Monday, August 15, 2011

The Evolution of Neoliberalism in the US and the Rise of Financialization

written by me

The era of neoliberal politics and economics that began in the late 1970s was marked by deliberate efforts to bolster the power and authority of corporations, particularly financial corporations. Tax reforms slowly eroded progressive taxation for corporations and the nation’s elite (see Hudson

Trade policies and banking regulations were “liberalized,” enabling the unfettered circulation of speculative capital. Steven Hiatt remarked that “if the global empire had a slogan, it would surely be Free Trade” (p. 21).

Simultaneously, citizens slowly lost access to the “positive liberties” of social-welfare benefits that had been established by the liberal security state in the 1930s through 1960s.

In the U.S., neoliberal reforms strove to empower “market” mechanisms, thereby targeting the supposed “excesses” of liberal government seen as creating dis-incentives for efficiency and enterprise.

Citizens found rights “to” social resources and privileges curtailed not simply by fewer economic opportunities, but also by a logic of personal initiative and responsibility that penalized the poor and working classes while affirming the greed of elites (e.g., the greed as good ethos).

The collectivized logics of pensions, government-sponsored health insurance, and even public education were subject to philosophical assault and tactical attacks (e.g., efforts to kill public programs through budget cuts). See Naomi Klein

The project of empowering the poor and lower-middle classes was largely abandoned by elites and their chosen policy makers. The poor and dependent reverted in the popular mind to undeserving populations. Welfare reform was adopted to discipline the undeserving into taking low-wage service jobs in the post-industrial FIRE economy (finance, insurance, and real-estate).

The elite cultural ethos of noblesse oblige that had somewhat fettered elite ideology and practice since the 1930s was shed in a frenzy of cultural narcissism and greed. This shift in zeitgeist was marked by popular culture in films such as Wall Street, novels such as The Bonfire of the Vanities, and music such as Madonna’s Material Girl.

In the late 1980s and 1990s, financialization of the economy occurred extensively in U.S., UK, and parts of Western Europe as financial motives, institutions, and elites became increasingly important in shaping the economy in response to the decline in profit margins in manufacturing.
Banks grew to dominate their domestic economies, particularly within the U.S.: by 2010, six U.S. banks, held assets in excess of 63 percent of the U.S. Gross Domestic (Bill Moyers, 2010).

Moreover, innovative financial instruments such as derivatives, collateralized debt obligations, and credit default swaps enabled the financial investment banks and commercial banks to accumulate wealth outside of the circuits of commodity production. See Max Keiser for details

Bryan, Martin, and Rafferty (2009) claim there is no direct historical equivalent for this new form of financialization, not simply because of the size of financial institutions, but also because securitization and financial derivatives “are transforming capital accumulation” in ways unimaginable by Marx and the classical economists (my italics, p. 459).

Contemporary financialization requires little labor to produce value (see Nadesan, in press).

International lending institutions such as the IMF and the World Bank became deliberate instruments of neoliberal accumulation regimes for western banks, investors, and contractors in the developing world (see David Harvey; Perkins Confessions of an Economic Hit Man).

Steven Hiatt describes a “Marshall Plan in reverse” implemented in the developing world that in 2007 required more than $375 billion in annual debt payments (19).

Hiatt explains how funds flowing into the developing world in the forms of loans for inflated projects, structural adjustment and development loans, and export credit agency financing lead to a significantly greater outflow of money back to the developed world in the forms of loan payments, rigged bids, flight capital, kickbacks, manipulated commodity markets, embezzled funds, arms contracts, tax evasion and money laundering, etc. (20).

What money that did flow into the developing nations at the beginning of the twenty-first century was aimed at securing transnational corporate and elite control of resources in a time of dwindling access to fresh water, fertile land, and that prize, oil....

to be continued...

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