By Nick Beams:
Milton Friedman 1912-2006: “Free market” architect of social reaction
21 November 2006
In his afterword to the second edition of Capital in 1873, Karl Marx noted that the scientific character of bourgeois economics had come to an end about 1830.
At that point the class tensions generated by the development of the capitalist mode of production itself made further advances impossible.
“In place of disinterested inquirers there now stepped forward hired prize-fighters; in place of genuine scientific research, the bad conscience and evil intent of apologetics.”
The economist Milton Friedman, who died last Thursday aged 94, will be remembered in years to come as one of the classic representatives of this tendency.
Indeed his own career, culminating in his rise to the position of intellectual godfather of the “free market” over the past four decades, is a graphic example of the very processes to which Marx had pointed.
In the post-war boom, now looked back on as a kind of “golden age” for capitalism, at least in the major economies, Friedman was very much on the margins of bourgeois economics.
When this writer begun a university study of economics in the latter half of the 1960s Friedman, and the free market Chicago School in which he was a central figure, were regarded as eccentrics, if not oddities.
This was the heyday of Keynesianism, based on the notion that regulation of “effective demand” by government policies—increased spending in times of recession, cutbacks in periods of economic growth and expansion—could prevent the re-emergence of the kind of crisis that had devastated world capitalism in the 1930s. …
If Friedman’s free market dogmas had no scientific content, they were nonetheless extremely valuable in the service of definite class interests, as the experience of Chile was to graphically demonstrate.
In 1975, following the overthrow of the elected Allende government in a military coup on September 11, 1973, the head of the junta, Augusto Pinochet, called on Friedman and his “Chicago boys”—economists trained under his tutelage—to reorganise the Chilean economy.
Under the direct guidance of Friedman and his followers, Pinochet set out to implement a “free market” program based on deregulation of the economy and privatization.
He abolished the minimum wage, rescinded trade union rights, privatised the pension system, state industries and banks, and lowered taxes on incomes and profits.
The result was a social disaster for the mass of the Chilean population.
Unemployment rose from just over 9 percent in 1974 to almost 19 percent in 1975.
Output fell by 12.9 percent in the same period—a contraction comparable to that experienced by the United States in the 1930s.
Pinochet’s financial fraud: here.
A very different economist compared to Friedman; from the Google cache, 1/2/06:
On 1 January 2006, United States economist and editor of Monthly Review, Harry Magdoff, died.
A Monthly Review interview with this analyst of imperialism is here.
British socialist economist Andrew Glyn: here.
For almost the past four decades the central policy of successive US administrations, starting with Reagan, has been the transfer of untold wealth to the heights of society, raising social inequality to levels never seen in economic history. Last week, the present incarnation of this program, President Donald Trump, conferred the highest US civilian honour, the Presidential Medal of Freedom, on its ideological godfather, the originator of so-called supply-side economics, Arthur Laffer. The birth of the theory is reputed to be a meeting over dinner in 1974 between Laffer, White House Chief of Staff Donald Rumsfeld, his deputy Dick Cheney, a former classmate of Laffer at Yale, and Wall Street Journal writer Jude Wanniski. Outlining his new theory, Laffer drew on a napkin what became known as the Laffer curve. The curve purported to show that if taxes on the ultra-wealthy and corporations were reduced this would unleash economic growth that would then bring increased revenue to the government and pay for itself. This late 20th-century version of economic snake oil became the basis for the tax cuts initiated under Reagan and forms a key ideological foundation for the massive corporate and personal income tax cuts enacted by the Trump administration at the end of 2017: here.
Related articles
- When neoliberalism exploded (salon.com)
22,000 at the gates of Fort Benning, human rights activists
Posted by: “Compañero” companyero@mindspring.com chocoano05
Mon Nov 20, 2006 9:06 pm (PST)
Sunday, November 19, 2006 at 12:30 PM
Fort Benning, Georgia
Over 22,000 people are marching here at the gates of Fort
Benning in a beautiful and massive funeral procession led
by Latin American torture survivors and social justice
movement leaders, among them Renato Antonio Areiza from
the Colombian Peace Community of San José de Apartadó.
Last year, Renatos´s sister was murdered by troops under
the command of an SOA graduate. This gathering, our
largest and most diverse ever, stretches over the length
of Fort Benning Road, with thousands holding crosses,
stars of David and other symbols of hope and resistance.
As musicians sing out “Deyanira Areiza” and the names of
hundreds more victims of School of the Americas (SOA/
WHINSEC)-sponsored violence, the crowd responds,
“Presente!”
Along the procession route people have begun to transform
the fences surrounding the protest site into expressions
of hope and remembrance, placing their symbols in and
around the three-layer chain-link barriers erected by the
city of Columbus and military personnel.
Thirteen people just went through a hole in the fence and
carried their protest onto the military base in acts of
nonviolent civil disobedience. Two of the human rights
activists that engaged in the civil disobedience action
were part of the 1000 Grandmothers organizing effort. The
military police just arrested and handcuffed the
linecrossers and are guarding the breached fence to
prevent others from entering the base.
Cathy Webster, a 61 year-old peace activist and
grandmother from Chico, California, was among those
arrested by the military. “As a grandmother, I feel deep
compassion and an urge for protection for the vulnerable,
the young, and families,” said Cathy Webster. “It breaks
my heart to know about the continual murders and
disappearances of countless people in Latin America. SOA
trains the perpetrators of these crimes.”
For UP-TO-DATE NEWS, please visit our homepage at
http://www.SOAW.org.
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I despised Milton Friedman. The public mourning for him was disgusting. Thanks for your friendly comments by the way. I’m sorry you’ve had trouble commenting there. I’ve suspended blogging for the time being. I’ve had some personal problems come up and I have to take care of them. I will continue to check here frequently.
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Hi Jon, thanks for commenting. All the best with your personal situation, and I hope you will be able to re-start your blog soon!
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Chile’s Retirees Find Shortfall in Private Plan*
by LARRY ROHTER
The New York Times
January 27, 2005
SANTIAGO, Chile – Nearly 25 years ago, Chile embarked on a sweeping
experiment that has since been emulated, in one way or another, in a
score of other countries. Rather than finance pensions through a system
to which workers, employers and the government all contributed, millions
of people began to pay 10 percent of their salaries to private
investment accounts that they controlled.
Under the Chilean program – which President Bush has cited as a model
for his plans to overhaul Social Security – the promise was that such
investments, by helping to spur economic growth and generating higher
returns, would deliver monthly pension benefits larger than what the
traditional system could offer.
But now that the first generation of workers to depend on the new system
is beginning to retire, Chileans are finding that it is falling far
short of what was originally advertised under the authoritarian
government of Gen. Augusto Pinochet.
For all the program’s success in economic terms, the government
continues to direct billions of dollars to a safety net for those whose
contributions were not large enough to ensure even a minimum pension
approaching $140 a month. Many others – because they earned much of
their income in the underground economy, are self-employed, or work only
seasonally – remain outside the system altogether. Combined, those
groups constitute roughly half the Chilean labor force. Only half of
workers are captured by the system.
Even many middle-class workers who contributed regularly are finding
that their private accounts – burdened with hidden fees that may have
soaked up as much as a third of their original investment – are failing
to deliver as much in benefits as they would have received if they had
stayed in the old system.
Dagoberto Sáez, for example, is a 66-year-old laboratory technician here
who plans, because of a recent heart attack, to retire in March. He
earns just under $950 a month; his pension fund has told him that his
nearly 24 years of contributions will finance a 20-year annuity paying
only $315 a month.
“Colleagues and friends with the same pay grade who stayed in the old
system, people who work right alongside me,” he said, “are retiring with
pensions of almost $700 a month – good until they die. I have a salary
that allows me to live with dignity, and all of a sudden I am going to
be plunged into poverty, all because I made the mistake of believing the
promises they made to us back in 1981.”
With many Chileans finding themselves in a situation much like that of
Mr. Sáez, people are still looking to the government, not private
pension funds, to ensure a secure retirement.
“It is evident the system requires reform,” the minister of labor and
social security, Ricardo Scolari, said in an interview here. Chile’s
current approach based on private pension funds has “important
strengths,” he said, but “it is absolutely impossible to think that a
system of this nature is going to resolve the income needs of Chileans
when they reach old age.”
In formulating proposals in the United States for individual accounts,
advocates of partial privatization of Social Security have sought to
overcome some of the problems in Chile. They have suggested, for
example, setting low limits on the fees that fund managers will be
allowed to charge and continuing to provide a major part of retirement
income through the traditional system of guaranteed payments.
[NOTE FROM ME: Have you ever heard of BAIT AND SWITCH? While
it could happen that at the beginning the government might
limit fees Wall Streeers could charge for private accounts,
there would certainly — and almost immediately — be enormous
pressure on the government to LIFT the ceiling on those fees
and PERMIT higher fees, much higher.]
The program in Chile differs from the voluntary model that President
Bush is considering. Participation here has been not voluntary for
people entering the labor force since 1981.
On the other hand, Chile was careful before it started its private
system to accumulate several years of budget surpluses, in contrast to
the recent large deficits in the United States.
The Chilean example also makes clear that introducing private accounts
does not solve a lot of the problems faced in the United States, Europe
and Japan, where pay-as-you-go systems remain the principal means of
government retirement support.
Over all, Chile has spent more than $66 billion on benefits since
privatization was introduced. Despite initial projections that the
system would be self-sustaining by now, spending on pensions makes up
more than a quarter of the national budget, nearly as much as the
spending on education and health combined.
Faced with the likelihood of the gap remaining as it is or, as Mr.
Scolari said, “perhaps even widening,” the Chilean government is
contemplating a new round of pension changes. Suggestions that have been
floated include many also under consideration in the United States and
Europe, like reducing benefits or setting a higher retirement age.
The problems have emerged despite what all here agree is the main
strength of the privatized system: an average 10 percent annual return
on investments. Those results have been achieved by the pension funds
largely through the purchase of stocks and corporate and government
bonds – investments that helped fuel an economic expansion giving Chile
the highest growth rate in Latin America over the last 20 years.
“The great success of the system is its high profit rate, more than
double what was initially projected,” said Guillermo Arthur Errázuriz,
executive director of the Association of Pension Fund Administrators.
“In total, workers have set aside nearly $61 billion, which is invested
in the sectors of the economy that show the most potential.”
Among the admirers of the privatized system here is Mr. Bush, who on a
visit in November called Chile “a great example” for other countries. On
other occasions, he has suggested that the United States could “take
some lessons from Chile, particularly when it comes to how to run our
pension plans.”
The main architect of the Chilean system is José Piñera, who was labor
and social security minister from 1978 to 1980 during the Pinochet
dictatorship. Mr. Piñera is now chairman of the International Center for
Pension Reform, co-chairman of the Cato Institute’s Project on Social
Security Choice, and he has been a board member of several Chilean
corporations.
[NOTE FROM ME: Here’s Josh Marshal’s comment on José Piñera:
“The case for the program is so strong it seems that José
Piñera, the labor and social security minister under Pinochet,
who ushered in the program, refused to even discuss it with
The New YorkTimes. That despite the fact that he’s had a
sinecure at Cato for years as their big phase-out macher.
He’s the Co-Chair of their Project on Social Security
(Privatization) Choice
“Perhaps the most telling line in the whole piece: “Among
other achievements emphasized here by advocates of the
privatized funds are the creation of a modern capital market,
cheaper credit for companies that formerly could turn only to
banks when they wanted to expand, and a brake on deficit
spending by the government.
“And which of those things has anything to do with retirement
security exactly?”
http://www.talkingpointsmemo.com/ (scroll down)]
Mr. Piñera declined repeated requests to be interviewed for this
article. In an article on the Op-Ed page of The New York Times last
month, though, he extolled the Chilean system as one based on ownership,
choice and responsibility and one that is widely popular because it
gives workers a stake in the economy.
Among other achievements emphasized here by advocates of the privatized
funds are the creation of a modern capital market, cheaper credit for
companies that formerly could turn only to banks when they wanted to
expand, and a brake on deficit spending by the government.
Critics respond that the privatized system has been less successful in
ensuring a dignified retirement for the elderly.
“What we have is a system that is good for Chile but bad for most
Chileans,” said a government official who specializes in pension issues
and who spoke on condition of anonymity, fearing retaliation from
corporate interests. “If people really had freedom of choice, 90 percent
of them would opt to go back to the old system.”
Among the complaints most often heard here is that contributors are
forced to pay exorbitant commissions to the pension funds. Exactly how
much goes to such fees is a subject of debate, but a recent World Bank
study calculated that a quarter to a third of all contributions paid by
a person retiring in 2000 would have gone to pay such charges.
But most Chileans are unaware of how much they are paying to the funds
because the lengthy quarterly financial balance sheet they receive “is
not comprehensible,” according to Guillermo Larraín, director of the
Superintendency of Pension Funds, a government agency. “It needs to be
replaced by a simple and transparent financial statement,” he said, so
workers can determine which fund charges the lowest fees.
In recent years, the number of pension funds has been winnowed to 6 from
a high of 22 in the early 1990’s. They have enjoyed record earnings, so
much so that foreign banks and insurance companies are investing in the
industry. While the pension fund association puts the average annual
return on assets just under 30 percent, government figures show profits
of 50 percent in 2000, with some independent studies suggesting the
funds did that well over the five-year period ended in 2003.
Proponents of the system justify the high returns as an appropriate
reward for the risk they undertake. But a recent World Bank report,
“Keeping the Promise of Social Security in Latin America,” minimized
that, noting that through the 1990’s, only three large companies
accounted for half of all shares traded on the Santiago stock exchange
and that pension funds tend to follow a herd instinct and invest in the
safest choices on the market.
Government officials like Mr. Larraín and Mr. Scolari acknowledge that
“commissions are high and need to come down.” They say that “more
competition is needed” to foster lower fees. But existing regulations
frustrate the creation of new funds – something that seems just fine to
pension funds that have become a powerful political and economic force.
“The dynamic of the market,” Mr. Larraín said, “is one of consolidation
and concentration.”
Some other problems of the Chilean system stem from factors that do not
apply with the same force in the United States and other advanced
economies. Nearly half of Chilean workers, for example, are employed off
the books in the so-called informal sector, while many others are hired
as independent contractors, who are not required to contribute to a
pension account and do not do so regularly because they cannot afford
it.
By the government’s own calculations, only about half the work force
contributes to a pension fund. “We are aware there is a big hole and
that we need to take corrective measures,” Mr. Larraín said.
Because many of the claims initially made on behalf of the privatized
system proved exaggerated or inaccurate, the transition period has
turned out to be longer and more expensive than anticipated. The annual
cost to the government, still the guarantor of last resort, has remained
steady at 5 to 6 percent of the nation’s economic output. (By
comparison, in 2003, Social Security outlays in the United States
totaled 4.2 percent of the gross domestic product.)
Chile spends about $2 billion a year to pay retirees from its armed
forces, according to Mr. Scolari. The military imposed privatization on
the rest of the country, but was careful to preserve its own advantages
and exclude fellow soldiers from the system. Despite calls that the
military be forced to give up its exemption, no civilian government has
been prepared to pursue that.
Proponents of the privatized system argue that those costs will diminish
in coming years, as those still receiving benefits from the old system
gradually die off. But critics disagree, pointing to the large numbers
of younger Chileans in the work force who either do not participate or
whose contributions will fall short of the amount required for a minimum
pension.
For those remaining in the government’s original pay-as-you-go system,
the maximum retirement benefit is now about $1,250 a month. The National
Center for Alternative Development Studies, a research institute here,
calculates that to get that same amount from a private pension fund,
workers would have to contribute more than $250,000 over their careers,
a target that has been reached by FEWER THAN 500 of the private
system’s 7 Million PAST AND PRESENT contributors.
[NOTE FROM ME: I would read that last paragraph again and
again.]
This leaves many Chileans in a situation that has led to the coining of
a phrase: “pension damage.” There is now even an Association of People
With Pension Damage, 157,000 members and growing, that consists of
Chileans, mostly former government employees, who find that their
pensions, based on contributions to the private system, are
significantly less than if they had remained in the old system.
“They come to us in desperation,” said Yasmir Fariña, the group’s
president, “because those who stayed in the government system are often
retiring with monthly pensions twice as large as everyone else’s.”
Read this at:
http://www.nytimes.c…094&partner=homepage
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Outsourcing Public Highways to Private Interests
Posted by: “bigraccoon” bigraccoon@earthlink.net redwoodsaurus
Mon Mar 12, 2007 6:31 pm (PST)
OUTSOURCING PUBLIC HIGHWAYS TO PRIVATE INTERESTS
Over the past few years, the federal government has rolled out
the welcome mat for private road companies. The 2005 highway
bill changed the tax code to allow private firms to raise
tax-exempt financing for road projects, something that only
governments were able to do up to now. (For congressional pork
buffs, this was the same legislation that contained Alaska
Republican congressman Don Young’s “bridge to nowhere,” and
that, by way of homage to Young’s wife, Lu, was named the Safe,
Accountable, Flexible, Efficient Transportation Equity Act – A
Legacy for Users, a.k.a. SAFETEA-LU.) The bill also expanded
eligibility for a transportation subsidy program that includes
loan guarantees and lines of credit, and created a pilot program
that lets participating states use tolling to finance interstate
highway construction and invite private-sector participation on
the projects. “It’s a very, very sweet deal,” says a veteran
congressional transportation committee staffer who requested
anonymity because of his role advising members on highway policy.
On June 29, 2006, Mitch Daniels, the former Bush administration
official turned governor of Indiana, was greeted with a round of
applause as he stepped into a conference room packed with
reporters and state lawmakers. The last of eight wire transfers
had landed in the state’s account, making it official: Indiana
had received $3.8 billion from a foreign consortium made up of
the Spanish construction firm Cintra and the Macquarie
Infrastructure Group of Australia, and in exchange the state
would hand over operation of the 157-mile Indiana Toll Road for
the next 75 years. The arrangement would yield hundreds of
millions of dollars in tax breaks for the consortium, which also
received immunity from most local and state taxes in its
contract with Indiana. And, of course, the consortium would
collect all the tolls, which it was allowed to raise to levels
far beyond what Hoosiers had been used to. By one calculation,
the Toll Road would generate more than $11 billion over the
75-year life of the contract, a nice return on MIG-Cintra’s
$3.8 billion investment.
The deal to privatize the Toll Road had been almost a year in
the making. Proponents celebrated it as a no-pain, all-gain way
to off-load maintenance expenses and mobilize new
highway-building funds without raising taxes. Opponents
lambasted it as a major turn toward handing the nation’s common
property over to private firms, and at fire-sale prices to boot.
The one thing everyone agreed on was that the Indiana deal was
just a prelude.
http://www.motherjones.com/news/feature/2007/01/highwaymen.html
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…Close the SOA
Posted by: “Compañero” companyero@bellsouth.net chocoano05
Sat Nov 3, 2007 8:21 pm (PST)
1000 Grandmothers March Again In Georgia November 18 Calling For
Closure of Controversial Facility for Latin Americans
St. Augustine’s grandmothers are joining grandmothers across the
nation in preparation for the annual mobilization to close the
Western Hemisphere Institute for Security Cooperation/ School of the
Americas (WHINSEC/SOA) at Ft. Benning, Georgia on November 16-18,
2007.
The grandmothers and their supporters will join tens of thousands of
people at the US Army base to bring attention to the notorious
training facility and to demand closure of the school.
Last year a campaign to bring 1000 Grandmothers to the gates of Ft.
Benning began in Chico, California. Thousands of white-kerchief’d
grandmothers swelled the throng at the demonstration, voicing
“Presente!”. Six grandparents trespassed on the base in an act of
nonviolent civil disobedience. Each spent time in prison, with
sentences ranging from 2 to 6 months.
Despite a shocking human rights record, this school continues to
operate with US taxpayer money. America’s grandparents are neither
afraid, nor hesitant to speak forcefully to what they clearly see:
our own nation divided, militaristic and subsidizing other nations’
militarism. As shepherds of the next generations we have a stake in
how our country relates to the rest of the world.”
Inspired by the Holly Near song “1000 Grandmothers” that calls on
the strength, wisdom and courage of the elders to end violence,
grandmother Cathy Webster of Chico, California relayed the call to
the grandmas of America . Webster served two months in jail for her
actions with fifteen others at the military base during the
demonstration in 2006.
The School of the Americas, now called Western Hemisphere Institute
for Security Cooperation, made headlines in 1996 when the Pentagon
released training manuals used at the school that advocated torture,
extortion and execution. Despite this admission and hundreds of
documented human rights abuses connected to soldiers trained at the
school, no independent investigation into the facility has ever
taken place. New research confirms that the school continues to
support know human rights abusers.
More information about the School of the Americas can be found on
the SOAWatch website at http://www.soaw.org.
I spoke at the demonstration at the gates of Fort Benning last year
and will be going again this year. I hope you might consider joining
me. It’s an important and inspiring event.
Thanks.
Peg.
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Market: Free from what? Free for who? Those are not anymore questions: We know the answers!
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Yes, certainly 🙂
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