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Why do politicians tell us Debt/Deficit myths which they must know to be untrue?

First posted on 3rd December 2013 at Think Left

The New Economic Perspectives’ video clip on the Government budget, Deficits and Debt presented below (produced for educational purposes), debunks the myths that politicians tell their populations to justify ‘austerity’.  In the case of the clip, it starts with 3 full minutes of American politicians misinforming the electorate.  An identical montage aimed at the UK electorate could undoubtably just feature George Osborne’s utterances from his forthcoming Autumn statement scheduled for this Thursday (5th December 2013).

However, the reality is that all economists know that the deficit and debt mythologies are not true and ‘have long known that the idea of balancing budgets over the cycle is a bit like a fairy story we tell to frighten the kids’.  Economists, and Central bankers like Mervyn King, Ben Bernanke, Alan Greenspan, all know that:

The UK government can never ‘run out’ of money;

The UK government can never be forced to default;

The UK government can never be forced to miss a payment;

The UK government is never subject to the whim of ‘bond vigilantes’.

In fact, the St Louis Federal Reserve, from the heart of Western capitalism in the US confirms the same for the US dollar (and any other nation that creates its own currency) :

‘As sole manufacturers of dollars whose debt is denominated in the dollar, the US government can never become insolvent ie. unable to pay its bills.  In this sense, the government is not dependent on credit markets to remain operational.  Moreover, there will always be a market for US government debt at home because the US government has the only means of creating risk-free dollar-denominated assets.’

Paul Samuelson, ‘father of modern economics’ and Nobel Prize winner, suggested the reason for perpetuating the mythologies in a 1995 interview:

“I think there is an element of truth in the view that the superstition that the budget must be balanced at all times [is necessary]. Once it is debunked [that] takes away one of the bulwarks that every society must have against expenditure out of control. There must be discipline in the allocation of resources or you will have anarchistic chaos and inefficiency. And one of the functions of old fashioned religion was to scare people by sometimes what might be regarded as myths into behaving in a way that the long-run civilized life requires. We have taken away a belief in the intrinsic necessity of balancing the budget if not in every year, [then] in every short period of time. If Prime Minister Gladstone came back to life he would say ‘uh, oh what you have done’ and James Buchanan argues in those terms. I have to say that I see merit in that view.”

It may be that politicians fear the ‘anarchic’ demands of the electorate were the public to understand that the UK economy is not like a household and can never be bankrupt.  However, these distortions of reality have been carried to a new pitch by George Osborne and the Coalition government:

The scale of the Coalition government’s intended austerity measures are on a scale never seen in modern Britain. What is planned here will dwarf anything that was undertaken by Thatcher in the 1980s. There is already massive unemployment in the public sector….Massive unemployment and lower wages mean lower tax receipts, and even bigger budget deficits and debt loads…It is now clear that the austerity policy in the UK is not a matter of economic necessity but of political choice… It is obvious that the cuts of this scale are about much more than just deficit reduction… The cuts are part of an agenda to transfer services from the public sector to the private sector. The pretence of ‘there is no alternative’ is a means for the Conservative project to radically transform the state.

It would be just as well to remember this week, when listening to George Osborne and Danny Alexander, that Keynes said:

’Capitalism is the extraordinary belief that the nastiest of men, for the nastiest of reasons, will somehow work for the benefit of us all.’


New Economic Perspectives on the Government Budget, Deficits, and Debt

Published on Nov 28, 2013

The video clip features the following speakers, in order of appearance:

Professor, Economics, University of Missouri-Kansas City
Senior Scholar, Levy Economics Institute
Author, Understanding Modern Money, Modern Money Theory

Professor, Economics, and Chair of the Department of Economics, University of Missouri-Kansas City

President, financial services firm Valance Co. Inc.
Author, Soft Currency Economics, The Seven Deadly Innocent Frauds of Economic Policy

For More Information:

University of Missouiti-Kansas City, Economics Blog:
New Economic Perspectives

The Modern Money Network

Other posts from Think left:

George Osborne says we’re running out of money ..

The fundamental deceit of ‘There’s No Money Left’

The Top 10 Flaws of Neoclassical Economics

First posted on Think Left

Unfortunately, Damon Vrabel’s Renaissance series of videos has been taken down and his site is no longer available – the reasons are not clear.  However, this summary remains, and remains instructive as to why neoclassical economics fails in its analysis.  Essentially, neoclassical economics ignores the activities of the banks, erroneously assuming their role to be the ‘middle man’ between depositor and investor.   Crucially (and perhaps in some cases, deliberately), neoclassical economists miss the overarching financial sector which leeches wealth from the real economy to the small number of oligarchs who constitute the entrenched private monopoly which effectively controls the global economy.

Revisiting Economics 101 – Debt: Imperial Power and Control discusses the power of debt-based money, emboded in the bond market, and its ability to exert total top-down power and control. Learn how our system is not a free market and how neoclassical economics misses so many key points.

The top 10 flaws of Neoclassical Economics according to Damon Vrabel

1. Money monopoly = free market

Neoclassical economics calls our current system under a private monetary monopoly a free market. Of course nothing could be further from the truth.
The monetary system is an overlay on top of the economic system. Economic systems create value through market activity, but the monetary system which overarches them, determine who captures their value.
Neoclassical economics completely ignores the monetary system, and the fact that it is controlled by an entrenched private monopoly.

2. Neoclassical Economics ignores that money comes from nothing but debt.

Economics does not address the fact that all money comes from debt. It assumes that base currency (M0, core money) is just a free-flowing medium of exchange that apparently comes from the US Treasury. It does not. It comes from the Federal Reserve backed by debt.

3. Neoclassical Economics ignores the artificial scarcity condition.

Economics ignores how a debt-based monetary system imposes scarcity on countries and populations. There is never enough money to pay back all the debt, so everyone is forced to jump on the hamster wheel, scrambling to find more money to pay back debt. This dynamic is perpetual. It never stops until the system crashes. It need not be this way.

4. Neoclassical Economics equates net worth with value creation.

Economics ignores how the financial class and others serving the upper end of the capital structure capture more money simply because they have entrenched power. They extract value. They do not create it. Economics is correct that participants in the economic system create value, but it misses the fact that the monetary system on top of the economic system determines who captures that value.

5. Neoclassical Economics assumes free, rational, economic actors by ignoring power differential of debt.

The power differential caused by the monetary system is ignored by economics. This is the only reason the system is erroneously called a “free market.” The monetary system is entirely centripetal, sucking all power to the center, or the top-tiered financiers. People are in servitude in a very controlling market, not a free market.

6. Neoclassical Economics ignores the instability of having a pure debt-based monetary system.

Economists ignore that the economic system is guaranteed to boom, bust, and eventually end – because the monetary system on top of it, is completely unstable and fundamentally flawed. It depends upon increasing debt. It cannot increase forever, and it can collapse to zero since people have no sovereign money.

7. Neoclassical Economics ignores the wealth illusion.

By not addressing the issue of debt-based money, economics fools people into believing the digits in their bank accounts equate to their wealth. But the fact is they represent a conditional liability, i.e. somebody else’s debt. This becomes obvious during deflation. The illusion is reinforced during inflationary periods.

8. Neoclassical Economics ignores perpetual exponential growth.

Unimaginably, economists ignore the most severe flaw of the monetary system that drives our economic system—it requires exponential growth. This guarantees eventual failure, but neoclassical economics conveniently assumes that problem away.

9. Neoclassical Economics ignores perpetual increasing scale.

As a result of perpetual exponential growth, institutions in the system continually get bigger and bigger. We saw this as the economic system made towns, counties, and states irrelevant through the last century, and we are now seeing it as mega banks and corporations are now making national governments irrelevant. People are now living as tiny cogs in a machine of incomprehensible scale. Everything in life has been monetized, so things that don’t generate bank credit get devalued (spirituality, psychology, rest, joy, play, etc).

10. Neoclassical Economics ignores perpetual increasing velocity.

Another problem from exponential growth is perpetually increasing velocity. The system has to chug faster and harder as it continues to grow. This means human life has to chug faster and harder. The most obvious manifestation of this is the endless, hectic commutes every morning to jobs we despise. We feel frustration, sometimes rage, toward our fellow commuters. That is just one small example of how systemic velocity affects the human spirit.

further reading:

The New World Order – Part 1. The Betrayal of the Nation

Plutonomy – Invasion of the Political Body Snatchers

Nineteen Eighty Four revisited – Is there a ‘world domination’ study course?

I have always wondered where Derren Brown learnt his skills – they are not in the average psychology textbook nor in a conventional hypnotherapy handbook.  However, I’m now also questioning the existence of a similarly secret school for world domination.


Because there is a remarkable similarity between George Orwell’s Nineteen Eighty Four dystopia and the pattern that the global elite and Cameron’s Conservatives seem to be trying to create.

Eton is the obvious answer because Cameron, half the cabinet and Orwell were all educated there but Eton was not the ‘playing field’ of Obama and the American contingent of the Washington consensus/global elite…  PPE at Oxford or a Masters at Harvard??

What are the parallels?

Obviously, the Edward Snowden revelations of Big Brother mass surveillance spring to mind, and also the lack of reaction from the broad swathe of the UK media (apart from the Guardian).

“The invention of print, however, made it easier to manipulate public opinion, and the film and the radio carried the process further. With the development of television, and the technical advance which made it possible to receive and transmit simultaneously on the same instrument, private life came to an end.”  Nineteen Eighty Four

But on top of mass surveillance, we find that the Conservatives are currently trying to purge the internet of their speeches and videos prior to 2010, just like the Ministry of Truth.

If you remember, Orwell’s Winston Smith worked in the Ministry of Truth as an editor, revising historical records to make the past conform to the ever-changing party line and deleting references to unpersons, people (video clips?) who had been “vaporised”, i.e. not only killed by the state, but denied existence even in history or memory.

Jim Killock, executive director of the Open Rights Group:

“The suspicion has to be that at the point they are engaged in a huge debate about mass surveillance … they are removing the videos where they criticise Labour for doing the same thing. That’s why it’s absolutely important that that material remains available.”

“He who controls the past controls the future. He who controls the present controls the past.” Nineteen Eighty Four

Then there are Cameron’s veiled threats to the Guardian over their publishing the NSA/GCHQ activities leaked by Edward Snowden.  (Alan Rushbridger should think himself lucky that he just had to destroy his hard drives.  It could have been ‘his worst nightmare’ culminating with his loving Big Brother Dave… but in the future?)

In the Britain of Nineteen Eighty Four, 2% of the population were the upper class ruling elite (probably an over-estimate in 2013 UK).  The majority, the 85%, were the ill-educated working class, or lower-class Proles.

“So long as they (the Proles) continued to work and breed, their other activities were without importance. Left to themselves, like cattle turned loose upon the plains of Argentina, they had reverted to a style of life that appeared to be natural to them, a sort of ancestral pattern…Heavy physical work, the care of home and children, petty quarrels with neighbors, films, football, beer and above all, gambling filled up the horizon of their minds. To keep them in control was not difficult.”  Nineteen Eighty Four

In addition to being kept busy, misinformed and badly educated, the Proles were seduced by the Lottery:

“The Lottery, with its weekly pay-out of enormous prizes, was the one public event to which the proles paid serious attention. It was probable that there were some millions of proles for whom the Lottery was the principal if not the only reason for remaining alive. It was their delight, their folly, their anodyne, their intellectual stimulant. Where the Lottery was concerned, even people who could barely read and write seemed capable of intricate calculations and staggering feats of memory. There was a whole tribe of men who made their living simply by selling systems, forecasts, and lucky amulets. Winston had nothing to do with the Lottery, which was managed by the Ministry of Plenty, but he was aware (indeed everyone in the party was aware) that the prizes were largely imaginary. Only small sums were actually paid out, the winners of the big prizes being nonexistent persons.”  Nineteen Eighty Four

It has to said that Michael Gove certainly seems committed to diminishing the educational prospects of the majority of state educated schoolchildren… and we’re told that many dream of winning the lottery/‘celebrity’/’getting rich quick’ which is fostered, coupled with the misinformation purveyed by the oligarch-owned so-called ‘free press’.

Interestingly, the remaining 13% of the population, the Outer Party, were the focus of the surveillance – not the Proles.  This fits with Chomsky and Herman’s contention that government ‘propaganda’ is aimed primarily at the middle classes.  ‘Bread and circuses’ are the fare of the red tops and are intended to distract the working class.

In Nineteen Eighty Four, Britain or Airstrip One, is part of Oceania, one of three inter-continental superstates that divide the world among themselves after a global war.  There is a perpetual war with the other two superstates, Eurasia and Eastasia, over disputed lands which include the Middle East and North Africa.

This is disturbingly close to truth, not only in terms of geography and physical warfare.  Significantly, Obama’s priority has been the TransPacific Partnership Agreement (TPPA) and that together with the EU-US Free Trade Agreement would form a single market which would basically include ‘everyone but China’… with the potential for a new cold war?  However, many including James Galbraith, contend that these Western trade agreements are not about trade at all, but more like an attempt to take-over and control the foreign country’s economy on behalf of the transnational corporations.

Why should we be very concerned about the current US/EU Free Trade Agreement?

The financial-corporate-political nexus is the hidden arm of any war-based economy.  Orwell again:

“The essential act of war is destruction, not necessarily of human lives, but of the products of human labour. War is a way of shattering to pieces, or pouring into the stratosphere, or sinking into the depths of the sea, materials which might otherwise be used to make the masses too comfortable, and hence, in the long run, too intelligent. Even when weapons of war are not actually destroyed, their manufacture is still a convenient way of expending labour power without producing anything that can be consumed.”  Nineteen Eighty Four

Which brings me to a final point, Cameron’s speech at the Lord Mayor’s Banquet:

Cameron talked about a “leaner, more efficient, more affordable state”. He argued that austerity could be a permanent government policy; a way of trimming down the administrative excesses of some public services. He framed it in the context of the current tough living conditions – a minimising of state spending, as it “comes out of the pockets of the same taxpayers whose living standards we want to see improve”.

In other words, Cameron admitted that the cuts were exactly what he had always intended, and not (as he had suggested in the culled speeches) an unfortunate necessity.

In way of explanation, Orwell writes:

“It was possible, no doubt, to imagine a society in which wealth, in the sense of personal possessions and luxuries, should be evenly distributed, while power remained in the hands of a small privileged caste. But in practice such a society could not long remain stable. For if leisure and security were enjoyed by all alike, the great mass of human beings who are normally stupefied by poverty would become literate and would learn to think for themselves; and when once they had done this, they would sooner or later realise that the privileged minority had no function, and they would sweep it away. In the long run, a hierarchical society was only possible on a basis of poverty and ignorance.”  Nineteen Eighty Four

In other words, when Cameron says ‘austerity could be a permanent government policy’, he is aiming to preserve the same type of unnecessary privation experienced by the Proles in Nineteen Eighty Four, and it’s fair to suggest, for many of the same reasons.

One of the contradictions identified by Marx, is the tendency of capital towards overproduction, and essentially, the main function of the unwinnable, perpetual war in Oceania was to ameliorate their ‘overproduction’ without threatening the maintenance of the power of the upper class elite.  Hence, instead of the wealth of their labour being fairly distributed to the Proles, it was consciously and deliberately destroyed by staging unnecessary wars.

Overproduction and Underconsumption

The term “over-production” is often used to describe that situation which initiates a period of capitalist crisis or recession, whereby too many goods have been produced, the goods cannot be sold, production grinds to a sudden halt, people lose their jobs, demand drops even further, and the downward cycle accelerates.

It is clear, that another way of describing ‘over-production’ is under-consumption or a lack of demand, which is identified by many as the real problem in the Western economies.  The overt problem is that real wages have not increased since the 70s, and are now decreasing further, which sets up a spiral of people not being able to buy goods, so production is cut back, further lessening the available income and decreasing demand.

However, underlying the ‘lack of demand’ is that industries and companies are not investing in jobs or expansion.  Jobs create income which is spent thus producing demand.  But big businesses are on strike… in spite of holding an estimated £800bn in ‘savings’ … because the profits that they can make from investing in the real economy do not match the profitability of fictitious capital.

Fictitious Capital is value, in the form of credit, shares, debt, speculation and various forms of paper money, above and beyond what can be realised in the form of commodities.

For example, car production is a minor activity on the part of General Motors, and this is the pattern across the large corporations.

However, fictitious capital has to be fed by the surplus extracted from workers and this grows to be more and more of a burden on the backs of the workers until profitabilty can no longer be maintained, and slump takes over.

Unfortunately, even George W Bush knew a resolution for this contradiction of capitalism – ‘The way out of a recession is war’… even if the method of war on people/nations is financial and corporate.

Why are many of the WW2 generation worried about the rise of fascism?

So perhaps there is no need for a secret school teaching ‘world domination’.  The global elite just need to have a thorough understanding of Marx’s contradictions of capital, and devise strategies, regardless of detriment to the 99%, to retain their  power. The Left should have followed the model of the Magic Circle and kept Marx’s analysis a close-guarded secret.

Why are many of the WW2 generation worried about the rise of fascism?

At a time, when those British soldiers killed in war are remembered, it is salutary to focus on why many of the WW2 generation are so nervous about the parallels between the 1930s and now.

“What no one seemed to notice,” said a colleague of mine, a philologist, “was the ever widening gap, after 1933, between the government and the people. Just think how very wide this gap was to begin with, here in Germany. And it became always wider. You know it doesn’t make people close to their government to be told that this is a people’s government, a true democracy, or to be enrolled in civilian defense, or even to vote. All this has little, really nothing to do with knowing one is governing.

 What happened here was the gradual habituation of the people, little by little, to being governed by surprise; to receiving decisions deliberated in secret; to believing that the situation was so complicated that the government had to act on information which the people could not understand, or so dangerous that, even if the people could understand it, it could not be released because of national security. …

 This separation of government from people, this widening of the gap, took place so gradually and so insensibly, each step disguised (perhaps not even intentionally) as a temporary emergency measure or associated with true patriotic allegiance or with real social purposes. And all the crises and reforms (real reforms, too) so occupied the people that they did not see the slow motion underneath, of the whole process of government growing remoter and remoter. 

 ‘They Thought They Were Free: The Germans 1933-1945′ – Milton Mayer  University of Chicago Press. Reissued in paperback, April, 1981.

Does that sound familiar?

Nevertheless, David Malone updates to the current era:

‘Repression is so last century.’

Why repress when you can simply drown it out.  All it takes is for the media outlets to be owned by a few powerful and like-minded friends.  A few media moguls and corporate giants, whose plastic pundits raise their voices while the dolly bird presenters flash their thighs.  It’s all so full throttle and frantic, and charged with desire and greed.

Anyone who disagrees is a conspiracy theorist.  Anyone who breaks ranks is a whistleblower and whistleblowers are domestic terrorists, dysfunctional loners with personality problems and axes to grind.

When the truth is vilified, hunted, gagged and goaled, then the State has chosen to go to war with the nation.

Bernadette Meaden agrees:

When the history of this particular period is written, people will marvel at what the Conservatives have achieved. To lose an election, scramble into office, and then go on to change society so significantly in a few short years shows, it has to be said, quite some chutzpah….

It is so much easier for a government when Ministers can tell lies which go unchallenged, become accepted ‘facts’ and are repeated ad nauseam to justify ‘difficult decisions’. Perhaps the classic example of this is Grant Shapps’ widely publicised statement that almost one million disabled people had dropped their benefit claims when tests became tougher. This was completely untrue… There was an effective media blackout on this development.

David Malone adds:

Our ‘Betters’ have found Goebbels was wrong.  You don’t have to protect the people from the consequences of the lies you tell them, as long as you can blame those consequences on someone else.  On unforeseen global economic forces, on conniving foreigners who devalue their currency, or terrorists or whistleblowers.  Or even the people themselves for taking on debts they couldn’t afford or on ‘necessity’ and ‘precedent’ – the bond holders cannot be made to pay – it goes against international precedent.

That certainly sounds like George Osborne’s stranger-to-the-truth explanations.

On top of all this, we have the Big Brother revelations of Edward Snowden about mass surveillance.  (Goebbels eat your heart out.)  This should have been no surprise.  Zbigniew Brzezinski was writing, as long ago as the late 70s, about the problems for the power elite of controlling the masses in an age of information and communication.  David Malone again:

In a democracy rule is by consent. In a dictatorship it is by control.

Which do we have in the West?  It seems to me, it is no longer clear.  We certainly still have the rituals of rule by consent.  But behind the elected front men and women is a shadow state.  Its people ritually swear allegiance to those we elect.  They declare themselves there to serve and protect.  But when it is us they spend their time spying on, whose interests are they protecting?  Can you really serve those you do not trust?

In 2008 we discovered that behind the banking system we knew about, there was a vast shadow banking system whose size most of us never suspected.  In 2013 we have glimpsed not only the scale of the shadow state but the degree to which it, like the shadow banking system, is out of control and not working for us at all.

Chomsky of course has no illusions about our living in a Democracy.  He calls the present system RECD – really existing capitalist democracy – pronounced ‘wrecked’.  In other words, our ’democracy’ is government by the wealthy for the wealthy, a plutocracy.

In the work that’s essentially the gold standard in the field, it’s concluded that for roughly 70% of the population – the lower 70% on the wealth/income scale – they have no influence on policy whatsoever. They’re effectively disenfranchised. As you move up the wealth/income ladder, you get a little bit more influence on policy. When you get to the top, which is maybe a tenth of one percent, people essentially get what they want, i.e. they determine the policy. So the proper term for that is not democracy; it’s plutocracy….


In fact a number of analyses have identified that it is only a handful of individuals, fewer than 200, that ‘rule the world’.  Real News 24 writes:

Some people have started realizing that there are large financial groups that dominate the world. Forget the political intrigues, conflicts, revolutions and wars. It is not pure chance. Everything has been planned for a long time.

 … In short, the Federal Reserve is controlled by four large private companies: BlackRock, State Street, Vanguard and Fidelity. These companies control U.S. monetary policy (and world) without any control or “democratic” choice. These companies launched and participated in the current worldwide economic crisis and managed to become even more enriched…. The same “big four” control the vast majority of European companies counted on the stock exchange.

In addition, all these people run the large financial institutions, such as the IMF, the European Central Bank or the World Bank, and were “trained” and remain “employees” of the “big four” that formed them.

Particularly focus on ‘It is not pure chance. Everything has been planned for a long time.’

The release of Margaret Thatcher’s cabinet papers from 1983, confirm that all this coalition government’s determination to dismantle and privatise the NHS/ public services, are just the end game that the Conservatives had in mind 30y ago.  We are experiencing ‘disaster capitalism’ as described by Naomi Klein.  The economic crisis caused by the banks in 2008 is being used to justify implementing IMF-style liberalization of the UK for the benefit of the transnational corporations.

In Europe, the ‘crisis’ is being similarly used to dismantle the welfare net and force through federalization.  The Brussels Business Documentary (Corporate Europe Observatory) charts the corporate capture of the EU, initially by the industrialists of the European round Table, and now by the vast body of lobbyists that rival the Washington contingent.



The next stage of neoliberal/neofeudal corporate supremacy is the rushing through (by 2014) of the US-EU Free Trade Deal, which will allow corporations to force governments to change any of their domestic legislation which is inconsistent with ‘liberalisation’… employment and environmental protection, banning of GM crops, and so on.

Michael Meacher writes:

‘It says a lot about democratic accountability that the most profound and far-reaching issues are not discussed in Parliament.   It was true of the decision in the UK to build the first atomic bomb.  It was true of the Multilateral Agreement on Investment in the 2000s which aimed to give the world’s rich countries the right to draft universal investment laws which would guarantee corporations unconditional rights to conduct financial transactions which could not be challenged by governments or citizens.   And it is true now of the Transatlantic Trade and Investment Partnership (TTIP) which US and EU trade negotiators are currently trying to bring to fruition.   It too, if carried through, will allow international companies to hold governments to account, rather than the other way round, if they believe that governments are introducing environmental, social or labour standards which unreasonably impinge on their commercial prospects.

Of course in selling the idea to the (gullible) public, not a word is said about this.   Instead we are told that it will increase transatlantic economic growth by 1-2% a year and that that will increase incomes by several hundred pounds a year.   What is not mentioned, even if you believe the salesman’s patter about the benefits, is that the increased incomes will accrue very largely to the holders of capital, not to ordinary folk to any noticeable degree.   But the real impact is felt on democracy.   There is a touching faith that everyone in the West accepts that democracy is the foundation stone of our society and culture and the immoveable basis of our rights for justice and redress.   But the capital holders, the corporate class, have never accepted this – and nor really have the ideological wing of the Tory party.’

‘Fascism should more appropriately called Corporatism because it is a merger of State and corporate power’ – Benito Mussolini

Gramsci, imprisoned by Mussolini, wrote shortly before his death in 1937:

 ”The old world is dying away, and the new world struggles to come forth: now is the time of monsters.”

That was true then and is true now.


The academic, Lawrence Britt composed a list of 14 characteristics common to the fascist regimes of Hitler, Mussolini, Franco, Suharto and several Latin American regimes.  It is a frankly alarming list to read with the Coalition Government in mind.

See also Think Left’s

Why should we be very concerned about the current US/EU Free Trade Agreement?


Grangemouth and the EU/WTO

The dispute at Grangemouth is the old trick of provoking industrial action – then holding the workforce to ransom by threatening their jobs unless they agree to the draconian changes in their employment packages that the bosses wanted all along.  It’s exactly what Margaret Thatcher did to the Miners, and it is what Ratcliffe, a private Hedge Fund owner, has done to his employees.

But it is not just those who were threatened with job loss, Ratcliffe was also holding the UK and Scottish governments to ransom.  70% of Scotland’s fuel is processed at Grangemouth, and represents 8% of Scotland’s manufacturing capacity or 2% of its GDP.

Isn’t about time, the politicians turned the tables and called a halt to these blackmailing tactics by private energy providers?

For example, Ed Miliband’s announcement at LP conference which identified the public anxiety and anger about energy prices, has been met by the energy providers increasing their bills by 10%, in spite of OVO reports that wholesale prices have not increased.

The energy companies’ action is nothing short of a provocative Vs-up to the public and politicians.

Cameron et al have nowhere to go because they are caught between the public anger and their ideological commitment to the corporates.  Meanwhile, Ed Miliband’s proposal to freeze prices for 20 months is criticized as not being able to prevent price hikes both before and after (as indeed, the current show of strength on the part of the energy companies is intended to demonstrate).

Too rarely reported, however, is Labour’s intention to regulate the wholesale energy market by pooling electricity prior to its being sold on to the energy companies.

But why on earth go to all that bother?

We’ve already seen the energy providers disregard for the public good; their indifference to increasing the numbers of cold-related deaths this winter, and people forced to choose between eating and heating.

How much further do the energy companies have to go, in clearly demonstrating that the UK needs to be able to control supply and energy prices on behalf of its people, the economy and the environment?

The political-bullying alone, is reason enough to curb the energy companies power by taking them into public ownership asap.

But on top of that, climate change and transforming energy provision away from fossil fuels will never be achieved through the markets.

… the project of sustainable capitalism was misconceived and doomed from the start because maximizing profit and saving the planet are inherently in conflict and cannot be systematically aligned even if, here and there, they might coincide for a moment. That’s because under capitalism, CEOs and corporate boards are not responsible to society, they’re responsible to private shareholders. CEOs can embrace environmentalism so long as this increases profits. But saving the world requires that the pursuit of profits be systematically subordinated to ecological concerns…

Profits depend on increasing sales and prices not on reducing energy consumption and supporting cheaper renewable energy.  The first duty of a private company is to maximize the return to its shareholders.

However, taking the refinery into public ownership is not so easy given the EU/WTO legislation, negotiated and signed in secret by the EU Commission and Council of Ministers… and the UK government will be even further constrained by the US-EU FTA (Free Trade Agreement) currently being rushed through for 2014.

Once a country is locked into the GATS regime, the right of its government to regulate liberalized service sectors is diminished, paving the way for foreign transnationals to enter the domestic market. Any attempt to reverse the situation would be subject to WTO disciplines and penalties.

The same holds true for Royal Mail and the NHS.  As an unelected Corporate Tribunal, the WTO has the power to overturn UK sovereignty on employment and environmental protection legislation, and many other decisions.

Unravelling the spin: a guide to corporate rights in the EU-US trade deal

But as Michael Meacher writes:

… this disaster reveals the desperate need for a proper industrial strategy to safeguard and steadily enhance the nation’s manufacturing capacity.   This dispute reveals the appalling consequences which flow from unconditional belief in private markets and the need for a strong supportive State role as exists in all successful economies today.

So how can we take back our public services and utilities into democratic ownership?

We are never going to dismantle this free trade regime with negotiation tactics… if we want to defeat the free trade regime or an institution like the WTO we need to build a new balance of forces led by social movements.

Essentially we need to organise/support a united anti-capitalist Battle-for-Seattle-on-Thames  and reject the ever-increasing stranglehold of liberalisation, financialisation and the Washington Consensus.  After all, none of us were even told about this, let alone voted for it.  We certainly are already in the post-democratic era.

Unravelling the spin: a guide to corporate rights in the EU-US trade deal


Plutonomy – Invasion of the Political Body Snatchers

First posted on Think Left

I want to pitch an idea for a contemporary science fiction film… the lead, called F, investigates the dark world of politics, wealth and manipulation of the economy in a small country called Brittania (B).

The first thing that intrigues F is a graph that shows that over a period of some 30 years, there had been a large upward redistribution of income from the bottom 90 per cent to the top 1 per cent… but most striking of all was the rapid increase in wealth of the top 0.1 per cent.

Whilst analysing international data, F realizes that this redistribution is not a generalised phenomenon of all advanced economies.  Instead it is particularly marked in Brittania and one other advanced economy, Americana.  It occurs to F that this puzzling pattern of income redistribution couldn’t have resulted from just any old factor.  It had to be due to government policies; and that meant that the redistribution had occurred regardless of which political party had been in power!

This is weird to F because there had been no significant change in the two countries’ formal systems of government … but F gradually begins to understand that there is more to government than its formal structures. The same institution, for example an elected parliament or even individual political parties, may perform radically, systematically and intentionally differently from one historical period to the next, including with regard to the welfare of the general population.

Perplexingly, even those political parties commonly identified with the interests of the wealthy, had won their seats by convincing the majority that their policies would best serve the electorate’s material interests.  The story was, that by generating a larger GDP, gains would ‘trickle down’ to be shared with the majority of the population.  Obviously, that hadn’t happened.  The graphs didn’t lie.

But in both Brittania and Americana, either of the two major political parties could win elections, and it was thus open to one or other of them to expose the policies which resulted in the declining standards of living for at least 90% of the population.

After all, F reasons:

 “It does not seem credible that the electorates would knowingly vote for their continuation. Together these points imply a change in the political structures of these countries.  Why?  Because if the major political parties have before them a straight-forward way of winning elections by appealing to the basic material interests of the overwhelming majority of the electorate and they repeatedly decline to do so even when it means defeat, then there must be a non-democratic reason that governs their decisions and their access to office.”

F concludes that it follows that the real agendas or platforms of the winning parties had been kept secret!  What are they?”  The plot thickens.

F reviews his findings.  It seemed that the populations of Brittania and Americana had been kept nearly totally ignorant of the fact that for over thirty years their countries have been subject to the engineering of huge and extremely skewed upward redistributions of income. Moreover, this central fact had virtually never been mentioned or discussed in their general media. Nor could F find much about it in economics journals.

The breakthrough comes when F finally gets hold of The Plutonomy Reports which, though incomplete, reveal that the redistribution phenomenon is documented, conceptually driven, and no mere historical accident. In fact, so-called Plutonomists exist… even though their history is clouded in secrecy.  Plutonomy is a real-world political force; and the primary players of this political ideology, political movement and concept of government, belong to the financial sector.  The Plutonomists are the 0.1%!

The three reports, written before the global banking crisis 4 years earlier, outline the key points of this political ideology.  Their strategic nature make it all too clear why it has been imperative for the plutonomists to keep the contents of these historical documents from entering into mainstream discourse.  Now F understands why the Plutonomists had gone to such lengths with threats of legal action to supress these important historical documents from the internet.  Fragments of the reports are given below:


‘Report no. 1

Little of this note should tally with conventional thinking. Indeed, traditional thinking is likely to have issues with most of it. The world is dividing into two blocs – the plutonomies, where economic growth is powered by and largely consumed by the wealthy few, and the rest. Plutonomies have occurred before in sixteenth century Spania, in seventeenth century Hollander, the Gilded Age and the Roaring Twenties in Americana.  

We project that the plutonomies (Americana, Brittania and Canadia) will likely see even more income inequality, disproportionately feeding off a further rise in the profit share in their economies, capitalist-friendly governments, more technology-driven productivity, and globalization.

In a plutonomy there is no such animal as “the Americana consumer” or “the Brittania consumer”, or indeed the “Russkian consumer”. There are rich consumers, few in number, but disproportionate in the gigantic slice of income and consumption they take. There are the rest, the “non-rich”, the multitudinous many, but only accounting for surprisingly small bites of the national pie.

. . . we think the plutonomy is here, is going to get stronger, its membership swelling from globalized enclaves in the emerging world, . . .

Report no. 2

 The second report begins by identifying three things that have enabled the creation of plutonomies in Brittania, Americana, Canadia and Aussie:

Asset booms, a rising profit share and favourable treatment by market-friendly governments”…

What Could Go Wrong

. . . the rising wealth gap between the rich and poor will probably at some point lead to a political backlash. Whilst the rich are getting a greater share of the wealth, and the poor a lesser share, political enfrachisement remains as was – one person, one vote (in the plutonomies). At some point it is likely that labor will fight back against the rising profit share of the rich and there will be a political backlash against the rising wealth of the rich. . . . .  We don’t see this happening yet, though there are signs of rising political tensions. However we are keeping a close eye on developments.

The third is the longest of the three reports.  Significantly, it notes that  ’The rise of this inequality is not universal. In a number of other countries – the non-plutonomies – income inequality has remained around the levels of the mid 1970s. It singles out Japan, France, Switzerland and the Netherlands as examples and dubs them “The Egalitarian Bunch”.  Further on, after reminding the readership that “plutonomy countries” are those with “economies powered by a relatively small number of rich people” and geared to “financial wealth creation”…. “the risks to plutonomy” are, as in previous reports, considered.

 Report no. 3

‘Perhaps the most immediate challenge to Plutonomy comes from the political process. Ultimately, the rise in income and wealth inequality … is an economic disenfranchisement of the masses to the benefit of the few. However in democracies this is rarely tolerated forever. One of the key forces helping plutonomists over the last 20 years has been the rise in the profit share – the flip side of the fall in the wage share in GDP. As plutonomists or capitalists tend to be long {on} the profit share, they have benefited from trends like globalization and the productivity revolution, disproportionately. However, labor has, relatively speaking, lost out. We see the biggest threat to plutonomy as coming from a rise in political demands to reduce income inequality, spread the wealth more evenly, and challenge forces such as globalization which have benefited profit and wealth growth.’

[emphasis added]


Our own view is that the rich are likely to keep getting even richer, and enjoy an even greater share of the wealth pie over the coming years.’

F is left reeling. These three plutonomy tracts, being windows both into the plutonomist’s mind and to their strategies, contain many interesting points, but for F, the most overwhelmingly significant one is that plutonomists see the subversion of the democratic process as the ultimate key to their success.

Indeed, if the “political enfranchisement remains” and is allowed to remain, then the“economic disenfranchisement of the masses” is only possible if the electorate can be bamboozled into voting against their interests.

The rest of the film is devoted to F uncovering the means by which the Plutonomists have undermined the democratic process and engineered the redistribution of wealth upward and off-shore.  F identifies the various strategies employed to effect and preserve the desired changes in law and government policy… the lobbyists, the think-tanks, the Public Relations, the political campaign funding, the long-term contracts enshrined by international treaties, the repeal of inconvenient legislation (particularly with regard to financial markets), off-the-books accounting for banks, deregulation (or non-regulation), tax havens, globalization, tax cuts for the 1%, shrinking state policies  and so on.

F finally realises, that underpinning all of this redistribution is the revolving doors movements of personnel between roles in government, corporations and finance.  For example, F’s attention is repeatedly drawn to the revolving doors movement of a mysterious organization referred to as the giant squid company, which seemed to wield inordinate influence in governments across the globe.

It also seemed that wherever the financial sector’s profit-seeking activities became focused primarily on the buying, selling, packaging and repackaging of either existing financial assets or new ones attached to existing real assets, the squid people were likely to be involved.  Furthermore, this profit-seeking activity, the redistribution of wealth upward, and the creation of asset bubbles were interlinked. By using their financial power to create rising prices which attracted investors, especially pension funds, from outside the plutonomy’s inner core, the prices became more and more inflated until eventually the bubble burst. Needless to say, the bubbles burst because the 1% sold off at the top, leaving themselves with proportionately huge profits to the disadvantage of the pension funds. The whole process was then re-started by the squid people, to create another bubble.

I will not spoil the climax of the film, which is essentially the struggle to regain power back from the 1%; and the difficulties for the 99% in identifying between the ‘good’ and the ‘infected’ politicians/activists … but suffice it to say that giant squids are definitely involved!


Edward Fullbrook, “The Political Economy of Bubbles”, real-world economics review,

issue no. 59, 12 March 2012, pp. 138-154,


‘Politics and Parasites’

‘Politics and Parasites’ might once have been thought an unusual title but I doubt that anyone wonders at it now because the term ‘parasitic’ has had such currency since the 2008 crash… ‘Parasitic’ Bankers, Politicians, Plutocrats, Benefit Claimants and so on.

Nevertheless, I want to extend the analogy beyond the usual description of individuals/groups/professions as ‘exploiters’ of the host population aka ‘we, the overwhelming majority’.  Specifically, there are two tenets of parasitology which offer insight, warning and hope in challenging the corporate-financial-political nexus.

The first is a warning that the potential risks of contemporary politics are very high.

‘Over-parasitism’ can lead to the extinction of both parasite and host communities.  In other words, too many parasitic demands on the host may be lethal, which in turn, will spell the end for the parasite… unless of course, the ‘parasite’ has a ‘get-out’ in some cosy tax haven or climate-regulated dome.

The hope is to be found in the notion that parasitism has ‘fueled’ evolution.

Clearly, there is a selection pressure for the host community to evolve better ways of resisting parasitism.  Hence, evolution is ‘fueled’.  In human terms, resistance and politicisation evolve from understanding the realities of exploitation and current politics.

However, host ‘resistance’ also sets up a corresponding pressure on the parasitic population to evolve responses to avoid host defenses.

Screen Shot 2013-08-01 at 01.39.04

As Jason Read suggests an important strategy of parasites, both human and other, is to shroud the true nature of the exploitation in ‘smoke and mirrors’, obfuscation, deceit and secrecy.  There is also another … ‘the boiling of frogs’ tactic … slowly turning up the heat so that we ‘frogs’ don’t notice.  Over the last 30 years, the ‘boiling of frogs’ strategy has been very much in evidence… for example, the creeping privatization of the NHS.

Nevertheless, there is a selection pressure on the parasitic population which is commonly known as ‘not killing the goose that lays the golden egg’…. in other words, for the parasite to become less pathogenic to the host.  Not only are the workforce and the natural world, the ‘golden egg’ producers of wealth (not the ‘masters of the universe’ and fictitious capital) but, as Henry Ford knew, it is the wages of the workforce that create the demand that creates the jobs and drives the real economy.  Ultimately, the current financial paradigm is unsustainable, but in order to preserve the control and wealth of the 0.01%, we are being steered into a neofeudalist world.

To date, capitalism has found ways to ameliorate the potential for the system’s implicit inequality to trigger civil unrest (rioting/revolution) by hiding or limiting (as little as possible) the wealth accumulating excesses.   We see a farcical pretense of this, in Osborne’s determination to ‘go after the tax dodgers’.

To be honest, David Cameron doesn’t seem very significant.  He is the PR boy who likes being PM.  The focus should be on Osborne and the Treasury because ‘following the money’ is the most straightforward way to cut to the chase.  Furthermore, George Osborne’s obsession with the US and the Republicans is a clear indication that US politics is extremely important.  The US is the template for what is, or will be, happening in the UK.

Interestingly, we are told that George Osborne treats politics as a game of chess:

… it is one of those three-tiered chessboards. The lower tier is tactics, the art of winning day-by-day scuffles. The middle tier is strategy, which is planning for the next election. The top tier is grand strategy.’

‘Politics and Parasites’ primary focus is the top tier – the grand and global strategy.  It is obviously essential that the policies and day-to-day tactics of this ‘Tory’ government be confronted but it needs to be understood that activity within each layer of the board is predicated on the intentions of the topmost…

For example, the ‘Bedroom tax’ is the strategy.  The strange rationalization… that government is trying to ‘reduce overcrowding’… is the tactic.

But the grand strategy is the age-old one of dispossessing low-income people from the high value land that they occupy… the long-term aim is social cleansing of the inner city.

The dire impacts of the ‘Bedroom tax’ on individuals are heartbreaking but the real targets are the social housing associations whose viability are threatened by the likely large scale rent arrears… and their subsequent difficulties in arranging finance:

The social housing sector is an intricate machine; significant manipulation of policy and funding levers without fully understanding the potential impacts, is likely to cause major disruption to the way the sector works, both in terms of its ability to support its tenants and its ability to attract investment for development of new affordable housing.‘ (1)


Why would the Tories want to cripple housing associations and clear the inner city? …Just think of the rents that private landlords will be able to charge for newly acquired ex-social housing in Kensington and Chelsea… and the prime locations that will become available for purchase.

But perhaps more importantly, it moves away potential ‘trouble’, creating much more easily defended areas for the wealthy (just like the heavily defended citadel in Soylent Green)(2).  By relocating individuals and families to cheaper areas, the assault on social housing also provides the means to break up natural communities of mutual support.  Public protests and rioting are invariably urban phenomena, as we saw in the London riots.

Boris may have said that there would be ‘”no Kosovo-style social cleansing” of the city’s low income households on his watch, but he has diverted 80% (£93.3 million) from affordable housing programmes to the Mayor’s Housing Covenant, which aims to help middle income earners into homeownership.

In war, the first casualty is truth … and as Warren Buffett said:

“There’s class warfare, all right, but it’s my class, the rich class, that’s making war, and we’re winning.”

The policies of the coalition government should be no surprise.  They were implicit in the 1994 Uruguay round of the GATT treaty, and explicit in the recently released 30y old Cabinet papers of Margaret Thatcher’s government.  A decision has clearly been made that it is more important to dismantle public services than worry about winning the next GE.  As a result, there are no brakes on this government’s behaviour.  They intend to leave public services and the economy in as much of a mess as possible which they hope will prevent future governments from being able to reinstate the welfare state (3) … and which will drive all who can afford it into the hands of the private sector.   In any event, if the US-EU FTA is implemented in time (projected for 2014), a corporate tribunal will be empowered to supercede parliament and will be authorized to demand changes to any corporately inconvenient domestic UK legislation (4).

We live in difficult times when the water is heating up nicely.

‘Politics and Parasites’ is a sister blog to Think-Left and shares the same red-green values and priorities.


(2)  Soylent Green, George Osborne and Plutonomy.

(3)  Has George Osborne been taking Trans-Atlantic lessons from Jude Wanniski and the Republicans?

(4)  Are we already in the post-democratic era?

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