Ideological engineering for the 1%
from Finance as warfare by Michael Hudson
The economy is polarizing because of how the 1% use their wealth. If they invested their fortunes productively as “job creators” – as mainstream textbooks describe them as doing – there would be some logic in today’s tax favoritism and financial bailouts. Rentier elites would be doing what governments are supposed to do. Instead, today’s financial oligarchy lends out its savings to indebt the economy at large, and uses its gains to buy control of government to extract more special privileges, tax favoritism and rent-extraction opportunities by political campaign financing in the United States (unlimited since the Supreme Court’s Citizens United ruling) and by lobbying.
Politics and the legal system have become part of the market in the sense of being up for sale. As in consumer advertising, ideological engineering is used to “manufacture consent,” using the mass media to broadcast an anti-tax and anti-regulatory ethic. Thorstein Veblen described the tactic a century ago in Higher Learning in America (1904). Business schools have been endowed, economic prizes awarded and public relations “think tanks” staffed with credentialed spokesmen to shape popular perceptions to accept widening financial inequality as natural and even desirable.
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Real-World Economics Review Blog 
Hard to disagree with this. Another aspect is the 1%’s advocacy of trade with China from the late 1980’s until…well, about two years ago when the Chinese hacking and grand Belt Road brandishing became too much even for those who benefited the most from dampening domestic labor and doing it under the logo of raising Chinese peasants into urban middle class consumers – the highest status in their eyes – excepting the 1% and the next 9% – them.
This is one of the most remarkable examples in economic history of the leading economic power willfully if not gleefully paving the way (rolling out the red carpet?) for its successor super power. How they have done this summersault in such a brief range in time without acknowledging Kevin Phillips, the late William Greider and others who didn’t think this globalizing trend with China at the fulcrum would be good for the West’s old working class is remarkable. Biden’s big speech to Congress is an excellent example of wiping out the how and why we have now become “competitors” with China (the easiest term he might have used) from policies he never mentioned which he supported along with “the Clintons” was one of the most astounding white washes of history I can recall, summoning up some very unsavory comparisons to other parts of the earlier century.
It’s like the critical faculties have been erased in the US, left to the crudest most incapable hands like Trump.
From Thom Hartmann’s blog post today.
America has to reinvent our understanding of economics aer 40 years of living under a taxcutting, austerity-imposing, Republican-promoted trickle-down Reaganomics scam and return to a Keynesian system that still works in those countries like Norway, New Zealand or Denmark that never adopted “austerity.”
The core idea of Reaganomics is that if we give huge tax cuts and multi-billion-dollar subsidies to billionaires and giant corporations, that will “incentivize” these “job creators” to expand the economy and raise prosperity all around for everybody. In fact, all those giant corporations and billionaires have done is put all that cash in their money bins and use it to buy 400-foot yachts and rocket rides into outer space…while destroying unions and holding down wages on working-class people.
A recent study from the London School of Economics has now totally debunked the Reaganomics notion that tax-cuts for rich people incentivize them to “create jobs” or lead to economic growth. In fact, such tax cuts only serve one single purpose: to move more of a nation’s income and wealth from the bottom 99% up into the money bins of the morbidly rich. And they do nothing whatsoever for the overall economy. To the contrary, Reaganomics has devastated America. As a result of Reagan/Bush/Trump tax cuts, notes former Labor Secretary Robert Reich, “Since the start of the pandemic, just 651 American billionaires have gained $1 trillion of wealth. With this windfall they could send a $3,000 check to every person in America and still be as rich as they were before the pandemic.” Reich adds: “Yet at the same time, more than 20 million Americans are jobless, 8 million have fallen into poverty, 19 million are at risk of eviction and 26 million are going hungry.”
So, how did we get here, and have Republicans yet copped to this giant, 40-year-long hustle that’s still being taught in our colleges and universities by professors subsidized by rightwing billionaires? Back in 1980 Repbulican candidate Ronald Reagan promoted trickle-down economics as a “new idea,” representing the latest, state-of-the-art thinking from billionaire-funded so-called “conservative” economists. At first, even Republican politicians recognized it as a con; in the 1980 primary, Reagan’s main opponent, patrician multimillionaire George HW Bush, called it a con job that he labeled “Voodoo Economics.” Bush and actual economists then knew what any student of economic history knew: trickledown was just a money-grab by Reagan, who was fronting for his patrons among the very richest Americans. And, since the Supreme Court had just (in 1976 and 1978) legalized political bribery by billionaires and corporations under the rubric of money being the same thing as “free speech” and therefore protected by the First Amendment, Reagan and his friends were all in.
But trickle-down wasn’t even a new con. Back in the 1890s it was called “Horse & Sparrow Economics,” the sales-pitch before the era of cars being that if you fed horses more oats than they could normally digest they’d drop all that undigested oat in their manure for the sparrows to pick at; rich people’s excesses [shit] would spill over to the average person. It not only didn’t work; it was blamed, in part, for the Panic of 1896.
Warren Harding revived Horse & Sparrow Economics in 1920 when he campaigned on dropping the then-91% top tax bracket down to 25%. He was elected and kept his promise, the result being the “Roaring 20s” when the rich got fabulously richer while working people saw their wages actually drop (leading to an explosion of unionization efforts by pissed-off workers that were violently suppressed by employers and police). It all came to a startling and final end in 1929 with the Great Crash that set off what was then called the Republican Great Depression (the “Republican” part of that label largely wore off after the election of Republican President Dwight Eisenhower in 1952).
Republicans stopped talking about horses and sparrows around that time, but the theory never really died; Reagan simply reinvented it in 1980 as “Supply Side Economics,” aka trickle-down. Back in 1896 and 1929 people didn’t need a detailed multi-decade, multi-country analysis of Horse & Sparrow to know it was bad news: the Great Panic and the Republican Great Depression pretty much convinced everybody.
But somehow — even after 4 economic crashes (the Reagan stock market crash of 1987, the Bush Great Recession of 1992, the Second Bush Great Recession of 2008 and the Trump Depression of 2020) and spreading poverty — most voters never managed to put together the cause-and-effect of trickle-down Reaganomics.
This most recent study of trickle-down is probably the most comprehensive effort ever made to figure out what happens when you radically cut taxes on the morbidly rich. The researchers used “data from 18 OECD countries covering the last fifty years to investigate the effects of major tax cuts for the rich on income inequality, economic growth, and unemployment.” And when they compiled those 50 years of data over 18 countries that had engaged in what we call Reaganomics and most of them call “austerity” economics, it wasn’t even close to what Reagan and his billionaire buddies told us would happen. “Our results show,” the researchers write, that “major tax cuts for the rich increase the top 1% share of pre-tax national income in the years following the reform (t+1 to t+5). The magnitude of the effect is sizeable; on average, each major reform leads to a rise in top 1% share of pre-tax national income of 0.8 percentage points.”
So the rich got richer. But did these “job creators” use any little bit of that money to, well, create jobs?
“No,” say the economists at the London School of Economics. “The results also show that economic performance, as measured by real GDP per capita and the unemployment rate, is not signicantly aected by major tax cuts for the rich. The estimated effects for these variables are statistically indistinguishable from zero…” So what is the single largest result of a nation embracing Reaganomics trickle-down austerity tax-cut policies?
“Overall,” their study summarized, “our analysis nds strong evidence that cutting taxes on the rich increases income inequality but has no effect on growth or unemployment. Our results … suggest that lower taxes on the rich encourage high earners to bargain more forcefully to increase their own compensation, at the direct expense of those lower down the income distribution.”
Americans seem to have largely figured this out: last year, for example, Arizona voters approved a ballot measure (Prop 208) that raised taxes by 3.5% on wealthy people making more than $250,000 a year. It was designed to raise $940 million a year from those taxes that would all go to fund the state’s crisis-ridden public-school system.
But when working-class people are gutted and billionaires make more billions, the stability of democracy suffers — particularly in a nation like the USA where the Supreme Court legalized political bribery in Citizens United.
Which explains why this year, when the Prop 208 tax increase on rich people was to take effect, the Republican-controlled, billionaire-funded Arizona legislature passed the largest tax cut for the rich in the state’s history. Altogether, Arizona Republicans passed and Governor Ducey signed a $1.9 billion tax cut that, as the Prescott Valley News notes “mainly benets the wealthy” to “shield high-earning taxpayers from the eects of a new 3.5% tax surcharge voters approved in November to boost education funding.” Until we get money out of the body of our political system, any effort to pull these billionaire leeches off our backs will be somewhere between extremely diffcult and futile.
The For The People Act goes a long way in this regard, which is why billionaire-funded groups like Freedomworks are working so hard to kill it. It explicitly requires transparency from so called “dark money” donors and groups, an important rst step toward restoring voter faith in our political system.
That’s also why no Republicans in the House voted for it and Republicans in the Senate have filibustered it. They don’t want the depth of how sold-out they are to become public. It’s crucial Democrats change senate rules with their 50 votes and end the Senate libuster so America can get this Act into law and solve our parasitic billionaire problem.
And then fix the holes the GOP has bored into our tax system so billionaires pay more than the 1% to 3% most are paying (and giant corporations pay nothing) while average Americans pay an average 24.2%. If we fail in this, our democracy will continue to crash and burn, the attacks on it funded by rightwing billionaires will increase, and more members of the working class in America will slide into poverty.
Hard to disagree with most of this, too. But one bit I do disagree with: that New Zealand “never adopted austerity”. I was there in 1990 when compromise Prime Minister Geoffrey Palmer had the land of plenty already needing soup kitchens. I’ll quote the blurb of Roger Douglas’s 1987 book, “Towards Prosperity”.
“Since [David Lange’s new] Labour’s election in 1984, Roger Douglas, as Minister of Finance, has implemented the most radical changes in New Zealand’s economic history since the first Labour Government instigated its social welfare system in the thirties”.
I wrote to Palmer at the time, objecting to the economic theories being taken for granted, and at least got what I would not get now: a courteous and more or less reasonable response.
The problem is all about finance as Hudson has been saying since forever, and specifically the monetary and financial paradigm as I have soldier on about here despite its incredible temporal universe benefits and problem resolutions being ignored or maybe even not comprehended.
When I studied in the 1950s, we read spendler, sound familiar?
Democracy, media, and money
Spengler asserts that democracy is simply the political weapon of money, and the media are the means through which money operates a democratic political system.[clarification needed] The thorough penetration of money’s power throughout a society is yet another marker of the shift from Culture to Civilization.
Democracy and plutocracy are equivalent in Spengler’s argument. The “tragic comedy of the world-improvers and freedom-teachers” is that they are simply assisting money to be more effective. The principles of equality, natural rights, universal suffrage, and freedom of the press are all disguises for class war (the bourgeois against the aristocracy). Freedom, to Spengler, is a negative concept, simply entailing the repudiation of any tradition. In reality, freedom of the press requires money, and entails ownership, thus serving money at the end. Suffrage involves electioneering, in which the donations rule the day. The ideologies espoused by candidates, whether Socialism or Liberalism, are set in motion by, and ultimately serve, only money. “Free” press does not spread free opinion—it generates opinion, Spengler maintains.
Spengler admits that in his era money has already won, in the form of democracy. But in destroying the old elements of the Culture, it prepares the way for the rise of a new and overpowering figure: the Caesar. Before such a leader, money collapses, and in the Imperial Age the politics of money fades away.[clarification needed]
Spengler’s analysis of democratic systems argues that even the use of one’s own constitutional rights requires money, and that voting can only really work as designed in the absence of organized leadership working on the election process. As soon as the election process becomes organized by political leaders, to the extent that money allows, the vote ceases to be truly significant. It is no more than a recorded opinion of the masses on the organizations of government over which they possess no positive influence whatsoever.
Spengler notes that the greater the concentration of wealth in individuals, the more the fight for political power revolves around questions of money. One cannot even call this corruption or degeneracy, because this is in fact the necessary end of mature democratic systems.
On the subject of the press, Spengler is equally contemptuous. Instead of conversations between men, the press and the “electrical news-service keep the waking-consciousness of whole people and continents under a deafening drum-fire of ….
Robert, agreed that democratic institutions and voters can fall prey to being redefined as money issues. In other words democracy is reduced to voting with money. Which speaks to the absolute necessity to remove money from societies wanting to be democratic.
Agreed, Ken, especially if you concede that societies exist at many levels from families up.
Thanks for this, Robert: extremely interesting. No, Spengler does not sound familiar (though I’ve heard of his book), so I just looked him up on Wikipedia. None of my books seems to mention him.
This sounds not unlike Lenin on “The Economic Basis of the Withering Way of the State”: a first-hand extract in Michael Oakshott’s “The Social and Political Doctrines of Contemporary Europe”, 1940, Basic Books. [This is an invaluable survey via first-hand readings, covering Representative Democracy, Catholicism, Communism, Fascism and National Socialism]. Spengler’s “end of mankind” fears sound horribly realistic today, but out of Caesarism came Christian subsidiarity, so after the 1% takeover of neo-Liberal democracy there is at least a hope of restarting from “Small is Beautiful”. In the Arabic number model of control, the freedom to use numerals decreases as the possibilities are used up, but one can restart the cycle at a higher level, with freedom restored until central control has been regained.
Spengler is relevant because we now face collapse….again and again and again. The lesson to learn is to solve the problem(s) instead of ignoring or merely palliating them. Hudson and others have much to teach us. The only additional thing we need to learn is the integrative intellectual process of wisdom aka paradigm perception.