Why Are Free-Market Economists Still Taken Seriously?

By MARC MCDONALD

They've been shown to be wrong time and time again. And their policies have led to widespread disaster and misery for millions of people.

Who am I talking about?

The NeoCons and their wrong-headed views on Iraq?

Nope, I'm talking about free-market economists.

No group of "experts" has a worse track record on accurate information about how our world really works. And yet, mysteriously, free-market economists are still held in reverence and awe by many. And their proclamations are hailed as the gospel truth by everyone from politicians to academia to the mainstream media.

Free-market economics seemingly got an enormous boost in credibility in the 1980s and has reigned supreme as the only conceivable policy for running America's economy ever since.

There's only one problem with free-market economists and their followers: they're full of shit and they have a dismal track record on the truth. And worse, the world simply doesn't operate the way they believe it does.

Free-market economists are rabid advocates of a unfettered, dog-eat-dog, ruthless form of capitalism. Leaving everything to the "free market" is the best way to run a society, they maintain. And at the end of the day, no other economic system can possibly compete with capitalism, they say.

As "Exhibit A," the free-market economists proudly point to capitalism's vanquishing of the Soviet Union's style of communism in the Cold War.

What more proof could one want that capitalism is the best way to create wealth and prosperity?

Actually, in the years since the Cold War ended, a few dissenting voices have started to speak up about the supposed superiority of unfettered capitalism.

First, there is the issue of whether the United States really prevailed in the Cold War, after all. A number of commentators have pointed out that, without enormous sums we borrowed from Japan in the 1980s, the U.S. wouldn't have "won" the Cold War.

Indeed, as the brilliant author Chalmers Johnson has pointed, out, it was really Japan, not the U.S. that won the Cold War. Indeed, the decade of the 1980s was nicely summed up by MIT economist Lester Thurow when he wrote: "We borrowed a trillion dollars from the Japanese and threw a party."

I should point out here the irony of celebrating an economic system that is totally dependent on vast amount of foreign capital in order to function. And make no mistake, no matter how one views the Japanese economy, it is definitely NOT anything that a Western economist would recognize as "capitalism."

Indeed, the Japanese model couldn't be further removed from U.S.-style economics. In Japan, the nation's economic destiny is shaped by powerful technocrats at the Ministry of Finance. Industrial policy is set by the government, rather than determined the whims of the private sector. It is a heavily regulated system that is a million light years removed from American-style "capitalism."

What's more, the Japanese economic model has been widely imitated throughout East Asia (which is now by far the most dynamic and fast-growing area on Earth). From Taiwan to South Korea to mainland China itself, Japanese economic policies are widely implemented these days. For example, China has copied elements of Japan's employment system, its mercantile policies, its emphasis on manufacturing, and even its Keiretsu system of organizing companies into powerful groups.

This important development, of course, is completely ignored by U.S. economists. Many of them maintain that "unfettered, free-market, U.S.-style capitalism" is the model that East Asia aspires to. Indeed, the "conventional wisdom" in U.S. economics is that Japan itself is "yesterday's news" and is a fading power. It's a bizarre viewpoint indeed, when one considers that the supposedly "more efficient, superior" U.S. economy would collapse were it not for the hundreds of billions of dollars in Japanese capital that props up the American economy and the dollar these days.

A big part of the problem with U.S. economists is that they are a remarkably ignorant about the rest of the world. The only country that they've studied at all, or paid any attention to (outside of the U.S.) is Britain.

Which brings me to another misconception spread by U.S. free-market economists. The latter are constantly praising the era of Margaret Thatcher.

What more proof does one need that unfettered capitalism reigns supreme than the example set by Thatcher's Britain, they ask? After all, Thatcher busted the unions, cut regulations and decimated the welfare state---and as a result, the former "Sick Man" of Europe prospered in the 1980s.

At least that's the fairy tale we've been led to believe.

As they did with Reagan's revolution, though, the economists aren't telling the whole story of the Thatcher era as they breathlessly sing the praises of the Iron Lady. Over the years, a growing number of writers, like James Howard Kunstler,
have pointed out that what really made Britain shine in the 1980s wasn't Thatcherism at all. Rather, it was the incredible bounty that Britain reaped with the North Sea oil bonanza in the 1980s.

It's this latter point that really irritates me and makes me question the honesty of the economics profession. The field's dishonesty can be summed up thusly:

1. Starting in the 1970s, free-market "Chicago School" economists urged various "reforms," from gutting the welfare state to crushing unions to abolishing any and all regulations on business.

2. In the 1980s, the above prescriptions were implemented in the U.S. and Britain, under Reagan and Thatcher.

3. The economies of both the U.S. and Britain prospered, thanks to hundreds of billions of borrowed dollars (in the case of the U.S.) and the North Sea Oil boom (in the case of Britain).

4. As the U.S. and Britain boomed, economists proclaim their free-market prescriptions "vindicated"---completely ignoring the fact that the prosperity in both nations had nothing to do with their remedies.

Free-market economists are so arrogant and sure of the wisdom of their teachings that they've become oblivious to the fact that the real world simply doesn't work the way they believe it does. (For example, the real economic success story of the past quarter century has been China---a nation which completely rejects every single tenet of how a nation's economy should be run, according to the gospel of the free-market economists).

And their ideas remain in vogue to this day among American policy-makers. Never mind the fact that the U.S. is in increasing peril, thanks to their policies. The gigantic deficits that Reagan racked up in the 1980s now seem trivial, compared to the even-more titanic deficits that America faces today.

Free-market economics has been directly responsible for America's out-of-control and spiraling fiscal and trade deficits. The latter crisis threatens to force a collapse in the value of the dollar. And when the dollar melts down, America's reign as a superpower will come to an end.

Free-market economists, of course, are blissfully unconcerned about this looming crisis. For them, the solution to anything and everything is more of the same. More tax cuts for the rich, more union busting, more elimination of any and all red tape and the complete rejection of anything remotely resembling a national industrial policy. As far as deficits go, they maintain a "Don't Worry, Be Happy" approach.

I never thought I'd find myself agreeing with anything that Pat Buchanan ever said---but actually, he of all people, once made a comment that neatly sums up the view of all those who wear free-market economics blinders: "To worship at the altar of free-market economics is no less a form of idolatry than worshipping at the altar of socialism."

Free-market economists have done at least as much damage to our nation as the NeoCons over the past quarter century. How much longer will we as a nation continue to follow their disastrous, wrong-headed advice?

White House Censorship Of Global Warming Science Nothing New

By MARC MCDONALD

The White House has come under fire for censoring congressional testimony on the public health challenges of global warming.

But it's not the first time the Bush administration has tried to censor the inconvenient truths of global warming.

In October 2004, NASA's top climate scientist revealed that a senior administration official told him in 2003 not to discuss dangerous consequences of rising temperatures.

The New York Times reported in January 2006 that the NASA scientist, James E. Hansen, said the Bush administration tried to stop him from speaking out after he called for "prompt reductions in emissions of greenhouse gases linked to global warming."

The Bush White House's war on global warming science continues to this day.

Yesterday, the Associated Press reported the White House "severely edited congressional testimony given Tuesday by the director of the Centers for Disease Control and Prevention on the impact of climate change on health, removing specific scientific references to potential health risks, according to two sources familiar with the documents."

No one should be surprised that the Bush White House is lying about global warming and is furiously working to censor the science. After all, George W. Bush is in the pocket of the oil corporations and other Fortune 500 companies who put him in power (and which fiercely oppose any government action on global warming).

What's amazing, though, is despite the lies, spin and misinformation pumped out by Bush (and the rest of the NeoCon propaganda machine), the American people are STILL alarmed by global warming and want the government to step in and deal with the crisis.

For example, a survey taken last year by ABC News, Time magazine and Stanford University revealed that almost seven in 10 Americans say the government should do more to address global warming. And what do you want to bet that those remaining 30 percent are the same Kool-Aid drinkers who get all their news from Rush and Fox?

AP Borrows A Page From Right-Wing Nutcase Blogs

By MARC MCDONALD

Browsing news stories of the latest carnage from Iraq today, my eye caught this extraordinary sentence buried in an Associated Press report about U.S. forces claiming to have killed 49 militants in a dawn raid in Baghdad's Sadr City Shiite enclave:

"Iraqi police and hospital officials, who often overstate casualties, reported only 15 deaths including three children."

Say what?

This sounds like the sort of wild-eyed, paranoia-fueled conspiracy claim that one normally would find only in the extreme fringe far-right blogosphere.

But that sentence didn't come from Little Green Footballs or Flopping Aces, or any of the other right-wing nutcase blogs that populate the outer fringes of the Web.

It came from the Associated Press.

And, frankly, it's an extraordinary claim--and one that doesn't hold up to scrutiny.

Note that this AP report isn't claiming that Sunni insurgents, or Shiite militias lie about their casualties. That wouldn't be anything new. In fact, we've heard claims like those before, (as the insurgency and the U.S. military continue their ongoing propaganda wars).

No, this is "Iraqi police and hospital officials," whose casualty claims, AP would have us believe, are no longer to be trusted.

Maybe I've missed it in previous AP coverage, but I don't recall ever seeing this extraordinary claim made in previous AP coverage. It seems like this bold claim would warrant a major, investigative story in and of itself.

There's a couple of major problems with AP's assertion that Iraq police forces and hospitals are liars.

First of all, it doesn't really make a whole lot of sense. If we're talking about claims made by insurgents, then surely a dose of skepticism is in order (although, from what I've seen, insurgent casualty claims have been no more inaccurate than claims by U.S. military officials over the years in Iraq).

But this latest AP report is disputing the Iraq police and hospitals: a solidly mainstream source if there ever was one. If we can't believe fundamental, basic information released by the major institutions of the Iraq state, then, who, exactly, can we believe? Is AP now making the kooky right-wing blog-like claim that Iraq's own police and hospitals are conspiring against the U.S. military? That's surely what this sounds like.

The second major problem I have with AP's claim is that I really wonder how on earth AP would know if the Iraq hospitals and police were "overstating" casualty figures.

Like I said, this AP report looks like it could've been lifted from the pages of the Web's extremist right-wing nutcase fringe. The latter, after all, are always disputing anything and everything that comes out of Iraq (unless it's spoken by the likes of George W. Bush, Dick Cheney, or Rush Limbaugh---a group which, ironically has the worst track record of accurate information on anything Iraq-related).

Ever since 2003, when the Iraq War began turning disastrous (around the time Bush declared "Mission Accomplished"), the right-wing blogosphere has been casting about, looking for a scapegoat to blame for the fiasco. AP has been one of the main targets of the right-wing lunatic fringe, with "controversies" like the Jamil Hussein case. In the latter case, the right-wing nutcases claimed that Hussein, an AP source, didn't exist. When it was later determined that he did, in fact, exist, the right-wingers quietly tiptoed away from the story and dropped the matter.

Despite the fact that the Jamil Hussein "controversy" blew up in their faces and revealed them to be the uninformed Kool-Aid-drinking idiots that they are, the right-wing blogosphere has continued to slam AP repeatedly over "biased" war coverage over the years.

And now, it appears that AP is caving in to the right-wing blogosphere and is giving credence to the sort of wild-eyed paranoid claims that one previously had to scour the nutcase fringe blogs to find.

American Airlines Fights To Halt Worker Pay Raises, Even As CEO Pockets Millions

By MARC MCDONALD

Workers at American Airlines agreed to wage and benefit cuts worth $1.6 billion when the company was on the verge of bankruptcy a few years ago. Thanks to the workers' sacrifice, American Airlines is profitable again.

Now, instead of rewarding its employees, American Airlines wants to halt worker pay raises.

However, there's one group of American Airlines employees who aren't being asked to share in the pain: the executives. Over the past couple of years, American Airlines gave stock bonuses worth $250 million to the company's executives and managers.

So much for "shared sacrifice."

American Airlines' CEO Gerard Arpey did particularly well last year. Arpey pocketed a $581,534 salary last year, along with $39,769 in other compensation. But that was chump change, compared with the $4.8 million in stock and option awards that Arpey received last year. And in April 2007, he pocketed a bonus of $6.6 million.

The American Airlines saga is just another chapter in the skyrocketing inequality that has taken place in America since Ronald Reagan declared war on labor unions in the 1980s. Indeed, the American labor movement never really recovered from Reagan's firing of 11,345 striking air traffic controllers in 1981.

Reagan, a former union man himself, stabbed the workers of the Professional Air Traffic Controllers Organization in the back. But worse than that, he gave a green light to corporate America to bust unions, ignore labor laws, and screw workers---a process that continues to this day.

As a result, America has been increasingly economically polarized since 1980s. The middle class is shrinking and inequality is at its highest level since the Robber Baron era of the late 1800s.

CEO salaries tell the story. In 1980s, the CEOs of Fortune companies earned about 42 times as much as the average worker. By 2000, CEOs were making over 500 times what the average worker earned. In 2004, the average CEO of a major corporation received over $9.8 million in total compensation.

This economic gulf is unique to America, by the way. In Japan, for example, CEOs only make around 17 times what the average worker earns. In Continental Europe, the multiple is around 22.

But if a U.S. CEO making more than 500 times what the average worker earns sounds like a wide gulf to you, it's nothing compared to what one sees in the airline business these days.

For example, United Airlines executive Glenn Tilton makes 1,000 times what a United flight attendant at the top of the scale earns. Tilton's total compensation in 2006 was estimated at $39 million. By contrast, United flight attendants earn an average salary of about $31,000.

No doubt, I will soon be hearing from this blog's NeoCon visitors, who will start lecturing me about how CEO pay is all part of the "free market." No doubt, they'll lecture me about how "liberals just don't understand capitalism."

Well, they're entitled to their viewpoints. But I wonder where these Republican-voting "capitalists" were in 2001, when the Republicans and the Bush White House bailed out the airline industry with $15 billion of taxpayer money (including a cash gift of $5 billion). If Bush supporters think this is "capitalism," they need to go back and re-read Adam Smith.