In 1994, in an interview, Milton Friedman said that in the 1990s there is “much less optimism and all the problems have been produced by government.”
This is the essential argument between the two political parties in the United States today. One pretends to be the party of Conservatives, whom they define as people like Milton Friedman.
The other, the Democratic Party does not object to being called the Party of (big) government because they see government doing good works for the People. When it is allowed to do so.
Both political parties are deeply involved in every activity of government. Both political parties know how much is earned in revenues and how much is spent. There are no stupid people asleep at the switch, or not many, as they would have you believe.
Your representatives in Congress are not stupid. But some are liars.
Friedman was wrong. Government does not create problems. Government is the recipient of problems. For example, the Wall Street crash was not the fault of government. It was inaction of government. If there was any fault of government, it was in deliberately ignoring the fraudulent activity of the private sector. The private sector crashed the economy. Government should have done more, not less, to prevent it.
The government became the recipient of the resulting catastrophe–the unemployment, the bankrupt companies, the financial bailouts. Private bankers, left to their own greed and fraud, either needed government or our entire economy, or so we were told, would collapse. So government once again stepped in to rescue the greedy and the foolish in the business world.
Even then, it was bad enough, with 15 million people out of work and another 5 million hanging on with part time jobs. And now the Republicans, beholden to Wall Street and the great corporations and fortunes, have stopped any recovery in its tracks with over 380 Senate filibusters.
The American economic problem is not government action. It is government inaction. A group of vain, arrogant and ambitious Senators from the old Confederate states, still not happy that segregation is in the past, cannot stand the idea that African Americans are allowed to live as equals in a free society Their clear goal is to remove every possible attempt to provide education, safety and the possibility of growth for American citizens.
Furthermore, with half a dozen corporations controlling each industry, many headquartered abroad with workers in Asia, Hayek’s and Friedman’s perfect competition simply does not exist in the United States, except in the minds of Conservatives.
Our Capitalist system is a slanted, corporate directed, influence peddling, lobbying, scheming, materialist economy of exactly the kind that Milton Friedman said he abhorred. Of course, while he was alive, while his entreaties at every juncture, every speaking opportunity, claimed that he was a true Classical Liberal economist…he joined with the Republican Party at every opportunity.
There is a good case that he talked Conservative (today’s term for Classic Liberal from the 19th Century) but that he was instead less than honest. After all, he was a supporter of George W. Bush and Dick Cheney, who in addition to clearly being unindicted and untried war criminals, stole more from the American People in an 8-year span than any other government. They were big government personified, in the worst possible ways.
As merely one small example, Cheney, unlike any Vice President in history before him, continued to draw income from Halliburton Corporation, a company to which he directed over $12.5 billion in war contracts during his administration. That alone, at any time when the government was not completely controlled by Republicans, would have been enough for his impeachment or a demand that he leave office.
Even worse than that for the American People, Cheney and Bush appointed a known anti-regulatory activist, Congressman Christopher Cox into the Chairmanship of the SEC. They then encouraged him…during the most dangerous time in our economy…a period of obvious speculation…to look the other way. That was all Cox needed.
According to many ex-SEC attorneys and regulators, Cox not only ignored the signals of a pending financial disaster, he supported those in Wall Street who were bringing it about. He promoted lax review of unsafe securities, fired attorneys who became too eager to prosecute swindlers and crooks, and literally threw the files of serious investigations of fraudulent securities sales into his own wastebasket. .
No one did more to aggressively ruin the lives of Middle Class Americans than Christopher Cox. He presided over the loss of more than $7.5 trillion of assets belonging to the American People just as surely as if he had stolen their money and burned it. If the crash and Depression had resulted in a revolution like that of 1789, Cox should have been in the top five to lose his head.
Milton Friedman’s Neo-Classical economics played directly into the 8-year Republican economic and political scam. He would have said that government should stay out of financial markets. But he would also have said that investors should not have been so ignorant of the securities they were buying that they would lose large amounts of money. In other words, “caveat emptor;” it is a free society. Blame the victims.
And that is exactly what Bush and Cheney did. Using the cover of phony Neo-Classical economics, “hands off the private sector,” hands off the giant corporations. Let the free markets decide. End regulations that hold back progress. Things are moving ahead spectacularly. Until they hit the wall. And who suffered? Not Bush or Cheney. Not Cox. The American People lost at least half of their wealth and they are still losing it.
Meanwhile, in 8 years they spent $12 trillion more than the country took in. You cannot say, “Well, but we had two wars and two tax cuts and a prescription drug plan that cost $600 billion.” That is true…because of their policies. Bush was the “decider,” remember? Those were his own words. He and Cheney decided to take this country into near-bankruptcy.
Of course, their putative economic guru, Milton Friedman, would say that government cannot spend beyond its budgets, with larger and larger debt each year. Nor would Hayek sign off on that. In Friedman’s theoretical world, one year’s deficit would be enough. But they had not one year but 8 years. Then they left us a Depression with 4 more years of catastrophic consequences.
Hayek and Friedman, no matter their personal allegiances, would be forced to call Bush and Cheney…not Conservatives…but…Socialists! But of course in the real world, they didn’t.
Instead of making drug companies compete on a fair playing field to lower prices, Bush-Cheney gave pharmaceutical companies over $600 billion in subsidies over 10 years, some to be borne by taxpayers, the rest by retired citizens on Medicare. There is no other way to see it than big government giveaways. This is redistribution of income. Your taxes went to subsidize big pharmaceutical companies. You continue to pay high prices, but now you, the taxpayer, give you, the person on Medicare a small discount on some drugs by capping your costs at around $3000 to $4000.
Was there more Hayek-like competition and fairer pricing in the Bush Administration? No. There was more concentration of economic power in the hands of a few corporations. When the stock market crashed, the Republican Secretary of the Treasury, Hank Paulson, went to Congress, asking for a $750-billion-dollar bail out of Wall Street banks and investment companies.
Does this sound like Classic Liberal economics, Austrian free-market economics? Do they think we are completely stupid and cannot read, write, add or subtract? Free market economics? On the contrary this is almost exactly Heyek’s definition of Socialism.
We bailed out wealthy stockholders of the largest banks in the world. Government was forced to bail out the richest men in America because they were in a position to ruin the economy even worse than it is now…if you can wrap your head around that concept. The average income of people working on Wall Street is $300,000 per year. The average American family makes maybe $45,000 per year in a very good year and it is going down.
So this was worse than centrally planned Socialism. This was unplanned simple Socialist redistribution of income…from the average taxpayer to the rich banker.
Hayek and Friedmen, it is pretty clear would not only be against government regulating stocks and bonds. But…they would be equally as adamant about not bailing out the big banks. They would be against the huge Bush-Cheney deficits. They would call the subsidy of huge pharmaceutical companies by government worse than Socialism. It would be Socialism for the rich and powerful…exactly what these two theoretical purists would expect to avoid with perfect competition.
So why would Conservatives in the Republican Party continue to maintain that they have austere policies that call for reduced government size when, in practice, they do the opposite? Why would a political party in power spend $12 trillion more than revenues it took in and then call themselves “conservative?”
It is a lie of course. It is a lie and further propaganda perpetuating the lie so that they can fool enough of the People to stay in political power. And why is that? It is because a new political agenda called Neo-Fascism that aligns corporate interests, superstitious religious views, the military and some of the super-wealthy now has a stronghold in Washington, D.C.
It could be called monopolist, oligarchic, plutocratic or corporatist…but not Neo-Classical Conservatism. These people are big government spenders. But now, with a Democratic President, someone working for the People, they want to cut government to save their hugely wealthy patrons from higher taxes to pay for the $16 trillion in debt that they almost exclusively caused.
Bush and Cheney were big government, big spenders, but with a twist. All the excess spending went to giant corporations, to the military-industrial complex and very often to large political contributors, including the very Wall Street firms that crashed our economy.
The other twist was that Bush-Cheney decided that not only could we afford giveaways to giant corporations but we could also cut taxes, reducing government income. Corporations earned tax cuts in the form of tax deductions for manufacturing abroad, or taking their corporate headquarters to Bimini. All the while, their paid flack economists, like those at the Cato Institute or the Heritage Founation supported greater and greater national deficits with continued deficits.
We cannot separate politics from economics any more than Hayek could. He feared totalitarianism. He thought that well-meaning Socialists were following a path leading to totalitarian government. What he misunderstood was that those governments were Socialist in name only. They had already transferred their allegiance to huge industrial corporations and the military. In Russia, Socialists did transform into a different kind of totalitarian government, but not because of Socialism. The government was taken over by Stalinists, totalitarian rulers who did not adopt the true ideas of either Socialism or Communism.
Over the last several decades, the Republican Party has replaced the Democratic Party as the party of the old Confederate states. They have deliberately pandered to a certain amount of racism, a certain amount of Fundamenalist Ecumenism, a certain false patriotism and an enormous amount of anti-humanist sentiment…against equality, against secular education, against gays, against climate change, against women’s rights and against “big government.”
In other words, Republicans turned against those who were in favor of a progressive society, of ending Segregation. It is no coincidence that the leaders of the Republican Party all refer to their roles models as people like the hyper-racists Jesse Helms and Strom Thurmond who left the Democratic Party on the issue of de-segregating the South.
It is very clear from the record that the Republicans who supported Bush-Cheney were not traditional Conservatives. All who did not agree with them, by the way, are now gone from the new Republican (Neo-Fascist) party. They spent big and cut taxes big so that government would fail. They did it and are still doing it deliberately. Whatever the current Republican economic formula, it is clearly not Neo-Classical Hayekian-Friedman Conservatism.
But how do you win by appealing to the bigoted and the racists and the intolerant and the homophobes? As bad as human nature can often be, you can’t count on racists alone to your political base. There are normally more decent people than slugs.
You do it by simultaneously capturing the media, pandering to rich and large corporations who advertise on that media, and creating enough daily propaganda to at least confuse the People at at best persuade them to vote against their own best interests. campaign donors who will help you lie to a vulnerable population. The confederate states are almost all among the least well educated, statistically, and among the most superstitiously religious.
Large campaign donations from oil companies and Wall Street help Southern politicians spread propaganda so thoroughly that they are able to continue the myths that have often plagued the south through Reconstruction and Segregation. In a society still bound to a great degree by racism and poverty and lack of education (statistically the old Confederate states all rank highest in those attributes) it is not difficult. Especially where people still think that the earth was created 6,000 years ago, including several medical doctors representing various districts of that kind in Congress.
Corporations and the rich, because they are the natural allies of the Republicans—do not want Southerners to have higher wages—they can always move South if they want more profit—spend enormous sums on syndicated radio programs popular in the South. Radio talk show hosts like Rush Limbaugh, under current laws, have no obligation to allow competing points of view.
At one time, anyone traveling in a rural area of the United States by automobile would only be able to get one AM radio station and that one station invariably carried Rush Limbaugh. He was on 1600 radio stations on one network and syndicated on others. He was kept on the air by Right Wing syndicators, paid by the wealthiest corporations. Even at the peak of Clinon’s popularit and the pinnacle of our country’s economic prosperity, Limbaugh attacked the Clintons mercilessly, supporting the obstruction of the Republicans in the Senate, which did not succeed.
Limbaugh did so despite the fact that we had the highest GDP growth and longest period of continued prosperity in our country’s history, including the one immediately after World War II up to the end middle of the 1970s. The Clinton era was the beginning of the relentless Right Wing propaganda attack on Americans that we see continuing today, trying to divide us by political party, by religious views and by false economic choices.
And that is where we are today.
Part V — The Failure of Conservative Economics — Transition