Americans, by and large, are terrible at math. We hate it. Anything to do with numbers is tedious and a little bit intimidating, so we normally avoid numbers and the disciplines that are based on them.
Likewise, we don’t like politics. For a nation forged by violent revolution, we ironically have little stomach for politics and for the nonsense that typically comes with it. We’re generally an apolitical people, tending toward “moderate” and toward “independent,” which means we are generally in the middle of the road, which means most of us have no strong opinion one way or another… and we are suspicious of those kinds of people who have strong opinions one way or another.
So, our standard approaches to both the numbers disciplines and to political affairs are very similar– we appoint people to handle those things. We defer to the experts in those fields. We don’t want to be bothered and we don’t really care to know the details. We just want those assigned the tasks to carry them out and to report back when everything is handled.
We want to eat the numerical and political sausage, so to speak, but we don’t want to witness how it gets made.
And that brings us to the “economy.” As Americans, we don’t really even know exactly what it is, except that numbers and politics converge in it, making it possibly the most tedious and most intimidating thing on the planet– and maybe even in the entire universe. We don’t understand the economy and we don’t want to understand it. We have economists for that.
Economists are like priests and priestesses who describe what this cosmic mystery is doing. Economists tell us when the economy is angry or offended, or why it has rained down fire and brimstone, or they tell us when the economy is well-pleased. Sometimes, economists wax prophetic and tell us what will happen in the future. We rely on economists. We know nothing ourselves.
For their part, economists are perfectly happy with the situation as it is. In fact, they do everything they can to reinforce this idea that the economy is impossible to grasp, that it is vastly too complex to comprehend, that such matters should be left to these economists and their big, big brains.
The problem is, our willful ignorance of even some basic history of economics and some fundamental theories of how economies work leaves us completely and absolutely dependent upon this class of special experts and their big, big brains. We are perfectly incapable of telling sage from swindle. Even more, not only are we subject to the whims of these special experts, but they know it. In the absence of our ability to fact-check, the only thing that protects us from misinformation and deliberate hoodwinkery is the noble and virtuous character of those who install themselves as experts.
Not wise on our part. Not wise at all.
So, what I suggest is a kind of crash course in some current history of economics and a superficial presentation of some economic theory in a way that normal humans can understand and appreciate it. That’s what I intend to do here.
Full disclosure– I’m not an economist and I’m not even all that well versed in economics. But, I know a little about it. I encourage you not to take my word– or anyone else’s, for that matter –for anything. Look up everything I present and fact-check it.
Further disclosure– I’m an anarchist. That means I am of the firm belief that large, sprawling systems like economies control us rather than us controlling them, which is a great reason, I think, to burn the rotten system of slavitude right to the ground. But, even so, whether you want to destroy it or improve your life within it, some basic understanding of the economy and how it works or doesn’t work probably serves your best interests.
A good place to start, for our purposes, is the Great Depression. The Great Depression is like the beginning of a new era in economics. Prior to the Great Depression, the economy was generally beyond the regulation of governments. Government played a very limited role in tinkering with the economy, limited to very infrequent enforcement of anti-monopoly regulation.
The Great Depression, however, was so absolutely catastrophic to the lives of everyone that the attitude of government toward economic affairs changed. Someone had to get a handle on things to prevent future such catastrophes. The devastation caused by the Great Depression persuaded Franklin Roosevelt that government needed to exert more influence over economic matters. Government had to have an active role in regulating the economy.
Roosevelt called in economists to advise him, chief among them a guy named John Meynard Keynes. Keynes would leave a lasting impact on economics and his ideas would shape the next half of a century or so.
Keynes had a theory that Roosevelt found persuasive, that when the economy is in shambles and lots of people are out of work and prices are high, there is something government can do. When the economy goes south like that, as it has occasion to do on a cyclic basis, the proper response for government is to restore the economy by putting large amounts of money into the hands of those most likely to spend it quickly– the poor.
When poor people get their hands on money, they go out and get all the things they’ve been lacking, like food and hygiene and new clothes, maybe even transportation or housing. And when the poor purchase groceries they otherwise would not have purchased, that money goes to the grocer who then places an order to fill the empty space on his shelves and sends the money to the supplier, who in turn gets more products from the manufacturer, who in turn hires more workers to make more product.
This is something of a simplification, but the “Keynesian” theory of economics is that if you place money in the hands of the poor, they become an engine that revives the economy.
In contrast, if you place large amounts of money in the hands of the rich, they hoard it. Rich people already have necessities. So, if you give more money to the rich, it doesn’t get introduced into the economy. That means that, if your aim is to create an engine to revive the economy, handing more cash to rich people is not the way to go.
Roosevelt followed the Keynesian theory. He found ways for the government to employ the unemployed and give them income and he found ways for the government to create and fund programs that infused money into the economy at the bottom, where the poorest people were. He also insisted upon living wages for workers and opened the door for the unions to become more powerful in their advocacy for working people.
Now, there are some interesting conclusions we can draw from the success of Keynes and the Keynesian theory. First, what Keynesian economics demonstrated is that it is in the interests of the larger economy and the health of the larger system to improve the condition of the poor. As the poor go, so goes the economic order.
Second, the accumulation of wealth into fewer and fewer hands is a hazard to economic health generally, while decreasing the difference between rich and poor is not just moral but practical.
Based on all of this, from a Keynesian perspective, you can develop some metrics that will indicate the health of the overall economy, that will predict success or failure in the future. Someone from the Keynesian school of thought would likely measure things like the spending power of the poorest, and the differences between the rich and the poor as good indicators as to how well the economy will progress.
Accepting the Keynesian approach, it would make sense to have a progressive tax system, where the rich pay a higher percentage than the poor, with higher and higher percentages for those who make more and more. It would also make sense to have social programs advantageous to the poor.
We can also make a kind of moral assessment about Keynesian economics, for what moral assessments are worth: Being nice to those who have it hard is economically good while being cut-throat and ruthless is economically dangerous in the long run.
Beginning with Roosevelt, all American presidents accepted the Keynesian theory as reality, just as we all accept the theory of gravity in our daily affairs. Truman, Eisenhower, Kennedy, Johnson, Nixon, Ford, Carter. It mattered not the party affiliation or whether a president was liberal or conservative. Those who ran government looked at the world through a Keynesian lens.
But during this same period, there were, elsewhere, economists who questioned the Keynesian model. Based largely on the theory of an Austrian economist named Von Hayek, some economists advocated for “free markets” and for “free market capitalism.” In principle, these free-market economists objected to the pattern of government interference and regulation, and called for a return to the good old days when markets and the economy regulated themselves.
However, the actual approach they described, in practice, did not match their non-interference rhetoric. They didn’t so much as seek government non-interference as they sought government interference in a different way. The Von Hayek approach advocated that governments had to focus upon the “commanding heights” of the economy– the health, stability, and success of the big movers and shakers of the corporate and banking world. If government could shape a favorable environment for those at the top of the pyramid, the theory goes, then the success of those major corporate and banking powers would translate into excellent economic health for the entire system.
Some of the major corporate powers in the U.S. had been promoting this kind of an idea for a long time. As early as the 1950s, a General Motors president was fond of saying that what was “good for GM” was “good for America.” The implication was that the interests of GM and the interests of the United States were so inextricably tied together that serving GM’s profitability benefitted the United States. Of course, GM workers and the other United Auto Workers could make a good case that it was in the interests of the U.S. to regulate GM and empower the union to secure higher wages and benefits for the American workers, and that such an approach would also be “good for America,” the GM president’s sentiments notwithstanding.
Writer Ayn Rand also advocated the economic theories of Von Hayek, a theory which soon inspired neophytes at the University of Chicago’s School of Economics. The University of Chicago became so closely associated with the theories of Von Hayek that the school of thought surrounding Von Hayek’s “commanding heights” approach would be termed “the Chicago School.”
The first real application of Von Hayek’s theory would occur in Chile in 1973. Following a coup orchestrated by the United States’ Central Intelligence Agency where duly-elected President Salvador Allende was removed, American intelligence operatives installed General Augusto Pinochet as president of Chile. After coming to power, Pinochet brought in advisors from the “Chicago School” to completely re-make the Chilean economy according to the Von Hayek theory.
In creating a favorable environment for the powers at the “commanding heights” of the economy, Pinochet broke the unions and sent secret police to round up union leaders who were jailed, tortured, and often killed. Simultaneously, Pinochet cracked down on the media.
In instituting reforms, Pinochet “privatized” a great deal of the government. By the Chicago School’s view, government should never perform any function that can be performed by the private sector for profit. So, a large amount of the Chilean government was essentially put up on blocks and sold off to the private sector to operate for profit.
This alone made life increasingly more expensive for Chileans, as government services previously provided for free and paid for by government funds taken in as taxes were now sold to them by private for-profit companies. But this reform was also accompanied by massive tax cuts and de-regulation of the wealthiest corporations, putting the greatest share of the tax burden squarely onto the backs of the working poor.
As life became increasingly more intolerable for the majority of the populace, the government grew increasingly more repressive. As a package, the Von Hayek/Chicago School approach was a roaring success for the privileged elite in Chile, for the profanely wealthy, for the military enforcers. For everyone else, the reform was devastating. The population was plunged deeper into poverty, spending decades staring down the barrel of a rifle, toiling in misery, under the threat of disappearance and torture , for the exclusive enrichment of the nation’s corporate elite.
By the time of his eventual ouster, Augusto Pinochet, poster-child for the Chicago School approach to economics, had racked up a body-count to rival the most brutal dictators in history.
Everywhere the Chicago School model of economics was introduced and deployed, the same pattern emerged: elimination of the public sector, tax cuts and de-regulation for the corporate giants, and a steady deterioration of human rights for the general population whose standard of living eroded over time and never improved.
So, by 1980, there existed two rival economic models: on the one hand, the Keynesian model where money was infused into the economy by being introduced into the hands of the poorest, serving as an economic engine for economic revival; on the other hand, the Von Hayek/Chicago School model where government served the interests of corporate powers and banks, resulting , in every instance, in concentrated wealth and power, erosion of human rights, devastation of the public sector, and general chaos for the vast and impoverished working poor.
Ronald Reagan advocated for the second option.
In fact, Reagan proposed that the problem with the Chicago School approach was that it had not been deployed thoroughly enough. In Reagan’s view, the disastrous consequences associated with the Chicago School approach were not due to the obvious– that the Chicago School approach was a disaster; instead, Reagan felt that prior deployments of the model had been done incompletely.
Ronald Reagan doubled-down in the U.S. on the program that Pinochet had wrought upon Chile. Reagan intended to be more Pinochet than Pinochet.
An opposing candidate in that election cycle, George Herbert Walker Bush, looked closely at the Reagan economic plan and coined the phrase “voodoo economics.” Of course, when Bush was later included on the republican ticket as Reagan’s vice-presidential pick, Bush ceased using the phrase.
In 1980, as Reagan ran for president, let’s not forget that the Chilean nightmare was in its seventh year and the Chilean people were plunged into poverty and oppression, starvation and bullets, and Reagan promised the American people that he would introduce the same economic model to the United States.
Reagan did not merely win the election, but won in a landslide. His victory was spearheaded, ironically, by so-called “Reagan Democrats”– blue-collar, working-class folks who rallied to the Reagan revolution… even as Reagan promised to introduce the worst possible economic model for those same workers, a proven catastrophe for workers everywhere it was deployed.
In all of this context, it is easy to discern that a vote for Ronald Reagan and his cataclysmic brand of voodoo fuckonomics– decried by liberals and conservatives alike and even ridiculed by his own running mate –was an act of suicide for the working-class “Reagan Democrats.” So the question naturally arises: why would American voters select such a president with such a program?
In short, we Americans are so economically ignorant that we had no clue what Reagan’s economic platform even meant. the American voter didn’t know Keynes from Von Hayek, had no idea of the impact of the Chicago School theory on the people of Chile– even though it was currently happening at the time of the election. Reagan’s personal charm and his jingo-isms were more real to American voters in 1980 than the facts about his voodoo fuckonomics.
Reagan, once elected, contrary to whistful revisionists with their rainbow-and-bunny-rabbit delusions, engineered the disassembly of the public sector including the virtual elimination of the entire psychiatric infrastructure in the United States, leaving prisons to warehouse the mentally ill; he destroyed the tax system, leaving working people to pay roughly 80% of the tax burden while much wealthier corporations paid a mere 20%; he ruined unions, including the firing and replacement of striking air traffic controllers with scab workers; and at the time that Reagan left office, working people had just a fraction of the economic power that they possessed when he entered office.
Worse still, despite all of the evidence to the contrary, the voodoo fuckonomic program was somehow touted as a raging success by Reagan supporters. When Reagan was succeeded by George H.W. Bush and Bush rejected the voodoo fuckonomic model, introducing a slightly more sensible tax plan that would eventually result in the economic boom of the 1990s, Bush was tossed out on his ear… by the very same voters who would later be able to put their kids through college as a consequence of the tax adjustment that Bush signed into law.
The electoral rejection of Bush sent a clear message that the American voter demanded that their presidents maintain the Reagan approach of voodoo fuckonomics or else face the consequences. To depart from the voodoo fuckonomic model was to be a “tax and spender,” anathema in the minds of the American voters.
So, Bill Clinton, a moderate democrat, did not depart from the Von Hayek/Chicago School model. Neither did George W. Bush. Despite what seemed to be a growing divide separating democrats and republicans in terms of political ideologies, both parties’ presidents agreed on one thing: the worst and most disastrous economic model ever devised in the history of economics was the best economic model in the history of economics.
In 2008, after decades of uninterrupted voodoo, when the economy finally imploded, George W. Bush and his economic adviser Andy Summers did not take the opportunity to return to the Keynesian model. Instead, Bush and Summers orchestrated an unprecedented bail-out– a veritable inversion of the approach undertaken by Roosevelt and Keynes: rather than introducing large amounts of money into the hands of the poor and creating an engine of economic growth, Bush and Summers bailed out the corporations and banks at the commanding heights of the economy… the very institutions that had driven the economy to collapse in the first place. In so doing, they concentrated more wealth into fewer hands than ever before.
On the election of Barrack Obama, a progressive democrat, the nation stood poised for an economic revolution, a restoration and rejuvenation of the economic order. Obama could potentially become the Franklin Roosevelt of the twenty-first century.
Joseph Stiglitz, who had articulated a thorough and indepth denunciation of the entire voodoo fuckonomic order long before the 2008 collapse, and who had quit his post at the World Bank, and who had earned a Pulitzer, developing the “assymmetrical information theory,” sent overtures to the Obama team.
Obama selected as economic adviser Timothy Geitner, who hailed from the same Citibank/Lehman Brothers locker-room as his predecessor, Andy Summers. Obama then doubled-down on the “commanding heights” bail-out, concentrating billions and billions more into the banks and corporations that were “too big to fail.” Not surprisingly, this approach spawned a “jobless recovery,” a recovery that excluded the broadest base of working poor who had, over the decades of voodoo fuckonomics, become irrelevant to the top-down economic order.
By 2016, voodoo fuckonomics had been the norm for 36 years, resulting in a steady decline in quality of life for working people. There had never been a restoration of the Keynesian model, despite the evidence of the failure of the Chicago School model.
Then came Donald Trump.
His candidacy was fuelded largely by the rage of the forgotten worker and much of his platform pandered to the aspirations of the millions sliding down the economic scale over the decades of voodoo fuckonomics and its predictable, observable consequences.
But, just as with Reagan, Trump’s popularity seemingly defied his economic plans. Just as with the “Reagan Democrats” of the 1980s, Trump captured the working vote… even though his economic program promised to be more voodoo and more fuckonomic than anyone who ever came before him. That is to say, anyone with a basic, general knowledge of this economic history could glance at the plans that Donald Trump presented and quickly conclude that his approach would be more than a continuation of the voodoo fuckonomic model that has enriched the privileged few at the expense of the broadest base; that he would be more Reagan than Reagan– concentrating even more obscene amounts of wealth into fewer and fewer hands, decimating whatever remained of the social safety net, diminishing further the economic power of the workers, and likely having to introduce new, draconian measures to further roll back civil liberties to maintain his program.
In other words, more of the same nightmare.
Anyone with a basic understanding of economics and history would look at the Trump strategy and say, “Oh, my God. That’s going to be awful.”
And so we return to the central theme: all of these devastating and cataclysmic consequences originate from an economic obliviousness that is, seemingly, inherently American. It is this general and widespread willful ignorance of all things economic that continues the trend of the American voters empowering, time and again, the most hard-line and most self-defeating voodoo fuckonomic program– more of the problem as a perceived solution to the problem… because Americans do not understand the problem in the first place.
What is desperately needed by the American working- and middle-class– if they are not going to consider burning down the entire system as they should –is a return to the Keynesian model of economics and a complete rejection of the Von Hayek/Chicago School model that has never done anything other than what Americans are now experiencing, what Americans have experienced since the Von Hayek/Chicago School model was first introduced in 1980. This cannot happen so long as the American voters continue to drink up the false promises of voodoo fuckonomics the way dogs, to their own detriment, drink anti-freeze.
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Categories: Sean Swain