Our world is headed towards disaster. That appears to be widely accepted; as are the reasons for it and what should be done to change direction to a safer, more sustainable, future. The Green Party exists for little else. All that is lacking is the power to achieve that change. Disaster is defined in many different dimensions: climate change, global population growth, unsustainable inequality of wealth and incomes within and between nations, global food insecurity and many other measures of impending doom. The underlying reason why those in power steer their disastrous course, always assuming they are not motivated solely by their own short term self-interest, is their belief in a fundamentally flawed version of what was formerly known as political economy.
Nobel laureate Paul Krugman flagged up one of the most basic errors of the currently dominant Friedmanite take on neoclassical economics [‘Challenging the Oligarchy’, Krugman, New York Review of Books, 17th December, 2015]. Friedman had argued that the development of monopolistic businesses was of no importance since it made no real difference. Krugman identifies that as one of Friedman’s fundamental errors. A complementary Friedman error was to claim business had no responsibility other than to make as much money as possible for stockholders. No wonder discredited ex-Barclays CEO Bob Diamond regarded Friedman as his ‘favourite economist’!
Market power has huge implications for economic behaviour. Failure over the past three decades to pursue anti-trust regulations vigorously has been a major reason for the economic trends we are now experiencing. Krugman identified two as of major importance: the financialisation of business and the ever increasing degree of inequality. Neither is sustainable in the long term, but it is unclear how their termination will be achieved.
By the financialisation of business is meant its metamorphosis from an organisation whose purpose is to satisfy customer needs, into an organisation whose purpose is simply to maximise shareholder wealth. The former purpose was achieved through the efficient and effective organisation and development of technologies, people and capital, while maximising shareholder value is achieved simply through cutting costs and raising prices as far as possible and aiding the extraction of value for shareholders.
This is a very fundamental change. The financialised business does not spur investment in technology and innovation in the real economy. It is most easily achieved by mergers and acquisition to achieve economies of scale where they are feasible, and to achieve market dominance so as to fix prices to maximise its surplus; or in the financial sector by speculative dealing and bets on capital market movements.
An example of monopolistic scale economies is the industrialised cruelty and fraud in the US food industry, revealed in Food, Inc. a documentary video by Robert Kenner (see http://www.takepart.com/foodinc). More than 80% of the US food market is now controlled by four monopolistic corporates. Their abuses include Monsanto empowered to sue farmers for patent infringement if they are caught saving Monsanto seed. That can even include farmers whose crops are not Monsanto seeded but have been contaminated by adjacent Monsanto GM crops. This nightmare scenario is supported by regulators many of whom are ex-corporate personnel, including ex-Monsanto.
The US administration is complicit in this monopolistic exploitation. In 1972 there were 50,000 food safety inspections by the Food and Drug Administration. By 2006, the US Department of Agriculture had not only given up the legal right to shut down plants that repeatedly produced contaminated meats, but food safety inspections were down to 9,164. The power of organised money in US food is used against the producers, farmers and workers, and against consumers who are kept in the dark as far as possible regarding the secretive cruelty of livestock processes and the content and origins of their food. The focus is simply on maximising stockholder wealth.
In the financial sector, the profits from speculative dealing and bets on capital markets are not the result of ‘talent’ or hard work, but mainly of insider dealing and other fraudulent activities noted in earlier postings on this site.
The US food industry is one example. Others previously noted on this site include the big four outsourcing contractors, big four professional services companies (accounting, audit and management consultancy), the big six energy suppliers, and so on.
This rise in market power of the financialised business is the result of what Krugman referred to as “the raw exercise of political clout to prevent policies that would limit monopolies.” The combination of political clout and financialised business, and the revolving door between the two, explains how the organised money establishment keeps the world on the road to disaster. So who are these people?
Could they be those attending the shadowy annual Bilderberg conference? The stated aim of Bilderberg is to foster dialogue between the US and EU by bringing together leaders from the industrial, financial, media, academic and political sectors, ie the self-perpetuating organised money establishment. The conference is an undercover talking shop where any disclosure of content is forbidden. Hence dealings re the TTIP agreement remain secretive. George Osborne is currently a regular attender, as is Google chairman, Eric Schmidt, which might explain Osborne’s enthusiastic approval of HMRC’s ‘sweetheart’ tax deal with Google that involves them paying £130m for 10 years back tax, which has been estimated as a rate as low as a 3%, rather than the official rate of 20%. Google is far from unique, as will be seen as further ‘sweetheart’ deals with other global corporates emerge.
The organised money establishment also uses the World Economic Forum (WEF) with what amounts to its AGM at Davos each January. The WEF claims a commitment to “improving the state of the world by engaging business, political, academic and other leaders of society to shape global, regional and industry agendas.” But it has clearly failed to improve the state of the world since the catastrophic failure it caused in 2008.
The prime focus of the organised money establishment is to defend the Friedmanite economic beliefs which have served them so well. A measure of their success is that, according to Oxfam, the richest 62 people in the world have the same wealth as half of the world’s population. Not only that but the richest 1 per cent of the world’s population owned as much in 2015 as the rest of the 99 per cent put together. These figures may be challenged in detail, but the broad picture is undeniable. Encouraging and supporting businesses to establish monopolistic control over important markets in order to maximise the wealth of the wealthy is a crime against humanity. It only serves to increase the certainty of impending disaster.