifth of the population have grown by 40 percent, while those of the bottom have declined by 10 percent. Chief executives of large American companies earn 419 times as much as a worker on the average wage, up from 10 times as much in 1980

Tom Morton, "Filthy rich and feverish", Sydney Morning Herald, 24.6.2000, p. 7s.

"Since 1983 the standard of living in Australia has increased by 50%. During the same period, however, the levels of inequality have also dramatically increased…the numbers of both the wage-earning poor and the salary-earning rich almost doubled.

R. Manne, "Two nations replace the lucky country", Sydney Morning Herald, 26.6.2000.

A number of studies have identified a trend towards rising inequality of earnings in Australia throughout the 1980s" See ABS catalogue 6306.0 "…the trend has continued throughout the 1990s."

Between 1985 and 1998 the level of real income declined for the poorest group. Since then their situation has improved a little, but "Lower paid employees are still slightly worse off relative to the CPI in 1998 than in 1985."

P. Saunders, "Earnings inequality still rising", Social Policy Research Centre Newsletter, 77, Oct, 2000.

"…the great majority of the benefits of global economic growth have gone not to the poor but to those who already have far more than they need…" 79.

In 1991 there were 274 billionaires in the world. In 1996 the number was 447. 80.

D. Korten, The Post-Corporate World, Kumarian, 1999.

In 1980 1% of people in Britain owned 20.5% of wealth. By 1997 this had risen to 40%.

"The US economy is working well, but only for the well-off…one quarter of all children live in poverty." 20

T. Ale, "Blair kitch project", Monthly Review, Jan, 2000.

The number of homeless in the UK has doubled in the last twenty years…The number of children in the country who are dependent on social benefits has risen from 7% in 1979 to 26% in 1994 and the number of people who are now officially living below the poverty line (defined as half the average income) has gone from 5 million in 1977 to 13.7 million today….Since 1972 the number of millionaires has doubled…

Freedom, 26.4.11997.

"In previous times economic development fed social development by diminishing inequality; today economic development escalates inequality."

J. Nelson, Post-Industrial Capitalism; Exploring Economic Inequality In America, Sage, 1995.

Between 1983 and !993-4 the income of the top 10% of income receivers in Australia rose $100 (real) per week. Due to welfare payment increases the poorest 10% had a $11 real increase in weekly income. The other 80% experienced a $67 real decline in weekly income.

J. Wiseman, Global Nation?,Cambridge Univ. Press, 1998. P. 65.

The rich in the US are getting richer. In 1983 the richest 1% of households had 43% of all wealth; by 1997 it was 49%

Average CEO income in 1998 was $10.6 million; average worker production income was $23,000.

600,000 to 700,000 Americans are homeless on a given night.

US household debt as a percentage of income, 1950, 35%, 1997, 100%.

J. Heintz and N. Folbre, The Ultimate Field Guide to the US Economy, New York, Free Press, 2000

In 1957 the top marginal tax rate for Americans was 91%. By 1993 it was 39.6%. (Under Reagan it went to 28%.)

There is near-unanimity that the real incomes of most Americans has stagnated since 1970. .

J. Slemrod, Does Atlas Shrug?, Harvard Univ. Press, 2000.

In the UK and US 1% of people have 50-66% of many categories of personal wealth, mostly because of inheritance.

Poverty in the US has become worse since the 1970s The "winner take all" attitude is increasing. Government is reversing its previous anti-poverty concern.

F. Ackerman, Ed., The Political Economy of Inequality, Washington, Island Press, 2000.

In 1980 CEO salaries in Australia were 10 times the income of the average worker. By the 1990s the multiple was 400. Incomes for the lowest 20% have fallen. 2% of Australians are millionaires.

ABC Background Briefing, c 5^th Feb., 2000.

By 1991 52% of the tax cuts implemented in the UK since 1979 have gone to the top 10% of income earners.

Nick, S., "Battling for Britain", Sustainable Economics, 8, 3, May, 2000, p. 71,

Measured in terms of after housing costs the poorest tenth in 1991-2 were 17% lower in real terms than in 1979. Thatcher minister Lawson's 1988 budget cut tax rates for the rich from 69% to 40%, Corporation tax in 1979 was 52%, now it is 30%, the lowest in British history.

Nick, S., "Battling for Britain", Sustainable Economics, 8, 3, May, 2000, p. 71,

The world's richest 20% have 150 times the income of the poorest 20%. The proportion has doubled in 20 years.

T. Clarke, "Twilight of the corporation", The Ecologist, 29.2, May/June, 1999, p. 158.

Liberalisation in the US has caused "...drastic worsening of the distribution of income." 97% of the increase in household income between 1979 and 1994 went to the richest 20%." (141)

J. Rapley, Understanding Development Theory and Practice in the Third World, London, Riener, 1996.

"Over the decade of the 1980s, the top 10% of American families increased their family income by 16%, the top 5% increased theirs by 23%, but the extremely lucky top 1% of American families could thank Reagan for a 50% increase...The bottom 10% lost...15%. " In 1977 the top 1% of American families had average income 65 times as great as those of the bottom 10%. A decade later, the top 1% was 115 times as well off as the bottom decile." (5)

"...virtually all countries have seen inequalities increase over the past twenty years because of neo-liberal policies."..."There is nothing mysterious about this trend towards greater inequality. Policies are specifically designed to give the already rich more disposable income..."

S. George, "A short history of neo-liberalism", The Global Policy Forum, reported in, ERA Email Network, 17th July, 1999.

The earnings for the poorest fifth of American families rose less than 1 percent between 1988 and 1998 but jumped 15 percent for the richest fifth, the Center on Budget and Policy Priorities and the Economic Policy Institute said in their report issued Tuesday.

Gordon shows that, while over the years 1899 to 1949 the ratio of value added to the wages of production workers in manufacturing in the United States fluctuated around 2.50, between 1949 and 1994 it rose fairly steadily to 5.25, more than double its 1949 value.

J. Bellamy Foster, "Monopoly Capital and the Turn of the millennium," Monthly Review, April, 2000, p. 7.

Despite more than five years of economic growth, one in seven Australian residents rely on welfare for at least 90 percent of their income. No less than 860,000 children—17 percent of Australia's children—are living in jobless families. The inescapable conclusion is that the much-heralded economic prosperity of the past five years has worsened poverty and inequality, not alleviated them. And this is part of a longer-term trend. Over the past 30 years the proportion of the workforce-age population receiving income support has quadrupled from 5 percent to 22 percent, even though the proportion of paid work has risen from 66 percent to 69 per, cent. The number of two-income couples has soared, but so has the number of families where no one has a permanent job.

What the report does not say is that these statistics point to two general trends: a general lowering of wages so that two incornes are needed to sustain a family, and the replacement of secure jobs by casual, temporary and part-time labour. Adding to the resultant social distress has been the slashing of spending on essential social services such as public housing, health care' government schools, child care, legal aid and community facilities, driven on by the demand of big business for ever-lower, more "competitive" corporate and personal tax rates. The welfare budget—the largest remaining item of social spending—has now become the central target.

M. Head, "The Australian government prepares to abolish social security system, Sustainable Economics, 8, 2000, p. 81.

In the US for example, income inequality has been increasing since the 1970s. In 1990 the poorest 20 per cent of Americans received 3.7 per cent of the national income, the lowest share since 1954. The richest 20 per cent on the other hand received more than 50 per cent of the national income in 1990, an all-time high. In 1960 chief executives of US corporations were making about 40 times the average wage of the American worker. By 1988 they were making 93 times the average wage… 30

Between 1978 and 1990, tax regressivity in the US increased sharply. Payroll and social security taxes went up by 30 per cent while income taxes, especially for high-income earners and the rich, came down. The overall tax rate in the US had not increased since the mid-1960s, but the average American was much more heavily taxed (ibid., p. 260). Had the tax code been even as progressive as in 1977 (already less progressive), the top fifth of Americans would have paid $93 billion more in taxes than they paid in 1989 (ibid.). …

The share of wealth of the top I per cent of American households increased from 33.8 per cent in 1983 to 37.2 per cent in 1992. Over the same period the bottom 80 per cent of households saw their share decline from 18.7 per cent to 16.3 per cent (Mishel et al., 1997, p. 283).During the period 1979-92 the proportion of Americans working full-time but earning less than a poverty-level income for a family of four (about $ 13,000 a year) rose by 50 per cent (Rifkin, 1995, p. 169). While stock prices in the 1980s rose nearly 400 per cent, the average weekly wage dropped from $387 in 1979 to $335 in 1989 (ibid., p. 168)…

Between 1979 and 1991/92 poverty in Britain nearly tripled, rising from 9 per cent to 25 per cent of the population. Over the period 1979-91/2 the poorest 10 per cent saw their income fall by nearly 20 per cent, whereas the top 10 per cent saw a rise of 60 per cent - the highest gain among the income deciles (ibid., p. 31). Taking all taxes, direct and indirect, into account, the bottom 10 per cent of the population was paying 43 per cent of income in taxes compared with 32 per cent paid by the top 10 per cent (ibid.) p. 30

R. Mishra, Globalisation and the Welfare State, Elgar, 1999.

In Britain between 1979 and 1993, poverty increased from 8 per cent to 24 per cent among couples with young children and from 19 to 58 per cent among lone-parent families. 31

T. Fotopoulos, Towards an Inclusive Democracy, (1997?)

11. THE PROBLEM OF SURPLUS

The most serious problem in a capitalist economy is where to find profitable investment outlets for all the capital that is constantly accumulating. From time to time this leads to depression. It is also the main source of globalisation, which is the gigantic recent push by corporations and banks to increase their access to markets, labour, resources previously closed to them by protection, regulation, government ownership etc.

The concept derives from Marx and the classic recent discussion is given by P. Baran and P. Sweezy, Monopoly Capital, 1966.

Throughout its history, Monthly Review has advanced a theoretical viewknown as monopoly capital or stagnation theory. This perspective, outlined in Baran and Sweezy's Monopoly Capital, argued that Marx's "law of the tendency of the rate of profit to fall" was no longer directly applicable to the monopoly capitalist economy that emerged at the beginning of the twentieth century, and had to be replaced by a "law of the tendency of surplus to rise"—where surplus was defined as the difference between the wages of production workers and total value added. A key contradiction of capitalism in its monopoly stage is therefore that of rising surplus and the associated problems of surplus absorption.

___________________________________________

Rising surplus and the accumulation of a mountain of surplus means that capitalist firms are faced with the problem of how to employ all of it, i.e., how to use the piled-up cash to make more profit. True, capitalists can use or waste some of this surplus for personal pleasure. But that is peanuts compared to the size of the growing surplus. So the problem remains one of how to absorb all of the surplus actually and potentially available. Generally, the answer is sought in new investment, but that expansion of capital comes up against consumption limits imposed by the distribution of income: who will buy the increased volume of output? New epoch-making innovations—resembling the steam engine, the railroad, and the automobile in the overall effect on accumulation—could conceivably provide sufficient profitable investment outlets, but such epoch-making innovations are historical rather than economic factors that cannot be counted on to appear when needed or on the scale necessary in terms of surplus absorption.

so far absorbed only a small part of the massive economic surplus hanging over the economy. Foreign investment, which once provided an outlet for surplus, has become an efficient device for the transfer of surplus from the periphery to the core of the capitalist system, thereby further compounding the problem. All of this means that the system has a powerful tendency towards stagnation, arising from an inability to find outlets for all of the surplus actually and potentially generated at the level of production—a problem partly (but only partly) compensated for by the rise of various countervailing factors, such as the growing sales effort, military spending, and financial expansion.

The first thing one notes, in turning to those accounts that dominate today's business news, is that corporations are awash in rising profits. …

…corporate profits plus depreciation plus net interest can be taken as a first approximation of the actual economic surplus—one which, however, leaves out many elements that properly belong to surplus, such as expenditures on marketing, now running at more than one trillion dollars a year. When we look at the trends in economic surplus,

...measured in this limited way, we discover that the share of surplus in total output is increasing. The average annual percentage of profits plus depreciation plus net interest of corporate business in Gross Domestic Product (GDP) rose from 14.2 percent between 1946 and 1973 to 14.7 percent between 1974 and 1998. Further, corporate profits plus depreciation plus net interest as a percentage of GDP soared to their highest level ever in 1997 at 16.6 percent— rising for the first time since the Second World War above 16.1 _ percent, the level reached in 1929 (the year of the Great Crash),…

Extract from Monthly Review, c 2000; source not recorded.

"Crisis results from the fact that the profits of capitalist exploitation cannot find sufficient financially profitable new outlets capable of expanding productive capacity."

"Stagnation (which has now characterised the system for twenty-five years) naturally gives rise to a gigantic surplus of capital which finds no outlet in productive investment."

S. Amin, Capitalism In The Age of Globalisation, London, Zed Books, 1997.

"A key contradiction of capitalism in its monopoly stage is therefore that of rising surplus and the associated problems of surplus absorption.

…so far absorbed only a small part of the massive economic surplus hanging over the economy. Foreign investment, which once provided an outlet for surplus, has become an efficient device for the transfer of surplus from the periphery to the core of the capitalist system, thereby further compounding the problem. All of this means that the system has a powerful tendency towards stagnation, arising from an inability to find outlets for all of the surplus actually and potentially generated at the level of production—a problem partly (but only partly) compensated for by the rise of various countervailing factors, such as the growing sales effort, military spending, and financial expansion.

The first thing one notes, in turning to those accounts that dominate today's business news, is that corporations are awash in rising profits … corporate profits plus depreciation plus net interest can be taken as a first approximation of the actual economic surplus—one which, however, leaves out many elements that properly belong to surplus, such as expenditures on marketing, now running at more than one trillion dollars a year. When we look at the trends in economic surplus, measured in this limited way, we discover that the share of surplus in total output is increasing. The average annual percentage of profits plus depreciation plus net interest of corporate business in Gross Domestic Product (GDP) rose from 14.2 percent between 1946 and 1973 to 14.7 percent between 1974 and 1998. Further, corporate profits plus depreciation plus net interest as a percentage of GDP soared to their highest level ever in 1997 at 16.6 percent— rising for the first time since the Second World War above 16.1 percent, the level reached in 1929 (the year of the Great Crash).

J. Belamy Foster, "The turn of the millennium", Monthly Review, April 2000, pp. 2, 3,9.

"…the basic issue of capitalism in its current apoplectic seizure; that of overproduction and underconsumption."

F. Clairmont, USA; The making of the crash, THIRD WORLD RESURGENCE, 125-126, 2001, P. 45.

“...the giant firms, un able to find sufficient investment outlets for their enormous economic surpluses within production, increasingly turn to speculation within the global financial sphere.”

Monthly Review, June, 2011, p. 19.

Re the case of the GFC...

“Growing competition in the capitalist world economy has created overcapacity in all sectors...inhibiting investment and encouraging non-productive financial speclation.’

J. B. Foster et al., Monopoly and competition in twenty first century capitialism, Monthly Review, April 2011,p. 27.

12. DEBT and INTEREST.

The average American family paying credit card debt off has a $15,000 debt and is paying 18.7% interest. Credit card debt doubled between 1993 and 1997.

T. Sullivan, The Fragile Middle Class, Yale Univ. Press, 2000.

The total US non-financial debt is $15,trillion.

P. Hellyer, Evil Empire, 1997, p. 10.

Money that they have created is not destroyed (when repaid to the bank) but is accounted as an asset of the bank…when banks create money and issue it as a debt, the ultimately account that money as their own. 29

Rowbotham stresses that if you have a debt money system the banks move constantly to owning more of everything…because for every dollar created and put into circulation, interest has to be constantly paid to the banks.

In Britain the debt is 780 billion pounds. This is all owned by banks, because it is debt created by them.

The proportion of housing mortgaged in UK has risen from 17% to 35% in 35 years; i.e., banks own 37% of all British housing. Note that the banks have been able to own, acquire this wealth simply by creating money from nothing and issuing it into circulation as debt.

"One of the inevitable consequences of funding an economy on the basis of debt is that the assets of the country are gradually transferred to the financial system, the banks and building societies." 30

Before World War 2 it cost two years income to buy an average house. By 1980 it cost 8 years income. Paying off a mortgage took 8% of income. Now it is 20%. P. 33

It is obvious that firms must set the prices of their goods higher than the wages they pay, because they must also pay interest on their borrowings, and their own profits. Thus it is not possible for all their output to be purchased; total wages paid are less than the total of prices of all goods produced…in a debt money system.

M. Rowbotham, The Grip of Death, Carpenter, 1998.

Every country in the world suffers from a massive and constantly increasing national debt.

UK debt, 1963, 8.2 billion pounds, 1996 788 billion pounds. P. 22.

M. Rowbotham, The Grip of Death, Carpenter, 1998.

"In an article United States public and private debt: 1791 to 2000 Professor Bob Blain comes to the essence of the situation. "Debt in all

categories of the (US) economy has been growing explosively - the debt for state and local governments, farmers, consumers, home buyers and, largest portion of all, debt for corporations. . . . '

"… total public and private debt has grown to about $20,000,000,000,000. That is $20 trillion, and it will continue to grow, like a snowball rolling downhill, by ever larger amounts."

Let us now consider the debt problem from a global perspective, and examine figures from the 1998/99 World Development Report. If we consider low income nations collectively, in 1980 their total external debt was 26.6% of their GDP. In 1996/7 the external debt to GDP ratio was 60.6%. Now many of these low income third world nations are at a point of total economic collapse.

The figures for middle income nations provide an interesting comparison. In 1980 the total external debt to GDP ratio for middle income nations was l 18.8%. In 1996/7 the external debt to GDP ratio was 28.0%.

Keane, "Preparing for the global economic crisis", ERA  Email Network, 23.2.2000.

US total public and private debt is around $20,000,000,000,000

Australia’s foreign debt in 1980 was $7 billion. In 2000 it was $380 billion.

D. Keane, http://www.nw.com.au/-keane/civilrep/Part3/33Meltdown.htm

The USA is by far the largest indebted nation in the world, says a new NEF report – but they are being bankrolled by some of the poorest nations on earth.

Less than 300 people in the USA owe a total of $2.2 trillion – almost equal to the $2.5 trillion owed by the whole of the developing world. In other words, each US citizen owes the rest of the world $7,333, while each citizen of the developing world owes only $500.

What is worse, the US debt has been spiralling further and further out of control in recent years. US imports are now more than twice their exports. US consumers have been getting high on Cartier watches and Nintendo Playstations, without generating the resources to pay for it. Their total current account deficit – or exports minus imports and interest payments on foreign debt, is now the largest ever, at a whopping $445bn, or four per cent of their GDP.

Radical Economics, the journal of the New Economics Foundation, , May, 2002.

"…in 2009 Canadians paid $160 million a day on public debt interest" This would be over $7,000 p.a for a family of four.

R. Priestman, Why it is necessary to take back control over our money system, Sustainable Economics, April, 2011, p. 32.

13. BANKS AND MONEY CREATION

Since 1970 British taxpayers have paid 450 billion pounds in interest to private banks which have lent money to the government…which could have created the money itself.

Sustainable Economics, Jan. 2001, p. 11.

"Since almost all of the current annual federal deficits are due to interest on the federal debt, if the government had created the money that commercial banks created since 1946 there would not only be no federal debt but no annual interest on debt and therefore no annual deficit." The reason for the debt etc "…is that the government permitted commercial banks to create money that the government should have created." 7

…"…nothing could be more foolish than a government that can create money for itself…allowing banks to create money that the government then borrows and pays interest on."

J. Herman, Government-created money vs bank-created money, ", ERA Newsletter, 12, 17, March-April, 2001, p. 7

At present in Britain less than five per cent of new money is issued andput into circulation by the government and the Bank of England as cash (coins and banknotes). The remaining 95 per cent of new money is non-cash money created and put into circulation by commercial banks. The situation in other countries is similar.

As J. K. Galbraith has commented: "The process by which banks create money is so simple that the mind is repelled. Where something so important is involved, a. deeper mystery seems only decent."

The banks simply print the money out of thin air into the current accounts of their customers — as interest-bearing, profit-making loans. Interest on these loans gives the UK banks supernormal, special profits ofabout £21bn a year.

J. ROBERTSON, "Does tax have a future after ecommerce?" New Economy, 14, July. 20900, p. 3.

The banks simply print the money out of thin air into the current accounts of their customers - as interest-bearing profit-making loans. Interest on these loans gives the UK banks supernormal, special profits of about £21bn a year .

J. Robertson, "The alternative Mansion House Speech, Sustainable Economics, 8, 5, Sept, 2000 pp 95-96.

In1948, for example, the British government created and spent into the economy, interest free, £1.3 b while commercial banks created £1.4 b which they lent into the economy in the form of interest bearing

debt. Some years later, in 1996, government created £22.4b while commercial banks created £563.6 b!

A. Armstrong, "Political economic cycles", , Sustainable Economics, 8, 5, Sept, 2000 pp 95-96.

Banks are "…unequivocally creators of credit which they claim ownership of, and lend into the economy only in the form of interest bearing debt…

"The annual bill for paying interest on the national debt is some £20 billon, roughly equivalent to £500 a year for every person in the country. Indeed, we spend substantially more on debt interest than we do on defence or education…

Roger Bootle writing in The Times of 13th. March 2000.

----------------------------------------------------------------------

THE FOLLOWING ITEMS HAVE NOT YET BEEN SORTED INTO APPROPRIATE CATEGORIES

Economics.Situation/descriptive.

Re corporate takeover of government…"I looked at government appointments, and I produced what I call a Fat Cat's Directory, in which is you just name a Fat Cat, previous gluttony and subsequent creamery, It's an extraordinary list of appointments. I've got about 40 people in there, and you get, for instance, a Director of one of the most polluting companies in the country pouring chemicals into the rivers of the North-West, becomes North Western Manager of the Environment Agency.

There are, for example, cases in which you've got someone responsible for sacking a whole load of workers who refused to take a cut in their pay from 140-pounds to 100-pounds a week. And they all got sacked when they refused to take that cut, ends up on the Low Pay Commission determining the level of the minimum wage. I mean just loads and loads of these extraordinary examples and just showing this creeping, subtle, very quiet corporate takeover of just about every aspect of government.

What we're effectively seeing is the displacement of democratic representative government with something approaching plutocracy, the rule by money… brokered by …the corporations. He refers to the "…draining of vast quantities of public money into the private sector. And I'll just give you one very brief example of this. I was working in Coventry, looking at the plan to build a new hospital in the outskirts of Coventry, having knocked down the two old ones. They aren't that old, the Walmsgrave Hospital there was built in 1971. And this project is a rather odd one, because originally the plan was to just refurbish the two existing hospitals at a cost of 30-million pounds, which would have been paid for from the public sector. And it magically transformed into a project to knock them both down and rebuild one hospital, smaller than the two existing ones put together, on the outskirts of town, getting rid of the city centre one, less convenient for the residents, at a cost of 174-million pounds, which would require a payback of 36-million pounds a year for 25 years to the consortium which built it. Why on earth was this happening? Why on earth would two perfectly structurally sound hospitals be knocked down and a smaller one be built instead? "…Commercial in confidence" provisions are used to conceal many arrangements governments make. Monbiot discusses disturbing cases of inflation of construction costs etc.,…"All these issues which were in the public domain, issues concerning our most fundamental public services, hospitals, schools, transport infrastructure, waste incinerators, social service officers, prisons, whatever it might be, all of that is effectively now confidential and the Freedom of Information Act can't touch it, because it's commercially confidential. And we're effectively shut out from finding out what's going on. So much of my research was reliant on leaks all the way through.

Extracts from ABC Background Briefing, "Global democracy", 11th Nov., 2001. George Monbiot. (Monbiot's book is entitled The Captive State.)

Wealth is gushing to the top as a growing economic chasm separates those who are benefiting from the system from an ever-expanding underclass. To ensure what American education writer Jonathan Kozol calls 'survival of the children of the fittest,' a tiered system of education and social security is becoming the norm all over the world as we collectively abandon an earlier dream of universal rights. We are creating top schools and healthcare systems for the elite of the world and a tiered system - or no system at all - for those who don't count.

M. Barlow, The last frontier, The Ecologist, 30.1., Feb., 2001, p. 40-

 According to Chomsky,the consequences of neo-liberal policies have been massive increase in social and economic inequality, deprivation for the poorest nations, a disastrous global environment, an unstable global economy, and an unprecedented bonanza for the wealthy.

Corporate executives have no choice but to drive for profit maximisation. Corporations which look after workers or the environment will not maximise profits, and will therefore be open to hostile takeover:

The CEO of a publicly traded corporation who fails to maximize profits because of a moral aversion to engaging in such predatory practices is al-most certain to be eliminated by the system, even if he … runs an otherwise profitable operation. Where the shareholders don't step in, a corporate raider most surely will.

Pacific Lumber Company for years pioneered the development of sustainable logging practices on its substantial holdings of ancient redwood timber stands in California. It also provided generous benefits to its employees, fully funded its pension fund, and maintained a no lay offs policy during down-turns in the timber market. This made it a good citizen. It also made it a prime takeover target. Corporate raider Charles Hurwitz gained control in a hostile takeover. He immediately doubled the cutting rate of the company's holding of thousand-year-old trees, reaming a mile-and-a-half corridor into the middle of the forest that he jeeringly named "Our wildlife-biologist study trail." He then drained $55 million from the company's $93 million pension fund and invested the remaining $38 million in annuities of the Executive Life Insurance Company.- which had financed the junk bonds used to make the purchase and subsequenty failed. The remaining redwoods are now the subject of a last-ditch effort by environmentalists to save them from clear cutting. …Professional buy-out artists are drawn like bees to a honey pot by a socially responsible firm that internalizes its environmental costs, pays union wages, invests in worker training, fully funds its pension fund, and pays its full share of taxes. In a system that puts short-term profits first, these are inefficiencies to be eliminated.

D.Korten, Money vs wealth, Yes, Spring 1997, p. 16.

…it becomes obvious that no national government today may follow economic policies that are disapproved of by the capital markets, which have the power to create an intolerable economic pressure on the t respective country's borrowing ability' currency value and investment flows.

T. Fotopoulos,"Globalisation , the reformist left and the anti-globalisation movement, Democracy and Nature, 7, 2, July 21001.p.249.

However, the evidence of the past 25 years or so shows that the more open and flexible the markets become the greater the degree of concentration of income and wealth in a few hands. 239. 

United Nations, Human Development Report, 2000,

Neo-liberal theory.Subject: A Strategy for Positive Change

Source: MAI-NOT network owner-mai-not@flora.orgAs I have been writing for years, these theories can be knocked over with the simplest facts even little children can understand. Their spiel is that their criminal globalisation is creating wealth and prosperity all around. They have no proofs, no facts, no figures to back up this claim. At the same time the opponents of globalisation can show tons of evidence of the poverty, misery, environmental destruction, illness etc. they create.

So don't waste your time demonstrating against the World Bank and the IMF, but concentrate on the economic schools who breed the criminal elements that staff these institutions. There are many economics students who already are questioning the compulsive dogmas they are forced to absorb, so give them and the few still sane professors opportunities to voice their opposition to this ideological crime wave. Neoliberalism " …is an instrument whereby the rich and powerful impose a set of values and rules of the game which reinforce inequality and injustice."

Levitt, "Debt adjustment and development", Economic and Political Weekly, 1990, quoted in S. Haesler, The Super Rich, 2000, p. 24.

Langmore and Quiggin (l994p.29) calculated that in the mid l990's unemployment was adding about $12 billion to direct government outlays and reducing government revenues by a further $8-12 billion annually adding up to a total cost to government of over $20 billion per year."

This means the cost to the nation is approximately $33,000 per unemployed person per year.

P. Brokensha, "Its time we got serious about employment" Australian Options, May,2001, p. 24.

1% of Australians own 60 % of shares.

Inequality Increasing."…the richest are becoming richer very rapidly." 19 Between 1983 and 1999 the richest 200 in Australia multiplied their wealth by 6, in deflated terms. 19.

The number of Australian millionaires multiplied by 2.5 in 5 years. 35

Median Australian annual income was 2% less in 1996-7 than in 1982-3. The living standards of the bottom half of Australians was 7% less. For the top half it was 25% higher.

In just two years, the total value of the 10 super rich fortunes rose by 55%, three times the rise in total private wealth according to Treasury, and the same holds true for others on the 1999 BRW Rich List. The super rich are getting richer rapidly while the number of poor is growing apace. (20) In early 1996, the Tax Office complained that almost half the Rich 200 declared incomes far below the level indicated by their high wealth. A notorious example is investor David Hains, whose tax lawyer, Mark Leibler, claimed the billionaire's taxable income was not the Tax Office's assessment of $612,000, but $12,524 - a weekly income of $241. (p. 21)

 The number of millionaires has soared in recent years. In the mid eighties, Phil Raskall estimated Australia had 25,000 millionaires. Hans Baekgaard, then working at NATSEM, put the figure at 71,700 in 1993. The same writer, now working for Access Economics, set the figure at 188,200 in 1998, up two and a half times in five years. Baekgaard (Economics Monitor, November 1998, pp.l2-17) findings include the following:

One in 50 Australian "economic units" are now in the millionaire class, up from 0.8% in l993. These millionaires now own 21.5% of all private wealth, up from 11.1% in 1993.

L. Aarons, Casino Oz, 2000. P. 107.

The very rich have certainly become richer, and the number of millionaires is multiplying... In the six years since 1993, the number of millionaires went from 71,700 to 208,000. Their share of the wealth has gone from 11.1% in 1993 to 23% in 1998. From 1993 to 1998, the total wealth of millionaires rose $288 billion and of the 9.1 million non-millionaires by $329 billion.

Ed Shann, Business Review Weekly, 28.5.98, p.73 , . . . .

In the United States, 1 percent of the population now has more wealth than the bottom 90 percent.

The Editors, "The Nader campaign", Monthly Review, Fb. 20012, p. 19.

…the fact that the world's richest people more than doubled their net worth within just five years, from 1994 to 1999. As a result, in 1999, the combined wealth of 200 billionaires amounted to $1 trillion, 135 billion, while the total annual income of the 582 million people in all the 'developing' countries together was 'only $146 billion, i.e. about 10 per cent of this. 241

In Britain the incomes of the rich have grown three times as rapidly as those of the poor during Blair’s period in office.

United Nations, Human Development Report, 2000.

In the go-go United States economy since 1978 labor has been left behind, and the gains have gone to the rich.

L Grant, Too Many People, Seven Rocks Press, Santa Anna, California, 2000. P. 84.

The Rich Pay little tax. (p. 107.) Of the top 200 wealthy individuals in Australia only a small proportion are amongst the top 200 individual taxpayers in Australia. (Treasury Executive Minute, Attachment A/ 20 December 1995, emphasis added.)

Professor Russell Mathews said, almost 20 years ago, that paying tax has become voluntary for the wealthy. It's still true, as revealed again during the 1996 election when Tax Commissioner Michael Carmody told Paul Keating and Ralph Willis that "l00 high-wealth people were avoiding $800 million in tax". (102)

In the 1993 financial year, 100 individuals (representing a significant proportion of individuals with an estimated net worth of over $30 million) each returned taxable incomes of $20,000 or less. (102.) 

L. Aarons, Casino Oz, 2000. P. 107.

 Tax on a $2million income in 1987-8 was 54%. In 19960-7 it had fallen to 21%…lower than the tax on low income earners. 61.  The Australian Tax Office in 1996 reported to the Prime Minister that 100 people were avoiding $100million in tax.  Packer’s Consolidated Press Holdings made $614 m illion in two years to 1998, and paid no tax. The 1998 profit was $385, but no tax was paid. 66

According to the Matthews inquiry into tax, "…paying tax has become voluntary for the wealthy." 102.

L. Aarons, Casino Oz, Goanna Books, 2000.

Effects of neo-liberalism:  More specifically, global financial markets and global corporations are programmed to destroy life. The lives of working people, the life of community, and the living wealth of the planet—to make money for the already wealthy. And they do it with extraordinary efficiency. The threat will not be resolved until the publicly traded, limited liability corporation is effectively eliminated as an organizational form.

D. Korten, Yes, 2001, p. 48.

Privatising: Claims of financial benefit to governments from privatisation have also proved hollow. Studies by Walker and others show that the one-off gains from sales of successful enterprises have been less than governments would have gained from future dividends (Walker and, 2000). The savings from contracting out are more difficult to assess, as contracts like the one with South Australian Water have been kept secret. Studies indicate that savings are often less than claimed and often come from cuts in staffing and services. The Commonwealth Auditor General's report on the out-sourcing of computing services showed that savings were far below the promised amount(Sydney Morning Herald, 2000). This forced the government to halt and reassess its program of comprehensive out-sourcing (Connors, 2001). The application of market forces and privatisation has proved even more devastating in the human services areas. The US private health system excludes millions of low income people without private insurance from access to health care. But it costs far more as a percentage of GDP than Australia's public system which covers everyone.

P. Ranald, "Privatisation and the WTO trade in services agreement, Australian Options, May, 2001, p. 4.

Privatisation has not had the effects claimed: While the main public justifications for privatization tend to be the increase in efficiency, productivity, or competition, the elimination of sources of state deficit, or less government intervention in the economy, it has not been shown that privatization has effectively contributed to any of these factors. On the contrary, in many cases it has done just the opposite. It can lead to increased government expenditures because private operations in health care, welfare agencies, highway maintenance, or prisons must produce a profit, whereas public corporations generally do not unless profit is specifically required. Moreover, because competition is far from desirable for capital, privatization might well simply substitute a private monopoly for a public one without producing any of the benefits that supposedly come from the "rigour" of competition. Privatization can also increase the need for government regulation to oversee private corporations operating in their self-interest, whereas public corporations with a mandate to operate in the public interest do not increase this need. 

G. Temple, Globalsation and the Decline of Social ~ Reform, Toronto, Garamond Press, 1995, p. 91.

It is "…a social system which, in its present universality, condemns to misery and insecurity the vast majority of the world population and threatens the planet with an ecological catastrophe. Ix.

Unidentified source.

To my mind, Polanyi's significant contribution was that he expressed the fundamental contradiction of the market economy system not in terms of an economic conflict between productive relations and productive forces…as Marx assumed, but in terms of a broader social conflict between the requirements of the market economy and those of society; in particular, in terms of the conflict created by the fact that in a market economy labour and land have to be treated as genuine commodities…

Source unidentified.

"Experience does not suggest that there is any necessary or general superiority in the productive efficiency of one kind of ownership or the other ---retailing and house-building in private hands, universities and blood services in non-profit hands, for example. Australian privatisers who claim a general supply superiority for private ownership are often generalising from a few American studies of rubbish removal and power generation. British and European research, wider in scope, has not found any general superiority either way.

Source unknown.

Inequality change

In Britain, for instance, official data from the Department of Social Security (which for the first time included a breakdown of how all income groups fared during the growth process of the period 1979-1991/92) are revealing about the significance of the trickle-down effect. The poorest tenth of the population suffered a 17 per cent fall in real income, the people in the second decile saw no increase at all in their income, whereas the two top deciles had an increase in real income of 46 per cent and 62 per cent 113.

T. Fotopoulos, Towards An Inclusive Democracy, Cassell, 1997.

Over the decade of the1980s, the top 10 percent of American families increased their average family income by 16 percent, the top 5 percent increased theirs by 23 percent, but the extremely lucky top 1 percent of American families could thank Reagan for a 50 percent increase. Their revenues went from an affluent $270.000 to a heady $405.000. As for poorer Americans, the bottom80 percent all lost something; true to the rule, the lower they were on the scale, the more they lost. The bottom 10 percent of Americans reached the nadir: according to Phillip's figures, they lost 15% of their already meagre incomes: from an already rock-bottom average of $4.113 annually, they dropped to an inhuman $3.504. In 1977, the top 1 percent of American families had average incomes 65 times as great as those of the bottom 10 percent. A decade later, the top 1 percent was 115 times as well off as the bottom decile.

There is nothing mysterious about this trend towards greater inequality. Policies are specifically designed to give the already rich more disposable income, particularly through tax cuts and by pushing down ages. The theory and ideological justification for such measures is that

higher incomes for the rich and higher profits will lead to more investment, better allocation of resources and therefore more jobs and welfare for everyone.

If wealth is redistributed towards the top, where people already have most of the things they need, it will go not into the local or national economy but to international stockmarkets.

S. George, "A short history of neo-liberalism, ERA Email Network, 2.8.2000

The spread of market relationships into sport, community services, the education of children, the public service and the very structure of families themselves is eroding the interpersonal bonds andshared values that sustain cohesive, nurturing and supportive communities.

Clive Hamilton, Executive Director of The Australian Institute, in the September 99 issue of its journal.

MICHAEL ROWBOTHAM quotes the head of Avis Car Rental as saying: 'America is is run largely by and for about 5,000 people, including maybe 2,500 mega-corporation executives' and he insists that the dollar created by these 5,000 people has been ruinous for developing nations.

For a review of M. Rowbotham, Goodbye America, in , Fourth World Review, 104, 2000, p. 14.

The human lot will never be rescued from damnation until it is realised that no worthwhile future is possible until economics is governed by a moral order rather than by market forces.

Japanese Fourth World Spectator, Fourth World Review, 104, 2000, p. 20.

In Britain, the income share of the 10 per cent of the population at the bottom of the social pyramid fell, during the last years of Thatcherism, by over a third (from 4.65 per cent in 1979 to 3 per cent in 1991), whereas the share of the top 10 per cent rose by about 21 per cent (from 20.4 per cent to 25 per cent). 95.

T. Fotopoulos, Towards An Inclusive Democracy, Cassell, 1997.

In a capitalist system production is conducted not to meet human needs but to make profit for private enterprises. No matter how great the unmet needs, people will be laid off and production facilities closed down when conditions make them unprofitable.

 ZNet Commentary. Collateral Damage: Neo-Liberalism.  By Jeremy Brecher and Tim Costello claim that One third of overtime workers are not paid for it. 117. 

L Aarons, Casino Oz, Goanna Books, 2000.

Lawrence Summers …in December 1990(?), while chief economist for the World Bank, … wrote an internal memo saying that the Bank should encourage migration of "the dirty industries" to the less-developed countries because, amongst other reasons, health-impairing and death-causing pollution costs would be lower. Inasmuch as these costs are based on the lost earnings of the affected workers, in a country of very low wages the computed costs would be much lower. "I think," he wrote, "the economic logic behind dumping a load of toxic waste in the lowest-wage countries, is impeccable and we should face up to that." Despite this memo receiving wide distribution and condemnation, Summers, in 1999, was appointed Secretary of the Treasury by President Clinton. This was a promotion from being Undersecretary of the Treasury for  international affairs.

W. Blum, Rogue State; A Guide to the World's Only Superpower, Monroe, Me., Common Courage Press, 2000, p.6

________________________________________________________