Citizen Action Monitor

Crisis in American democracy: Part 7 – The short tragic life of the “Golden Age of Capitalism”

No 339 Posted by fw, November 15, 2011

In Part 6 of this 11-part series, Ferguson looked at labor’s struggle to build power and political influence during the 20th century in America’s money-driven political system. In this post, Part 7, the film catches Obama and Geithner paying lip service to small business in stark contrast to a new breed of “business democrats” who are now running the Democratic Party. There’s a flashback to the Golden Age of Capitalism, which is short-lived indeed. By the ‘70s and after, destructive financial capitalists have effectively returned to a 19th century approach to labor-management confrontation.

Continuing with the format for this series, a complete 77-minute video of Shockley’s documentary film is embedded below followed by my time-indexed transcript comprising Part 4, including subheadings, and any external links and text highlighting. The time indexing facilitates switching from the text to its related place in the video. Of course, readers have the option of watching the complete 77-minute video at one sitting.

Golden Rule: The Investment Theory of Politics a documentary film by Jonathan Shockley


31:53 <On screen text> — OK, big business grows & dominates, but what about Small Business?

Tom Ferguson – The small business story is they’re so different. I mean everything from MA & Pa groceries to hundred-person factories.

32:06Reta Lewis — I’m Reta Lewis. I’m the Director of the Office of Public Liaison. The work that I’m doing is really about reaching out to the numerous stakeholders around the country who want to have a seat at the table. Women, business organizations and women executives and women leaders in their own companies wanted to come in and have an opportunity to speak to our agency review team and our policy teams about the work that they have been doing and how they would like to see this next administration move as it relates specifically to small business. These are women who have revenues of more than a million dollars. Organizations like Count Me In, out of New York, who are really about helping women who start building their companies and now are doing additional efforts about moving businesses to the million dollar level.

Obama and Geithner talk up small business though Obama is “first and foremost a candidate of finance” says Ferguson

32:53 Barak Obama – That drive to make a profit is what has always fueled our prosperity. What has always fueled our prosperity. . .  And their company now has 78 employees, has grossed nearly $4 million in sales last year. Tom Masterson. Where’s Tom? Tom’s right here. Co-found TEM Electric. Today the company employs 75 people and has over $12 million in revenues. Andy Wells. His company generated $54 million in revenues and his customers included Coca Cola, Boeing and Oshkosh. So small businesses like these are driving our economy. You’re the job creators responsible for half of all private sector jobs. You’re the starting point for the products and brands that have redefined the market. After all, Google started out as a small business. McDonald’s started with just one restaurant. And small businesses don’t just strengthen our economy. They also strengthen our communities. Your customers aren’t just anonymous folks who buy what you sell. They’re your friends, they’re your neighbors. . . .

34:02 Timothy Geithner, US Secretary of the Treasury – Small businesses are the engine or America’s dynamism. You create and sustain most of the jobs in the country. You are the anchor of our communities and you are ever-more closely linked to the global economy. When you prosper, the nation prospers. And when the national economy is hurting you bear that burden heavily but you will lead us out of this.

34:21 Tom Ferguson – [Ferguson starts off talking about France but the film editor cuts him off in mid-sentence and splices in talk about the New Deal]. In places like France the amazing swings from left to right of the small business guys are quite striking. In some regions and times, they’re all going down the tube because of a depression or something like that, you will see cases where they’ll support quite liberal . . . <splice here> –

During the New Deal, big business spread self-interested misinformation about small business

It’s clear I think that despite all the stories about how small business was dead, opposed to The New Deal, when you go back and look at polls and things like there was a fair amount of small business support for some of it. An awful lot of the rhetoric that emanates from big business about small business is just self-interested garbage trying to tell you, in effect, worry about them. I mean that’s the sort of, if you want, one generalization about American life. When big business guys start telling you how it’ll kill small business, think “big business” and you’ll understand.

35:09 <On screen text> The Rise & Deregulation of Finance

After World War 2, the creation of social democratic programs lead to the “Golden Age of Capitalism”

Noam Chomsky – In a substantial measure the food crisis plaguing much of the South and the financial crisis of the North, has common roots, namely the shift towards neoliberalism since the 1970s. That brought to an end the post-war, post-world war Bretton Woods system. It was instituted by the United States and Britain right after World War 2. It had two architects: John Maynard Keynes of Britain and Harry Dexter White of the United States. They anticipated that its core principles, which included capital controls and regulated currencies, would lead to relatively balanced economic growth, and would also free governments to institute the social democratic programs – welfare state programs – that had enormous public support around the world. And to a large extent they were vindicated on both counts. In fact, many economists called the years that followed, until the 1970s, the Golden Age of Capitalism.

36:19 <On-screen text> Anti-colonial struggles at the same time

Noam ChomskyNow, that Golden Age led not only to unprecedented and relatively egalitarian growth, but also the introduction of welfare state measures.

36:33 <On-screen quote> — “The 60s were an excess of democracy, related to relative affluence and economic expansion. This led to a breakdown of traditional means of social control . . . a delegation of political and other forms of authority, and an overload of demands on government.” —Trilateral Commission Report

But lenders and investors worked to sabotage Golden Age social democratic programs

36:46 Noam Chomsky – Keynes and White were perfectly well aware that free capital movement and speculation inhibit these options. Professional economics literature points out what should be obvious that the free flow of capital creates what is sometimes called a virtual senate of lenders and investors who carry out a moment-by-moment referendum on government policies. And if they find that they’re irrational – meaning they help people instead of profits – then they vote against them by capital flight, by tax on a country and so on.

Productivity has doubled from 1955 to 1995, so how come we work longer hours just to make ends meet?

37:26 Michael Albert, author, Participatory Economics – In the 1950s in the United States, it was called the Golden Age of Capitalism and there was a certain amount of output. And it was a certain amount of output so there’s was this much output per capita in the economy. And then 40 years later there was double that, almost exactly – just coincidentally, double the amount of output per capita. So if you think about it you realize that if in 1995 people work half as long as they work in 1950, right, and from 1955, then the output per person will be the same as it was in the Golden Age of CapitalismSo you sort of ask yourself, well why aren’t we working one month on and one month off? Or why aren’t we working a thirty and a half hour week? After all, that technological innovation has created a condition in which we could do that and we’d be as well off as in The Golden Age of Capitalism. So why don’t we do it?

Market competition drives us to work ourselves to death

38:14 Michael Albert — And the answer is because markets don’t let us. It’s not that everybody got together and decided we’d rather work twice as long, as we could. And in fact, people work longer than they worked in 1955. People didn’t decide I want to do that. I mean even the rich lawyers didn’t decide I want to do that. Rather, market competition compels it, coerces it because if you don’t do it you get out-competed. So there’s this drive to accumulate, this drive to work ourselves to death in essence.

The accumulated wealth from increased productivity goes mostly to the powerful and the rich

38:46 Michael Albert — Now it’s also true that that extra – where’s the extra product go? Where’d the double the output go? Well, it partly goes to military stuff to protect the system. It partly goes to police stuff to protect the system. It partly goes to cleaning the ecological messes that the system produces. And it partly goes to the rich. And so the normal person is marginally better off. And, in fact, from 1970 to the present the normal person doesn’t get better off at all.

The remaking of the Democratic Party in the ’80s and ‘90s run by “business democrats”  

39:15 Tom Ferguson – Joel Rogers and I wrote a book called Right Turn where we sort of walked through the remaking of the Democratic Party in the 1980s. Effectively, the business democrats run the basic modern Democratic Party. That was what Clinton, and for that matter, Al Gore and those people were all about. That’s what all the subsequent Democratic Party candidates thus far have been to, including the current president. The folks who created this crisis are to a very large measure the folks who principally financed the Obama campaign. That’s to say, this guy [Obama] is first and foremost a candidate of finance. I mean, you hear all these government Sachs’ jokes – Goldman Sachs – no reason to pick on them <unintelligible> – Morgan Stanley, Bank of America. There’s a big raft of hedge funds and investment houses. They dominate the early financing among large investors for Obama. I suspect to this day you’ll find that the majority democrats – the firms that continuously contribute to the Democrats in big numbers are still, at least vestigially more capital intensive.

A 19th century approach to labor-management confrontation returns in the ‘90s

Tom Ferguson — But obviously the big story in the 1970s, and after – first of all the enormous role finance takes, and then the harshness – you know, as I said, the private equity case of the ‘90s – you could see inside finance folks like Kohlberg Kravis Roberts, those folks At that point when they get into the business of running companies — and where your basic scheme is buy a company, grab the pension fund, pull the assets, as much assets out of that as you can, put it in the rest of the firm, bust up the firm, sell it and things like that, and also fire a lot of people to pay down debt – that’s in fact what seems often to happen in these takeovers. you’re beginning to act like a sort of classic capitalist but what you’re got there is you’ll also find these folks very antagonistic to labor. And a lot of the folks in the – I mean you get almost a 19th century approach to labor-management confrontation.

Case study of “destructive financial capitalism”

41:08 Juan Gonzalez, Democracy Now [2009] – We turn now to a labor struggle here in New York. More than 130 workers at the Stella D’Oro Biscuit Company in the Bronx have ended an eleven-month strike. The workers returned to their jobs on Wednesday, a week after the National Labor Relations Board ordered the company to reinstate and pay back wages to the striking workers. The employees at Stella D’Oro walked off their job last August after company officials tried to force them to accept a 20 percent pay cut, elimination of sick days and overtime, reductions in vacations and holidays, and an increase in employee healthcare contributions. While the Stella D’Oro workers have returned to their jobs, their fight isn’t over. The company’s owner, the Connecticut-based private equity fund Brynwood Partners, is now threatening to close the factory within ninety days.

41:54 Louie Nikolaidis, attorney — It was a family-run company for many, many years, and then that got sold to corporate owners, first Nabisco, and then Nabisco got bought by Kraft. So Kraft was the owner that sold it to the private equity company. So when they say it’s not profitable, they really don’t mean it’s not profitable. They mean, we don’t get the super rates of profit that we expect. These folks tell their investors that they’re going to return a 30 to 35 percent rate of return. That is an unreasonable rate of return . . . . They’re not an operating company; they’re a financial investor. They’re only going to keep it for three to five years, and they’re going to turn it around. So their whole point was to reduce labor costs to the point where they could get another buyer to come in and have a contract that was gutted. Some of it was financial, and some of it was issues of control, not just financial. Like one of the provisions in this contract, it’s an old kind of — if people know CIO, it’s an old industrial contract. We have a provision that says that the cookies will have union labels on them. So that was one of their proposals, to take off the union labels from the packaging. Now, that doesn’t save them any money. It’s just an issue of who’s controlling what.

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