Strange Bedfellows


The New Deal, which did much to equalize and humanize American capitalism, has always been despised by the plutocracy that owns our country. The reasons for this hatred were largely about power and control as outlined in the Political Aspects of Full Employment, in 1943, by Polish economist Michael Kalacki.

“Every widening of state activity is looked upon by business with suspicion, but the creation of employment by government spending has a special aspect which makes the opposition particularly intense.  Under a laissez-faire system the level of employment depends to a great extent on the so-called state of confidence.  If this deteriorates, private investment declines, which results in a fall of output and employment (both directly and through the secondary effect of the fall in incomes upon consumption and investment).  This gives the capitalists a powerful indirect control over government policy: everything which may shake the state of confidence must be carefully avoided because it would cause an economic crisis.  But once the government learns the trick of increasing employment by its own purchases, this powerful controlling device loses its effectiveness.  Hence budget deficits necessary to carry out government intervention must be regarded as perilous.  The social function of the doctrine of ‘sound finance’ is to make the level of employment dependent on the state of confidence.”

So basically the New Deal, which put Americans back to work through government efforts, subsumed the wealthy owners power and control. No wonder they hated it.

Neoliberalism was their response to the progressive reforms brought about by this  government intervention. While the economists and political theorists who met at Mont Pèlerin, depicted their efforts as saving humanity from the long and painful road to serfdom, the end result has been a return to the type of power enjoyed by the robber barons of the Gilded Age.

I’m sure it’s just a coincidence.

The neoliberal theory that best sums up how the masters of the universe have been able to reestablish control over the economy is shareholder capitalism. “Epitomized by neoliberal economist Milton Friedman, the theory of shareholder capitalism states that the only social responsibility of a corporation is to increase its profits, laying the groundwork for the idea that shareholders, being the owners and the main risk-bearing participants, ought therefore to receive the biggest rewards. Profits therefore should be generated first and foremost with a view toward maximizing the interests of shareholders, not the executives or managers who (according to the theory) were spending too much of their time, and the shareholders’ money, worrying about employees, customers, and the community at large. The economists who built on Friedman’s work, along with increasingly aggressive institutional investors, devised solutions to ensure the primacy of enhancing shareholder value, via the advocacy of hostile takeovers, the promotion of massive stock buybacks or repurchases (which increased the stock value), higher dividend payouts and, most importantly, the introduction of stock-based pay for top executives in order to align their interests to those of the shareholders. These ideas were influenced by the idea that corporate efficiency and profitability were impinged upon by archaic regulation and unionization, which, according to the theory, precluded the ability to compete globally.”

This pernicious theory has long had its critics, including yours truly, but now something strange is happening.

Marco Rubio, of all people, has fired the latest salvo against shareholder capitalism. Rubio–neocon extraordinaire–normally spends his days plotting regime change against Cuba or Nicaragua or Venezuela.

In a new report, “American Investment in the 21st Century,”  Rubio sounds almost like socialist Alexandria Ocasio Cortez, and puts the blame squarely on institutional changes in corporate management and capital markets that demand a single-minded emphasis on short-term financial results over sustainable growth. What’s amazing is that the only reason this sounds so radical is because for so long Republicans like Rubio have reflexively supported anything that the plutocracy and the corporations they own have proposed.

I really don’t know what’s gotten into him but Rubio argues that the prevailing business model of shareholder value—the idea that the only goal of a corporation is to return the maximum value to its owners—is ruining us. “The decline of business investment in the U.S. is not due to inexplicable secular shifts in the economy, nor a lack of capital available for investment, but a misallocation of productive resources. This misallocation is driven by the choices of political and social institutions that do not properly prioritize the obligation of the American economy to reproduce itself.”

I couldn’t agree more.

I guess politics really does make strange bedfellows.

Update: What the fuck! Is there something in the water?

Rahm Emanuel says It’s Time to Hold American Elites Accountable for Their Abuses. “[E]ven after being bailed out, the nation’s banking executives never faced any real consequences. No one went to jail. They never had to repay the personal fortunes they’d made by passing out those bad loans. Once again, the middle class was called to bail out the elites who were responsible for the mess while the elites got off scot-free…. As the White House chief of staff, I argued, unsuccessfully, that the American people needed the catharsis of seeing that the bankers who had gotten the country into this mess were being forced to take responsibility—that faith in government would plummet if we failed to deliver some ‘Old Testament justice.’”

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