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Forum Post: chomsky on history and plutonomy

Posted 6 years ago on May 9, 2012, 9:01 a.m. EST by flip (7101)
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Before the 1970s, banks were banks. They did what banks were supposed to do in a state capitalist economy: they took unused funds from your bank account, for example, and transferred them to some potentially useful purpose like helping a family buy a home or send a kid to college. That changed dramatically in the 1970s. Until then, there had been no financial crises since the Great Depression. The 1950s and 1960s had been a period of enormous growth, the highest in American history, maybe in economic history.

And it was egalitarian. The lowest quintile did about as well as the highest quintile. Lots of people moved into reasonable lifestyles -- what’s called the “middle class” here, the “working class” in other countries -- but it was real. And the 1960s accelerated it. The activism of those years, after a pretty dismal decade, really civilized the country in lots of ways that are permanent.

When the 1970s came along, there were sudden and sharp changes: de-industrialization, the off-shoring of production, and the shift to financial institutions, which grew enormously. I should say that, in the 1950s and 1960s, there was also the development of what several decades later became the high-tech economy: computers, the Internet, the IT Revolution developed substantially in the state sector.

The developments that took place during the 1970s set off a vicious cycle. It led to the concentration of wealth increasingly in the hands of the financial sector. This doesn’t benefit the economy -- it probably harms it and society -- but it did lead to a tremendous concentration of wealth.

On Politics and Money

Concentration of wealth yields concentration of political power. And concentration of political power gives rise to legislation that increases and accelerates the cycle. The legislation, essentially bipartisan, drives new fiscal policies and tax changes, as well as the rules of corporate governance and deregulation. Alongside this began a sharp rise in the costs of elections, which drove the political parties even deeper into the pockets of the corporate sector.

The parties dissolved in many ways. It used to be that if a person in Congress hoped for a position such as a committee chair, he or she got it mainly through seniority and service. Within a couple of years, they started having to put money into the party coffers in order to get ahead, a topic studied mainly by Tom Ferguson. That just drove the whole system even deeper into the pockets of the corporate sector (increasingly the financial sector).

This cycle resulted in a tremendous concentration of wealth, mainly in the top tenth of one percent of the population. Meanwhile, it opened a period of stagnation or even decline for the majority of the population. People got by, but by artificial means such as longer working hours, high rates of borrowing and debt, and reliance on asset inflation like the recent housing bubble. Pretty soon those working hours were much higher in the United States than in other industrial countries like Japan and various places in Europe. So there was a period of stagnation and decline for the majority alongside a period of sharp concentration of wealth. The political system began to dissolve.

There has always been a gap between public policy and public will, but it just grew astronomically. You can see it right now, in fact. Take a look at the big topic in Washington that everyone concentrates on: the deficit. For the public, correctly, the deficit is not regarded as much of an issue. And it isn’t really much of an issue. The issue is joblessness. There’s a deficit commission but no joblessness commission. As far as the deficit is concerned, the public has opinions. Take a look at the polls. The public overwhelmingly supports higher taxes on the wealthy, which have declined sharply in this period of stagnation and decline, and the preservation of limited social benefits.

The outcome of the deficit commission is probably going to be the opposite. The Occupy movements could provide a mass base for trying to avert what amounts to a dagger pointed at the heart of the country.

Plutonomy and the Precariat

For the general population, the 99% in the imagery of the Occupy movement, it’s been pretty harsh -- and it could get worse. This could be a period of irreversible decline. For the 1% and even less -- the .1% -- it’s just fine. They are richer than ever, more powerful than ever, controlling the political system, disregarding the public. And if it can continue, as far as they’re concerned, sure, why not?

Take, for example, Citigroup. For decades, Citigroup has been one of the most corrupt of the major investment banking corporations, repeatedly bailed out by the taxpayer, starting in the early Reagan years and now once again. I won’t run through the corruption, but it’s pretty astonishing.

In 2005, Citigroup came out with a brochure for investors called “Plutonomy: Buying Luxury, Explaining Global Imbalances.” It urged investors to put money into a “plutonomy index.” The brochure says, “The World is dividing into two blocs -- the Plutonomy and the rest.”

Plutonomy refers to the rich, those who buy luxury goods and so on, and that’s where the action is. They claimed that their plutonomy index was way outperforming the stock market. As for the rest, we set them adrift. We don’t really care about them. We don’t really need them. They have to be around to provide a powerful state, which will protect us and bail us out when we get into trouble, but other than that they essentially have no function. These days they’re sometimes called the “precariat” -- people who live a precarious existence at the periphery of society. Only it’s not the periphery anymore. It’s becoming a very substantial part of society in the United States and indeed elsewhere. And this is considered a good thing.

So, for example, Fed Chairman Alan Greenspan, at the time when he was still “Saint Alan” -- hailed by the economics profession as one of the greatest economists of all time (this was before the crash for which he was substantially responsible) -- was testifying to Congress in the Clinton years, and he explained the wonders of the great economy that he was supervising. He said a lot of its success was based substantially on what he called “growing worker insecurity.” If working people are insecure, if they’re part of the precariat, living precarious existences, they’re not going to make demands, they’re not going to try to get better wages, they won’t get improved benefits. We can kick ’em out, if we don’t need ’em. And that’s what’s called a “healthy” economy, technically speaking. And he was highly praised for this, greatly admired.

So the world is now indeed splitting into a plutonomy and a precariat -- in the imagery of the Occupy movement, the 1% and the 99%. Not literal numbers, but the right picture. Now, the plutonomy is where the action is and it could continue like this.

If it does, the historic reversal that began in the 1970s could become irreversible. That’s where we’re heading. And the Occupy movement is the first real, major, popular reaction that could avert this. But it’s going to be necessary to face the fact that it’s a long, hard struggle. You don’t win victories tomorrow. You have to form the structures that will be sustained, that will go on through hard times and can win major victories. And there are a lot of things that can be done.

Toward Worker Takeover

I mentioned before that, in the 1930s, one of the most effective actions was the sit-down strike. And the reason is simple: that’s just a step before the takeover of an industry.

Through the 1970s, as the decline was setting in, there were some important events that took place. In 1977, U.S. Steel decided to close one of its major facilities in Youngstown, Ohio. Instead of just walking away, the workforce and the community decided to get together and buy it from the company, hand it over to the work force, and turn it into a worker-run, worker-managed facility. They didn’t win. But with enough popular support, they could have won. It’s a topic that Gar Alperovitz and Staughton Lynd, the lawyer for the workers and community, have discussed in detail.

It was a partial victory because, even though they lost, it set off other efforts. And now, throughout Ohio, and in other places, there’s a scattering of hundreds, maybe thousands, of sometimes not-so-small worker/community-owned industries that could become worker-managed. And that’s the basis for a real revolution. That’s how it takes place.

In one of the suburbs of Boston, about a year ago, something similar happened. A multinational decided to close down a profitable, functioning facility carrying out some high-tech manufacturing. Evidently, it just wasn’t profitable enough for them. The workforce and the union offered to buy it, take it over, and run it themselves. The multinational decided to close it down instead, probably for reasons of class-consciousness. I don’t think they want things like this to happen. If there had been enough popular support, if there had been something like the Occupy movement that could have gotten involved, they might have succeeded.

And there are other things going on like that. In fact, some of them are major. Not long ago, President Barack Obama took over the auto industry, which was basically owned by the public. And there were a number of things that could have been done. One was what was done: reconstitute it so that it could be handed back to the ownership, or very similar ownership, and continue on its traditional path.

The other possibility was to hand it over to the workforce -- which owned it anyway -- turn it into a worker-owned, worker-managed major industrial system that’s a big part of the economy, and have it produce things that people need. And there’s a lot that we need.



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[-] 1 points by francismjenkins (3713) 6 years ago

As always, excellent thoughts by Chomsky. In the short term, we need to figure out a way to get a grip of our political system. Banning gifts, closing the revolving door, setting limits on donations (which may require an amendment), etc., is all well and good, but I think we may have to ultimately do more to change the underlying funding structure of political campaigns.

The idea that change can only come from the bottom up is a core principle here, but I think change can come from ALL directions (the bottom up, top down, the middle outward, and so on). I think a better way to put it is if the bottom isn't participating in the change, and indeed driving it, then the changes probably won't be sustainable, they won't be robust, they'll lack depth, etc.

But, in some cases, the bottom can drive changes at the top, in the middle, and every place in between. We don't want to drive an exceedingly wider wedge between government and the people, we should want the opposite. I think the way things are going now are pretty good, but the elections in November will be somewhat of a test (yup I said it, elections, assuming the vote is reasonably accurate, are an obvious indicator of national sentiment).

We have to be just as willing to respond to the people as we're demanding of Washington, our state capitals, and city halls. This doesn't mean giving an inch on our principles, since for the most part, public perception of our principles is skewed by a hostile media. But it does require a real focus on public relations (and that would be the one area where I think we have a real opportunity to improve, grow, refine, and to borrow a typical political slogan, get our "unadulterated" message to the kitchen tables of America).

To begin with, when people think of Occupy Wall Street, terms that should come to mind are participatory democracy, fight against political corruption, save and grow our middle class, equal protection under the law, preservation and enhancement of liberty, etc. We should come up with a short list of "wants" ... not a pledge or demands or anything like that, but something that has broad appeal, with maybe five or six or at the most ten bullet points (not a laundry list of 50 or 100 or 150 items), and maybe political candidates will express support for those ideas.

In the alternative, we might think that if we get some of things we want too soon, then the whole thing will fizzle (and "real" change will never happen). This is a real risk, but there's another side to the coin. If we take this as a multi-decade long effort to change society, the establishment probably won't sit around with their thumbs up their ass, while we're accumulating support on the ground. Ideally, we're able to do both, achieve short term change, stick around for the long haul, and achieve real change; but to some degree, we have to admit, there's no play book for this sort of thing. Anarchist theory is just that ... a theory (not even a theory really, more like a hypothesis). I personally see no reason why we shouldn't adapt to circumstances, and remain flexible. In my view anarchism is by far the most elegant political theory in existence. It's purity and simplicity are beautiful, and it would be a shame if we allow the establishment to reduce this wonderful idea to a bunch of college students tossing Molotov cocktails into store widows.

[-] 3 points by VQkag (930) 6 years ago

Agreed. With everything, even the anarchy statements. And it is shame that the establish. has (over a century) reduced it to violence and negativity. But a list of "wants" is critical. The 1st s/b related to election changes to therefore allow for all the rest of the changes societies needs. that the process will be decades long is demoralizing but true. We must keep the pressure on, with protests, marches, civil disobedience, petitions, coalition building, and yes voting. I think we agree. I certainly agree with Chomsky. Solidarity.!