1: Confiscating American Prosperity: High Crimes and Economics
April 7, 2008
Reviewing The Confiscation of American Prosperity: From Right-Wing Extremism and Economic Ideology to the Next Great Depression, Michael Perelman, Palgrave Macmillan, 2007
By Seth Sandronsky
Michael Perelman, a professor of economics at California State University, Chico, has written a compelling new book which puts the current social crisis into historical context. As the U.S. credit and housing bubbles crash, mortgage defaults and home foreclosures are tearing a hole in the nation's social fabric. For Perelman, the main story line which got the American nation to this point of instability begins in the early 1970s, the end of the "Golden Age" of the U.S.'s post-World War II prosperity. As the balance sheets of German and Japanese rivals rose, corporate America's fell.
Its recovery points to the winners and losers of this process to restore profitability to U.S. corporations. In a main theme of the book, American politicians and think tanks united to weaken corporate regulation and taxation. Accordingly, Perelman's book reads a bit like a crime story. One of the figures who loom large in it is Supreme Court Justice Lewis Powell. His 1971 memo, penned as a corporate lawyer, set off alarm bells for big business. It was time, Powell said, to ideologically and politically confront the popular movements (Civil Rights and Vietnam War) of the day. Later, the two U.S. political parties, in response to their large corporate funders, targeted social policies of the New Deal and Great Society protecting the American people from the scourge of hunger and poverty due to loss of jobs, health care, etc.
Powell's role in Main Street's declining fortunes since the end of the Vietnam War illustrates Perelman's close attention to class interests. He brings into sharp focus the reasons for and results of a one-sided upper-class campaign over the past three decades. The extent to which a small but strong minority of Americans hoarded the bulk of growth from the sweat of a diverse labor force, increasingly female, boggles one's mind.
Consider this data. As the nation's gross domestic product tripled from 1970 to 2003, the "top 13,000 tax-paying households ... saw its wages and salaries increase fifteen-fold," Perlman writes. Meanwhile, for the bottom 99 percent of Americans, average income remained basically unchanged between 1970 ($36,008) and 2004 ($37,295).
One outcome has been working Americans' growing reliance on credit to make ends meet, Perelman explains in jargon-free prose. Such clear language from a professor of economics may startle some readers who might be accustomed to opaque English from the likes of Alan Greenspan, former head of the nation's central bank.
Perelman reminds readers that pro-business policies of deregulation are not the monopoly of the GOP. The weakening of government oversight of industry took off under Democratic President Jimmy Carter. So did the high-interest rate policy of Paul Volcker, former Federal Reserve Bank chief. This one-two policy punch buckled the knees of the U.S. working class.
Likewise, former actor-turned-California Governor Ronald Reagan did his part as president to batter organized labor. Reagan fired striking federal air-traffic controllers who had earlier campaigned for him. Later, private employers aped Reagan, terminating their work forces during union actions throughout the 1980s and beyond. Unionized Americans have been backpedaling since, mainly in the private sector, in which workers creates profits (what Marx termed surplus value), unlike the public sector.
Political right-wingers pushing corporate-friendly policies have left no stone unturned. Some public schools whose students fail to score well enough on highs-stakes achievement tests and consequently face closure. One option is to re-open them as private charter schools. The owners who are politically connected to business leaders and political officials can then void employees' union contracts and earn profits.
And who helps shape public opinion as the upper-class rollback proceeds? Perelman answers in part with a look at the Heritage Foundation, which grew with funds from beer mogul Joseph Coors. This think tank became a service provider of so-called expert commentators to news media, increasingly in the hands of fewer and fewer global corporations such as News Corp. and its chair Rupert Murdoch.
On that note, Perelman's radical viewpoint runs counter to the mainstream notion that income and wealth inequality are regrettable but inevitable outcomes of market forces that free people's productive potential. He evaluates the research on the past three decades in the U.S. and finds that this notion is a false assumption. Alternatively, Perelman suggests that such inequality disrupts and obstructs economic growth.
Lastly, Perelman critiques the economics profession and Professor Martin Feldstein. In brief, his research said Social Security harmed the U.S. economy by cutting personal savings. In time, Feldstein's methods were found to be fatally flawed. Yet he stayed close to the White House and remained a Harvard professor, shaping the world views of policy makers and corporate execs.
What is to be done with a profession that basically serves moneyed interests? "In the longer run, a total rethinking of economics is needed," Perelman writes in conclusion. "Economists can make a contribution to this transformation by deemphasizing competition, while learning to understand more humane motives of behavior than profit maximization."
Seth Sandronsky lives and writes in Sacramento.
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