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Is It Time for Another New Deal?
The United States, Europe, and the rest of the world are experiencing perhaps the worst financial crisis since the Great Depression of the 1930s. This crisis is so severe that even conservative leaders such the French President, Nicolas Sarkozy, have said that there is a need for a new kind of Capitalism. But what are the influential ideas behind this crisis, what is their impact on different parts of the world, and what can be done at this stage to save Capitalism from itself?
For close to 40 years the ideas of the famous economist, Milton Friedman, who was an advisor to presidents Nixon and Reagan, and the school of economics at the University of Chicago, have been forced upon many nations around the world. Friedman’s ideas advocate the privatization and deregulation of almost everything in a society, from railways, telephone systems, airlines, and oil industries, to pension funds, and water and land resources. They also advocate free trade with no regulations. NAFTA, CAFTA, and the proposed free trade with Columbia are all results of these ideas aiming to minimize government spending as much as possible, roll back labor standards, and let the free market run everything. These in turn produced speculation, greed, corruption, and outright social Darwinism. Another term for these ideas is Shock Therapy. For years, financial institutions, such as the International Monetary Fund or the World Bank, provided loans to third world countries under the condition that these countries carry out privatization and deregulation. Such conditions created negative effects for the majority of these populations. One consequence has been an increase in migration to the countries of the North in search of employment and better living standards.
The first real application of Friedman’s ideas was in Chile, after the Fascist coup of 1973. The brutal military dictatorship of Pinochet crushed any resistance to this economic shock therapy model. The rich got richer, and the public was left with a great amount of debt when the military handed power over to a civilian government in 1990. A more severe shock therapy was applied to the countries of Eastern Europe and the former Soviet Union after its collapse in 1991. Upon consultation with disciples of Milton Friedman, huge state institutions and enterprises were rapidly privatized, a few people became mega rich and large numbers of people became unemployed. This economic model caused the standard of living to plummet, people to lose their retirement savings, prices to skyrocket, poverty and homelessness to grow on a massive scale, prostitution and drug abuse to increase, and diseases such as AIDS and Tuburculosis to spread like wildfire. The free market reigned supreme. Capitalism was reintroduced with vengeance, like no other time in history. All of this occurred during a short span of time in a country that was a superpower and people had free health care, education, low cost housing, almost no unemployment, and many subsidies for everyday necessities. The same thing happened in Argentina during the time of its military dictatorship and the policies continued during the civilian rule until the whole economy collapsed in 2000. Banks and factories closed, many of the owners packed up and left with their money to Florida, and the people of Argentina were left with debt, no savings, and no jobs. The total collapse of the Argentinean economy was unprecedented.
But, there was resistance. In 2000 the World Bank declared that it would not renew its loan to Bolivia unless it privatized its water services, and Bechtel Corporation was suppose to be one of the beneficiaries of this privatization. But they were not ready for the mass organizing and revolt that started in the city of Cochabamba and spread to the rest of the country. Bechtel had to withdraw and water remained publicly owned. This became known as the Cochabamba Water Wars. In Argentina, after the collapse, many workers and employees decided to take over and run the factories and shops abandoned by their owners.
This trend still continues and hundreds of factories and shops are currently worker owned and successfully operated in Argentina. (The documentary, “The Take,” clearly shows this process). The resistance to these policies resulted in the election of numerous new governments in Latin America: Venezuela, Bolivia, Ecuador, Argentina, Chile, Nicaragua, and more recently Paraguay. People voted these governments in with the hope that neo-liberal policies and shock therapy will be reversed and that the wealth of these nations would be used for the betterment of the majority and not the enrichment of the elite. For the past thirty years, these policies have been, more or less, implemented in the US, starting with the presidency of Ronald Reagan. Attacks on government spending and social services have increased. “Big government” has become the evil in society; deregulation, privatization and roll back of labor and environmental standards have become the norm. Big corporations, banks, and financial institutions have benefited and working Americans have suffered. The so-called “trickle down” economy has become the model for successive administrations both Republican and Democrat.
With the recent economic meltdown, the neo-liberal model and the ideas of Milton Friedman were debunked. People now realize that government involvement is necessary. But instead of bailing out the fat cats on Wall Street, people are demanding that there should be a bailout of Main Street. Perhaps this is the time for a new “New Deal.” There should be a freeze on all foreclosures and homeowners should be able to re-negotiate their loans so they can be affordable again. There should be a tax reduction for working Americans. The tax loopholes for large corporations should be removed and they should pay their fair amount of taxes.
The CEO’s of large corporations, banks, and Wall Street firms should not enrich themselves at the expense of the majority. There should be stringent regulation for banks as well as Wall Street. Health, labor, and environmental standards and regulations should be strengthened and applied. NAFTA and other free trade agreements should be replaced by fair trade agreements. Military spending should be drastically cut, at least by half, and consequently the wars in Afghanistan and Iraq must come to an immediate end.
Money should be used by government for investment in the civil society. There should be public works projects and investment in the infrastructure to improve the condition of roads, highways, railroads, airports, ports, and bridges. Investment to build affordable public transportation, to produce hybrid and electric vehicles, to create infrastructure based on clean energy, and to move the society toward a more environmentally sound way of life should be increased by many fold. Investment in education in general, and in math and the sciences in particular, should be increased. Healthcare should be provided to all with the same urgency that the recent bail out of Wall Street was done.
These are just but a few of the steps that can be taken to create jobs, jump start the economy, and redirect the resources and the energy of this great nation in a more constructive and positive manner. The neo-liberal model of economy should be buried once and for all and a more humane model should replace it.
For further reading please read: The Shock Doctrine. The Rise of Disaster Capitalism by Naomi Klein.
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