Thursday, March 11, 2010

Economy: Of Social Justice and Lack of It

By Julio Godoy

1968 postage stamp issued by the U.S. Post Office to commemorate Oliver Wendell Holmes, Jr

Kind permission of IDN-InDepth NewsViewpoint

BERLIN (IDN) - Between the end of World War II and 1979 it was conventional wisdom in North America, Western Europe, and the industrialised countries of Asia and Oceania that taxes were the best way to make social justice dreams come true.

In those decades, which in France are known as the Golden Thirty Years, in Germany as the economic wonder years, and elsewhere in the industrialized world as the Keynesian epoch, taxes were seen as the best way not only to allow government to correct the market's shortcomings and failures, but also, and as important, as the best available means to redistribute the nation's wealth. As the distinguished U.S. judge Oliver Wendell Holmes, Jr., once put it, "Taxes are the price we pay for civilization."

Then came Thatcher Britain and Reagan in USA. With them came too, to paraphrase Wendell, the end of civilization. Actually, the mentioned leaders were only – excuse me for the pleonasm – the obvious talking heads of a movement that had began earlier, in the 1960s in the academic world, and in the early 1970s in the business and political arena, and which was motivated by … well, by the upper classes' concern in both countries with their loss of revenue to the benefit of the … plebeians.

As the French economists Gérard Dumenil and Dominique Levy did demonstrate in their excellent study Capital Resurgent: Roots of the neoliberal revolution (Harvard University Press, 2004), during the late 1960s and early 1970s the share of income held by the top one percent of the U.S. population had fallen … well, not drastically, but it had fallen. A similar social and economic development had been occurring in Britain and France during the post-war years, as the Task Force on Inequality and (U.S.) American Democracy showed in a 2004 survey.

In other words: The Keynesian years were an era of consistent redistribution of wealth in the heart of capitalistic world. Or, to use the opposite formulation: The aim of the neoliberal revolution of the 1970s and the 1980s was the restoration of the capitalistic class power that had reigned in those countries throughout the early stages of the industrial revolution and until the 1930, and which had been reversed by the New Deal policies of the 1940s and 1950s.

This neoliberal revolution had different characters: At its onset, Thatcher and Reagan, and, of course, Augusto Pinochet in Chile – but also, and for some surprisingly, the French and Spanish "Socialist" leaders Francois Mitterrand and Laurent Fabius, and Felipe González; also the New Zealand "social democrats" around Roger Douglas.

In Germany, the neoliberal revolution goes from the conservative Christian Democratic chancellor Helmut Kohl to his "Social Democrat" successor Gerhard Schroeder, the latter supported by the Green party around its opportunistic leader of the 1990s and 2000s, Joseph Fischer.

In the U.S., the restoration of the capitalistic order produced excellent results – that is, for the capitalistic class. For everybody else, the results were devastating, even if it took some time to realize it: Between 1978 and 2000, the top 0.1 percent of the population tripled its income, measured as the share of the country's GNP. In other words: Less than 300,000 people pocketed 586 billion U.S. dollars in the year 2000. As of 1970, the average incomes of the U.S. corporate executives represented 30 times that of middle class workers.

By the year 2004, that rate had jumped to 500. Against this backdrop it is easy to see that the speculative bubble on U.S. real estate of the 1990s and 2000s was a way to create an illusion of wealth for the once existing middle and lower classes – an illusory wealth that temporarily concealed the system's fundamental social injustice.

In Germany, the restoration of capitalistic class order produced similar results, albeit less contrasting: Between 1995 and 2006, German salaries grew by only 9.5 percent nominally – such growth was surely wiped out by inflation. In the same period, the salaries grew in France by 49 percent, in Spain by 103 percent, and in Britain by 128 percent.

To put this economic involution in social inequality terms: Ten years ago, the income of the richest 20 percent of the German population was 3.5 times higher than that of the poorest 20 percent. This ratio jumped to five times in 2007. In the same period, the number of people living in poverty jumped from 10 percent to 15 percent of the population.

The Berlin-based Institute for macroeconomic research showed the growing social injustice another way: Between 1986 and 2006, the German middle class shrank by some six million people – most of them people who despite having a job continuously descended in the social scale. I could go on with examples of the growing social inequality in the industrialised world during the last 30 to 40 years.

However, and despite the dire straits states are facing because of the gruesome irresponsibility of financial capitalism, and despite the recent enormous efforts by tax payers to support demand to save the economic system from bankruptcy, some petty neoliberal hotheads are now arguing that tax cuts for the rich in the industrialised countries are a matter of "social justice" and essential to encourage economic growth and well-being.

Even though the past 40 years have been exemplary in the manipulation of data and sentiments in capitalist societies, such attempts can only be called extremely coarse examples of demagoguery – they are also very easy to prove wrong. That some societies may succumb to such laughable siren songs is also a proof of the terrible damage made by demagoguery and greed – of class struggle in its worst form. (IDN-InDepthNews/11.03.2010)

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